What: Nordstrom Rack's Q1 sales growth significantly outpaced that of Nordstrom's full-line department stores, despite both segments experiencing sales increases.

Why it is important: The continued expansion and success of Nordstrom Rack highlight a strategic shift towards off-price retail, which is becoming a critical growth driver for the company.

In Q1, Nordstrom reported a 5.1% increase in net sales to $3.2 billion, with comparable sales up 3.8%. Full-line Nordstrom saw a modest 0.6% net sales rise, while Nordstrom Rack's net sales surged by 13.9%, with comparable sales up 7.9%. Gross margins contracted by 225 basis points to 31.6%, partly due to theft in the transportation network. Despite the challenges, the net loss shrank by 81% to $39 million. CEO Erik Nordstrom announced plans to open 22 new Rack stores this year, emphasizing their strong performance and rapid return on investment. The quality of Rack's merchandise has improved, attracting more customers and increasing transaction values. Full-line Nordstrom, although improving its assortment, still struggles with relevance and higher prices. External theft remains a concern, potentially affecting future margins.

Nordstrom Rack continues to overshadow the department store in Q1