The past year has been a terrible one for department stores. We've seen a number of well-known brands like J.C. Penney (OTC: JCPN.Q) and Neiman Marcus declare bankruptcy, while others, like Lord & Taylor, have completely bitten the dust. That's been dreadful for malls, which commonly rely on department stores to serve as anchor tenants. These stores take up multiple floors of space, frequently sign extended leases, and draw in tenants as well as customers.
But one department store may be in the process of setting itself up for success. Nordstrom (NYSE: JWN) recently struck a deal with Tonal, an at-home fitness company that sells high-end workout stations. And that could position Nordstrom to emerge as a stronger player in the retail space this year.
Capitalizing on an ongoing trend
The coronavirus pandemic has caused a lot of people to change their lifestyles -- and that includes a shift from working out at gyms or taking group fitness classes to exercising at home. Tonal, meanwhile, sells a wall-mounted workout station that comes at a fairly steep price tag -- $2,995. But seeing as how a lot of people aren't spending money to work out at a gym, many consumers now have the flexibility to outfit their homes with the equipment they need to get (and stay) in shape.
Nordstrom will be adding 40 mini-Tonal shops to its stores beginning in March. The shops will be located in Nordstrom's active department, adjacent to its workout apparel and fitness accessories. Customers who visit the store will be able to try out the product and consult with Tonal employees who can walk them through how it works.
Clearly, this arrangement is highly beneficial for Tonal, as it means added exposure. But it's also a very strategic move for Nordstrom.
For one thing, the price tag of Tonal's fitness setup aligns fairly well with the department store's clientele -- Nordstrom tends to appeal to higher-end shoppers, whereas bargain hunters might take their business to another department store. Also, positioning itself as a fitness gear destination could work wonders for Nordstrom, especially at a time when so many people are focusing on personal wellness.
Added workout gear sales could also help Nordstrom compensate for slower sales in the professional attire arena. With so many people continuing to work from home and so many companies contemplating remote work as a long-term arrangement, the need for office-appropriate clothing has already started to wane. Introducing Tonal could draw new customers into the mix -- younger professionals with money to spare who would rather invest in a quality pair of workout pants than a business suit.
Good news for malls
If partnering up with Tonal proves lucrative, it could be enough to help Nordstrom maintain its staying power at a time when many department stores are shuttering. That would, in turn, be excellent news for malls, which can't afford to lose another large tenant.
Nordstrom's recent fourth-quarter earnings exceeded analysts' estimates, but the company recently grappled with inventory issues due to shipping delays. The retailer is calling for fiscal 2021 sales to grow more than 25%, and this new partnership could help Nordstrom meet or even surpass that goal.