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Nordstrom Alters Operating Model: Cuts Jobs, Supports Tech

Nordstrom Inc. JWN revealed plans to make amendments to its operating model in response to the constant slowdown in mall traffic resulting from customers’ shift to online shopping. These factors have been weighing on the Zacks Rank #4 (Sell) company’s performance for a while now.

Hence, the company plans to cut costs through a phased approach and eliminate about 300–400 jobs, mainly including positions at Nordstrom’s Corporate Center and regional assistance team. While the company initially aims at cutting unfilled posts to reduce the adverse impact on currently hired personnel, it will also reimburse the eliminated workers in various ways.

This elimination process, anticipated to conclude by the end of second-quarter fiscal 2016, is expected to generate cost savings worth nearly $60 million in fiscal 2016. Further, it forms an integral part of the company’s strategy to enhance productivity and service, while solidifying its base for future development.

Apart from this, Nordstrom has been committed to undertake other initiatives as well. These include its new operating model in the Technology space, which concentrates on boosting e-commerce and digital networks, and improving the company’s supply-chain channels and marketing efforts.

Nordstrom stated that the impact of these changes was also reflected in the guidance issued with its fourth-quarter fiscal 2015 results, wherein the company repeated its dismal trend with lower-than-expected top- and bottom-line numbers. Results were impacted by a tough holiday season, heavy discounts and unseasonably warm weather.

Along with the earnings announcement, Nordstrom stated that it remains focused on the execution of its customer strategy via various growth initiatives, in order to enrich customer experience and boost results. On account of these initiatives, along with factors like sale of credit receivables and the unfavorable shift of the Anniversary sale event, Nordstrom issued a bleak earnings outlook for fiscal 2016.

While earnings for fiscal 2016 are envisioned in a range of $3.10–$3.35 per share, the bottom line is anticipated to nosedive approximately 30% in the first half of the fiscal year. This reflects the effect of the aforementioned changes in the operating model, which is also expected to be completed around the same time.  

With these operating changes, Nordstrom seeks to achieve its long-term growth targets, meet the ever-changing customer demands and work according to the evolving business environment.

Stocks to Consider

Some better-ranked stocks worth considering in the same industry include American Eagle Outfitters, Inc. AEO and Express Inc. EXPR, each with a Zacks Rank #1 (Strong Buy), and Abercrombie & Fitch Co. ANF, with a Zacks Rank #2 (Buy).

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ABERCROMBIE (ANF): Free Stock Analysis Report
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
EXPRESS INC (EXPR): Free Stock Analysis Report
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