Once considered the company's greatest asset, sales growth has slowed at Rack in recent years.
Analysts say Rack has an inventory problem and suffers by being connected to a full-price brand.
We visited three Racks to find out more.
Just two years ago, Nordstrom's discount chain, Nordstrom Rack, was considered to be the company's biggest asset, outperforming and outgrowing its full-price business in sales and store locations.
But increasingly it has become a lag on the company's earnings, reporting an 8.1% drop in sales over 2019 in the most recent quarter, while its rivals TJ Maxx and Ross Stores continue to thrive.
Analysts say the store has become chaotic and overrun with inventory. Nordstrom didn't immediately respond to a request for comment.
We visited three Nordstrom Rack stores in two parts of the US to find out more about the shopping experience.
Our first impressions of one of its stores in Madison, Wisconsin were good. Clothing racks were neatly organized and employees were actively keeping displays in check.
There seemed to be a good assortment of recognizable brands and the selection wasn't overwhelming.
Still, some of the clothing seemed to be well out of season. Handy for those hitting hotter climates but less so for locals taking on the cruel midwestern winter.
Next, we headed to a Nordstrom Rack in Manhattan's Midtown district.
The store is close to the busy Herald Square shopping area, key tourist attractions such as the Empire State Building, and a ton of offices, meaning that there are lots of different customers to appeal to.
Our initial impressions were also positive. Commonly messy parts of the store were kept in good order.
And there seemed to be an appropriate amount of inventory on sale, without racks being overstuffed.
Some of the signage in the store didn't match the clothing on offer, however, possibly indicating that the store is using different items to cover up inventory gaps.
A ton of winter clothing was on offer.
And we spotted some well-known designer brands...
...as well as more generic pieces...
...and lesser-known labels.
It didn't necessarily feel like you were getting the most exciting assortment of designer brands.
Next, we headed to Nordstrom Rack's Union Square location. This definitely felt more chaotic.
A mismatch of clearance items was jammed onto racks.
And the displays were more disheveled than in other stores.
Still, it was fairly organized for an off-price store where customers are likely to be riffling through the racks to find the best deals.
We spotted some well-known brands...
...along with designer labels...
...and trendy millennial brands.
GlobalData Retail analyst Neil Saunders has blamed the store's current woes on the lack of discipline in its buying team. "It's almost as if Nordstrom just acquires lots of stuff, which it then shoves into stores," he told Insider.
BMO Capital Markets analyst Simeon Siegel told Insider that Nordstrom Rack is also at a disadvantage to its competitors, TJ Maxx and Ross, for example, because the company operates full-price stores too.
This means that its Rack locations can be used to sell leftover inventory from full-price stores rather than inventory that's been bought at a discount, which is what TJ Maxx would do. That leads to weaker margins for Nordstrom.
Nordstrom's management team has addressed Rack's weakness in recent earnings calls and partly blamed this on difficulty securing inventory because of current supply chain issues.
But Siegel said it's also harder for Rack to attract brands because it has an online store. "Brands prefer the invisible sale done at TJ Maxx," he said. "If you are a brand looking to move product through off-price, seeing it online is a different proposition to believing you can drop boxes off at a TJ Maxx without anyone knowing."
Read the original article on Business Insider