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Failed campaign forces Nordstrom to reinvent itself

Posted: Thursday, September 07, 2000

SEATTLE -- Earlier this year, Nordstrom Inc. marked the launch of its ''Reinvent Yourself'' campaign by bringing bright new colors and hip music to its stores, putting cutting-edge fashions on the racks and creating trendy new ads urging customers to give something new a try.

It didn't work. In fact, the $40 million ad campaign flopped. Now Nordstrom is the one that's reinventing itself.

On Thursday, the 99-year-old one-time family business announced that it would go back to the future, with once-retired president and co-chairman Bruce Nordstrom returning as chairman of the company. His son, 39-year-old Blake, was named president and will be in charge of day-to-day operations.

The old chairman and chief executive officer, 24-year Nordstrom veteran John Whitacre, was ousted by the board, in part because of the failure of ''Reinvent Yourself'' and many other strategies to boost sales.

''It's no secret we're not hitting the ball out of the park right now,'' Bruce Nordstrom said Thursday.

For increasingly impatient investors, that might be an understatement. For the second quarter, Nordstrom earned $45.4 million, or 35 cents a share, compared with $70.8 million, or 51 cents a share, from a year ago. Part of that loss included a write-off on a $30 million investment in an Internet company, but some stores were faced with major drops in sales -- up to 10 percent at one store.

The Pacific Northwest stores were hit particularly hard as longtime customers, who felt alienated by the ''Reinvent Yourself'' campaign, stayed away. While Nordstrom didn't give up its trademark doormen and main floor piano players, there were other problems.

The campaign led the company's old management to consider sending a letter of apology to Nordstrom's customers, signed by Northwest general manager Erik Nordstrom -- an extraordinary step for a major retailer.

And even now, there's still some question of whether new management can solve the problems at hand. Analysts from three Wall Street firms -- Bear Stearns, Credit Suisse First Boston and Merrill Lynch Dean Witter -- all downgraded stock ratings from ''buy'' to either ''neutral'' or ''hold.'' The reason: it will take time for the new management to get its bearings, leaving the company drifting for a while longer.

But Jennifer Black, a Portland-based retail analyst for First Security Van Kasper, reiterated her ''strong buy'' rating on Nordstrom. She said in a research note that the change could serve as a catalyst for growth, especially with Blake and Bruce Nordstrom involved.

''Whether or not Blake's last name is Nordstrom, he is the best choice for Nordstrom,'' said Black, a 22-year industry veteran who once worked for Nordstrom. ''I have total confidence in Blake.''

Swedish immigrant John W. Nordstrom founded the company in 1901, investing his $13,000 gold rush stake into a shoe store. Today, Blake Nordstrom represents the fourth generation of family leadership in a company that boasts 114 stores in 25 states.

Bruce Nordstrom became president of the company in 1963 and, with his two brothers, took the company public in 1971. He retired as co-chairman of the company in 1995. And despite the fact that Blake Nordstrom is just 39, he already has 26 years of experience at the store, ranging from floor sweeper and salesman to store manager and, most recently, president of the company's Nordstrom Rack discount store unit.

That merchandising experience will help address one of the company's most pressing problems -- finding the right mix of merchandise to please both the company's ultra-traditional shoppers as well as attract newer, younger customers.

''Merchandise is the most important component of service. It means having the right item at the right price at the right time,'' Blake Nordstrom said.

The other key is customer service, something that Bruce Nordstrom stressed in his 22 years of leadership at the company. Both father and son admitted Thursday that service had slipped, and that the old standards need to be revamped and upheld.

At the same time, however, the new leadership promised to continue innovating at the store.

''The minute we stop trying things, we're in trouble,'' Blake Nordstrom said. ''I don't blame us for trying (the new directions), and we've learned a lot.''

The trick will be in finding the right balance between young and old, traditional and cutting-edge -- while appeasing Wall Street.



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