Ongoing initiative results in IT cuts.
Nordstrom has confirmed the cut of 120 individuals from its IT team, on top of 11 layoffs announced in late February, bringing the total elimination of 131 jobs, the Puget Sound Business Journal reported. The Seattle-based retail giant began a restructuring initiative seven months ago designed to “ensure that the organization’s operating model is best prepared to support our company’s future growth goals and provide us with a competitive advantage moving forward,” company spokeswoman Tara Darrow said in an email.
Last month, Nordstrom missed Wall Street expectations for fourth-quarter earnings and posted a 30 percent drop in quarterly profits and a 17 percent decrease in yearly profits.
Co-president Blake Nordstrom said during a conference call with analysts that the company will reduce expenses and capital spending in 2016. “We have always considered 2015 to be a peak investment year — that hasn’t changed,” Nordstrom said. “What has changed is the current environment that we are facing, which requires us to pivot even more as we remain focused on improving profitability.”
Now, the company is making changes designed to reduce costs in its e-commerce division and restructure to achieve higher efficiency. The restructuring has impacted all levels of the technology team at different times, Darrow told GeekWire.
“We have had people impacted at the vice president, the director and the senior director levels, and other levels,” Darrow said. “This has been a process over time over the last seven months or so, and there have been impacts over various times.”
While the latest cuts did not include any upper management positions, in unrelated personnel changes, some executives have left the tech team recently, sources told GeekWire, including Bill Tucker, VP of technology; John Mayfield, VP of enterprise architecture and system development & support; and Sam Hogenson, executive VP of selling technology, who retired.
"This business model has a high variable cost structure driven by fulfillment and marketing costs in addition to ongoing technology investments," Nordstrom CFO Mike Koppel said on a call with analysts. That has meant that "expenses in recent years have grown faster than sales."
For 2016, Nordstrom plans to spend roughly $300 million on technology and fulfillment in 2016, a flat figure compared to 2015 investment.
Koppel explained that Nordstrom wants to turn its growth into more profit and increase efficiencies and lower costs in technology, fulfillment and marketing. As part of the initiative, the company wants to lower shipping costs with efficiencies around deliveries, refine online assortments to focus on profitable items, focus on fewer, more meaningful projects and improve effectiveness across all channels.
Nordstrom plans to spend a total of $4 billion on capital improvements over the next five years, which marks a $300 million reduction in store investments compared to 2015 figures. The company still plans to open 20 new Rack stores and three new full-line stores in 2016, continuing its focus on the discounted Rack locations.
