Nordstrom Sells Credit Card Portfolio to TD Bank
Brand name clothing store Nordstrom has decided to sell its credit card portfolio to TD Bank Group, giving the Toronto-based bank exclusive rights to issue private label credit cards and branded Visa cards for its stores in the United States. The portfolio currently has $2.2 billion in receivables.
This may not change much from the customers’ perspective, but it will drastically change the way Nordstrom operates.
The retailer will still be responsible for customer service on its branded cards, but it will not be directly financing purchases for its members. Instead, Nordstrom plans to focus on building more brick and mortar stores and expanding its online sales. The company will still get a large cut of the credit card profits, but it will share them with TD Bank. Currently, credit card profits represent one-sixth of Nordstrom’s earnings before taxes.
The deal should be finalized in the second half of 2015. Nordstrom will remain in control of the loyalty program and debit cards issued to its customers, but it will leave the credit card sector to TD Bank. The company did not disclose the purchase price of the credit card portfolio, but they did say credit card sales are expected to increase by 5% this year.
If everything goes well, this could be a very lucrative opportunity for TD Bank. Just last year, the credit card sector of Nordstrom’s operations pulled in $396 million before taxes, which turned into $184 million after expenses. With the growth the store is expecting in the next few years, credit card sales could increase substantially in the near future.