Nordstrom's Income Took a Hit in 2014, Thanks to Tech Investments

The company is preparing to make even bigger investments in 2015.
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Eliza Brooke
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The company is preparing to make even bigger investments in 2015.
Photo: Tasos Katopodis/Getty Images

Photo: Tasos Katopodis/Getty Images

Nordstrom's stock price took a 3 percent hit on Thursday afternoon after it announced that its earnings for 2014 came in at $720 million, a sizable downgrade from the $734 million it brought in during 2013. 

Of course, that had a lot to do with certain big expenses — namely, improvements in technology and fulfillment, along with the acquisition of the men's styling service Trunk Club, which set the retailer's profit back by $25 million before interest and taxes. For the record, things seem to be going pretty well with that business: the executive team said on a call that Trunk Club doubled its sales in 2014 and will likely do so again this year. 

In fact, a number of Nordstrom's sales channels have shown healthy growth of late. Net sales increased 9 percent to $3.9 billion; Nordstrom.com grew 19 percent (slower than last year's 30 percent growth), Nordstrom Rack was up 17 percent and HauteLook's sales increased 28 percent. The slowest growth area is currently Nordstrom's full-line segment, comparable sales for which increased a meager 0.5 percent relative to last year. (Maybe Caroline Issa will help with that.)

If the retailer's various investments held back its income last year, the same is likely to be true for 2015. Nordstrom says that it expects to spend $1.2 billion on projects including store expansions in Canada and Manhattan, renovations and the opening of a third fulfillment center. Quick comparison: That's $449 million more than it spent in 2014. So while Nordstrom's net sales could increase as much as 9 percent and comparable sales 4 percent in 2015, profit is likely to decline once again.

Of course, the goal with all of these expenses is to set the foundation for higher growth later. Onward and upward.