Financial Impact
Since the beginning of the year 2020, the world’s economy has faced immense challenges owing to the break out of the Covid-19 pandemic. The main economic effects of the pandemic include partial or total closure of specific sectors of the economy such as tourism and hotel industries, travel bans across countries, disruption of the global supply chain, the decline in household expenditure, rising unemployment, and inflation. The U.S. Census Bureau (2020), for example, indicated that household spending declined by 8.7% in the first two months since the break out of Covid-19 in February 2020, amounting to the most significant decrease in household spending with a period of two months. Lowered household spending caused a considerable decline in the demand for products and services and hence the reduced sales for Nordstrom Inc. In addition to declining demand, Covid-19 introduced additional costs on businesses due to the need for employees and customer safety through social distancing and disinfecting premises and closure of businesses premises. Although the Covid-19 effects have slowed due to the increase in vaccinated individuals, the future remains uncertain.
In 2020, Nordstrom Inc. sales declined by 29.6%, with Nordstrom rack sales suffering a more severe decline of 35.6%, mainly due to the closure of the stores in adherence with the Covid-19 protocols (Nordstrom, 2020). Owing to the slowing down effects of Covid-19, the company’s sales are projected to grow significantly in 2021 before stabilizing in the year 2022 going forward. Nordstrom projects a 25% revenue growth in 2021 (Nordstrom, 2020), 28% in 2020 (Finance Yahoo, 2021), and 5.30% in the long term (Finance Yahoo, 2021). As the sales increase, the costs of sales and operating costs are also expected to increase. The projections assume a 10% growth in sales and a 3% growth in interest expense.
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