Dive Brief:

• Nordstrom on Wednesday said it will permanently close 16 full-line stores across the country. This represents about 14% of its fleet, according to analysts.

• In order to save about $150 million, the department store is also restructuring regions, support roles and its corporate organization, achieving 30% of previously planned expense cuts of more than $500 million, according to a company press release. 

• For its remaining stores, Nordstrom plans to follow local public health guidance​​ for a phased reopening of its off-price Rack and full-line locations. The department store said it will take certain precautions like employee health screenings, providing masks for employees and customers, and limiting hours and number of people in the store, among others. The retailer is also shifting its popular anniversary sale from July to August.

Dive Insight:

While something of a surprise, Nordstrom’s move to permanently close a significant number of full-line stores was by and large taken in stride by analysts.

“A pruning of the estate was always on the cards,” GlobalData Retail Managing Director Neil Saunders said in emailed comments.

GlobalData analysts have long advocated for Nordstrom to exit “sub-optimal locations” in areas where demographic and competitive changes have left Nordstrom “exposed;” exiting such malls allows the retailer to preserve cash and continue to invest in better-performing stores, Saunders said. It also allows Nordstrom to add stores as well, including “expansion in large cities and the development of a network of smaller Nordstrom Local stores.”

Nordstrom didn’t immediately return Retail Dive’s request for more information about which stores will close, which will reopen, and when.

In light of Nordstrom’s strength in e-commerce and omnichannel services, Saunders called the permanent closures “not so much of a step back from physical retail as it is an optimization of the store portfolio.”

Nordstrom on Tuesday said that online sales generated a third of its revenue last year, with digital off-price sales alone topping $1 billion. To offset the loss of sales as stores closed due to the pandemic, the retailer in mid-April expanded its store-based fulfillment, including adding its Rack stores to the mix so that its entire fleet has the capability, the company said in its release. As a result, more than half of full-line website orders and a quarter of off-price website orders are now fulfilled by stores, the company said.

That garnered props from Cowen & Co. analysts. “We believe [Nordstrom’s] local market inventory strategy, Rack concept, human capital and consistency, digital innovation, curbside and local store pickup, and specialized and exclusive product do position the company well for the long-term,” they wrote in a client note Wednesday.

Several analysts joined Saunders in noting that a reduction of the fleet was inevitable for the department store, and that COVID-19 likely accelerated the company’s plans. Others are sure to follow, which will be a blow to the malls involved. More than half of mall-based department stores are expected to close in the next two years, speeding up a trend previously expected to play out over five or six years, commercial property firm Green Street Advisors said this week. 

“Unfortunately, [Nordstrom’s] announcement is likely the first of many as we expect stores may close in 10% or more of shopping centers and the number of malls may eventually decrease to 800 or less from [about] 1,200 at a -5% [compound annual growth rate],” Cowen & Co. analysts led by Oliver Chen said.