Nordstrom to Combine Catalog, Web Businesses

After months of limping sales, upscale department store chain Nordstrom Inc. said Tuesday that it will combine its catalog and Internet businesses into a new subsidiary, in a move that underscores the company’s desire to include e-commerce as part of its turnaround plans.

The new venture, which included $10 million in cash from Nordstrom and $16 million from Benchmark Capital and Madrona Investment Group, will launch Nordstromshoes.com this fall. The Web site will offer 20 million pairs of shoes, up from the current Nordstrom Web site’s 200,000 pairs.

The Seattle-based chain has watched its sales suffer during a period of phenomenal growth for the retail sector. For its fiscal second quarter, the company posted profit gains of 2.4% compared with the same period last year, but sales in stores open at least a year were down 2.6%.

Analysts have said those figures speak to Nordstrom’s continued tinkering with its fashion mix and to lean inventories as the company tries to work through changes.

“Nordstrom seems to still be in the early stages of transforming its good business into the great business that it could be,” said Edward Weller, an analyst with Sutro & Co. in San Francisco. “It would be even better to be able to see the momentum of the core business building before it looked like they were diverting resources into this new business, but apparently they feel some urgency to get into this business.”

Dan Nordstrom, Nordstrom co-president and new chief executive of Nordstrom.com, said the time is right to enter the online market in a bigger way. And since the company’s roots and reputation come from shoes, he said, it made sense to broaden that sector first on the Web.

“We’re very confident that we can effectively sell shoes on the Internet, and we’ve proven it to ourselves,” Nordstrom said, adding that shoes are the best-selling category on the current Web site, accounting for 30% of Nordstrom’s online sales.