Shakeup hits LV-bound Nordstrom

Kathy Mulady

Tuesday, Sept. 5, 2000 | 10:53 a.m.

SEATTLE -- Responding to flat earnings and marketing strategies that weren't producing a turnaround, Nordstrom Inc. restored members of its founding family to top management last week.

Chief Executive John Whitacre, the 24-year Nordstrom veteran who has led the company since 1997, resigned as chairman and chief executive. Blake Nordstrom took over as president of the company founded by his great-grandfather almost 100 years ago.

Bruce Nordstrom, Blake's father, was named chairman of the board of directors.

Michael Stein, chief financial officer and a key member of Whitacre's team, also is leaving the company in the shake-up of the upscale Seattle retail chain's management.

"We have been disappointed with our results for some time; this is a result of that dissatisfaction," said Enrique Hernandez Jr., the newly appointed lead independent director for Nordstrom.

Blake Nordstrom, 39, had been president of the Nordstrom Rack Group.

Bruce Nordstrom, 66, is the founder's grandson and was part of the third-generation of leadership that took the company public in 1971.

Whitacre, 47, had been with the company since 1976, selling shoes while attending the University of Washington. He joined the company full time after college and worked his way up.

While the change was more abrupt than the low-key management changes that have typified the family-run company, it was no less gracious to the departing leader.

"John Whitacre has been a dedicated and committed leader with our company for his entire career," said Hernandez. "He mentored and coached literally thousands of employees and gave the company 110 percent of himself every day."

Whitacre was not present.

"We are now at the point where we believe the company could benefit from a different style of leadership," Hernandez said.

The Nordstroms emphasized a new dedication to listening to their customers.

"It is all about the customer," said Blake Nordstrom. "That includes service and merchandise, and clearly we have been getting messages that we can improve on that. What works best for us is taking care of our customers, and listening to them one at a time."

Company executives stressed their determination to continue the company's expansion efforts -- including entry into the Las Vegas market -- and compete aggressively in the national market. They also denied any plans to sell the company, as some Nordstrom watchers have speculated.

Nordstrom was founded in Seattle almost 100 years ago as Wallin and Nordstrom shoe store on Pike Street. Wallin sold his half of the business to John W. Nordstrom in 1929. A year later, Nordstrom sold the business to his three sons.

The company is one of the country's leading fashion specialty retailers, with 114 stores in 23 states.

Two weeks ago, Nordstrom reported a sharp decrease in second-quarter earnings, hit by flat sales, heavy markdowns, calendar variations and higher expenses.

Nordstrom tipped off the media and investors about a "senior management announcement" Thursday morning. That sent the stock down nearly 24 percent during regular trading. It closed at $14 a share. After the announcement, it regained most of that loss, selling in the $17.25 to $18 range in light trading on the after-hours markets.

Hernandez said the company had hired a national search firm and the board had considered several external candidates before deciding that Blake Nordstrom was the best choice.

Some analysts found it hard to believe that the company searched very hard.

"I was hoping for them to bring in a real aggressive outsider that didn't have any of the history and a fresh approach," said Michael Shea, with D.A. Davidson & Co., a Portland analyst.

"I don't see this as much of a change. They talked about customer service and about listening to customers, the same platitudes we have heard before.

"If they had said they were making changes at the top and bringing in an outsider from a five-star retailer I would be applauding, but I am concerned that this is a stop-gap measure. The Rack has done well, but running a corporation is a little different story."

Other analysts, however, cheered the news.

"I think this is a positive announcement, from the standpoint that the whole culture of Nordstrom is to worship the customer and give them the merchandise and service that the customer wants," said Jennifer Black. "I think the decision to bring Bruce back was an excellent decision. He was the key spokesman for years, and in his heart, this man truly cares about the customer. Seattle is his hometown and he is committed to the company.

"I have known Blake for years, he understands the culture and the new initiatives, I think he deserves to have the position. I think the shareholders deserve it. When he spoke today it came from his heart," she said.

Some shareholders and longtime customers were optimistic about the Nordstroms taking back the reins.

"I think it is a good move," said Leonard Guss, a shareholder who has been critical of recent changes by the company and the Re-Invent Yourself campaign.

"I have been buying at Nordstrom for almost 40 years with one family member or another. I thought they had lost their sense of direction and were borrowing the latest buzz words."

He said he's held onto his stock through the downturn "not optimistically, but out of curiosity."

"Nordstrom seems to have lost some of its excitement. Macy's in Union Square (San Francisco) is bursting with excitement. Nordstrom is still a nice store, but it has lost some of its pizzazz."

The Re-Invent campaign, launched in February, and an emphasis on more trendy styles, alienated many of Nordstrom's dedicated customers. Some criticized the company for dumping them in favor of younger customers.

Blake Nordstrom is determined to revitalize the company and polish its customer-first tradition.

"Merchandise is the most important component of service, it means having the right item at the right price at the right time," he said. "The key is to learn from our mistakes, and not repeat them."