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Nordstrom, Inc. (JWN): This Upscale Retailer Has a Balanced Growth Strategy

Macy’s, on the other hand, opened one new Macy’s, Inc. (NYSE:M) store during the first quarter and expanded into an additional location in an existing mall. It will open more Macy’s stores, a Macy’s replacement store, a new Bloomingdale’s store, and a Bloomingdale’s Outlet store in the remainder of fiscal 2013. Dillard’s, Inc. (NYSE:DDS) has not announced any expansion plans yet.

Canada expansion

Canada is the sixth most preferred global destination for retailers, according to a report by consultancy firm CBRE. Of the US retailers, Target has forayed into this market. Now it’s Nordstrom’s turn.

Nordstrom will open its first store in Calgary in 2014 fall. Subsequently, it will add one more in Ottawa and Vancouver, respectively, and two more in Toronto. Neither Macy’s, Inc. (NYSE:M) nor Dillard’s, Inc. (NYSE:DDS) have any stores in Canada. However, Macy’s accepts online orders from the country at a flat shipping fee of C$9.99.

Nordstrom, Inc. (NYSE:JWN)’s will compete with upscale Canadian retailers like Hudson’s Bay and Holt Renfrew and will start its promotions well ahead of its actual launch to build up the excitement. Success will depend a lot on pricing. Typically, there is a price differential of 10%-15% between US and Canada due to incremental costs involved.

Sensing a competitive disadvantage, Nordstrom has declared that it will match prices with competing Canadian chains. It is already known for exclusivity and customer service. Now, if it can keep its word on the pricing, Nordstrom, Inc. (NYSE:JWN) can see excellent growth in Canada. If all goes well it may open a total of at least 8-10 full-line stores and 15-20 Nordstrom Rack stores across the country.

Total investments

For all its planned expansions, Nordstrom has a capital-expenditure budget of $3.7 billion over the next five years. Around $2.8 billion will go into new stores, brand building, and leveraging the company’s multichannel presence. The remaining $900 million will go to support e-commerce and technology initiatives.

Thanks to its excellent planning and execution, Nordstrom, Inc. (NYSE:JWN) has had good returns on its capital invested. In 2012, ROIC had been at its five-year high of 13.9%, and in the first quarter, it inched up to 14%.

Net-net

Nordstrom has appreciated 18.97% over the last 12 months and also paid a $1.20 per-share dividend to its investors. With domestic store additions, Canada expansion, and a solid e-commerce position, the company is on a good growth path which would bring nice returns for the company and also those who have invested in it.

Eshna De has no position in any stocks mentioned. The Motley Fool owns shares of Dillard’s, Inc. (NYSE:DDS).

The article This Upscale Retailer Has a Balanced Growth Strategy originally appeared on Fool.com.

Eshna is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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