THE WALL STREET JOURNAL. ** Monday, August 19, 2019 |B3
Nice,’” Pete Nordstrom said in
a 2017 interview. “Sometimes I
worry that we’re too nice. We
have to be super accommodat-
ing with customers, but we
also have to pivot and be
sharp businesspeople who ne-
gotiate in the best interest oftinue to fully cooperate,” a
company spokeswoman said in
an emailed statement.
FedEx bans shipments of
firearms outside the U.S., ac-
cording to the company’s ser-
vice guide. Domestically, such
shipments are allowed pro-
vided the shipper and recipient
meet certain criteria, such as
compliance with licensing
laws.
Chinese authorities are al-
ready investigating FedEx over
the mishandling of packages
destined for Chinese telecom-
gear maker Huawei Technolo-
gies Co. FedEx has apologized
over the mishandling, which
occurred in May, and said it is
cooperating with authorities in
that probe.
State media accused FedEx
of knowingly violating Chinese
laws, noting that the alleged
gun was shipped during the
government probe into the
mishandled deliveries.
In its Sunday evening news-
cast, China Central Television
said FedEx must be severely
punished for actions that have
“gravely harmed China’s public
security” and “definitely aren’t
occasional operational errors.”BEIJING—Chinese police are
investigating the presence of a
gun in a package shipped by
FedEx Corp. to China from the
U.S., the latest scrutiny di-
rected at the American ship-
ping company by Chinese au-
thorities.
The package was sent by a
U.S. client to a sports-gear
company in China’s southern
Fujian province, police in the
provincial capital of Fuzhou
said Sunday.
Fuzhou police launched the
probe after receiving a report
recently and confiscated the
gun, according to a microblog
post by police in Fuzhou’s
Jin’an district. The post didn’t
name the client who sent the
package or the company that
received it.
Chinese law prohibits the
delivery of firearms, and bring-
ing firearms into the country
requires a number of permits,
including from public security
and customs authorities.
FedEx said it had notified
the authorities about this ship-
ment on June 14. “We take this
matter seriously, and will con-BYCHUNHANWONGChinese Probe Gun
In FedEx Package
Novartis AG Chief Execu-
tive Vas Narasimhan has spent
part of his 18 months at the
helm of the drug manufacturer
cleaning up issues that
emerged before his watch.
Now, he is facing a storm of
his own making.
Dr. Narasimhan said on a
call with analysts this month
that the company kept a data-
manipulation issue under
wraps while the Food and
Drug Administration com-
pleted its review of Novartis’s
Zolgensma, the world’s most
expensive drug. The Swiss
company has said it wanted to
finish its own review before
alerting the FDA, which it
eventually did.
That timeline, however, has
triggered scrutiny by the regu-
lator and drawn the ire of a
handful of prominent politi-
cians, casting a shadow over
Dr. Narasimhan’s short tenure.
“He’s certainly in big dan-
ger of losing credibility,” said
Brad Loncar, an investor who
runs an exchange-traded fund
of biotech companies.
“They’ve handled this in just
about the worst way possible.”
Mr. Loncar doesn’t own shares
in Novartis.
The FDA has referred the
Zolgensma matter to its Office
of Criminal Investigations to
begin a preliminary inquiry,
according to a person familiar
with the events. Submitting
false data to the agency as
part of a new-drug application
could be a crime if investiga-
tors prove the actions were in-
tentional and not an oversight.
Novartis says it hasn’t been
notified of the referral. The
FDA declined to comment.
The manipulation occurred
at AveXis, a separate company
that developed the drug and
that Novartis later bought. Dr.
Narasimhan has said that the
lag in telling the FDA about
the issue was unrelated to the
approval timeline for Zol-
gensma. Novartis has said
those responsible for the ma-
nipulation are being ousted.
“We tried to do all of the
right things,” Dr. Narasimhan
said on the analyst call. He de-
clined to comment for this ar-
ticle.
Dr. Narasimhan, a 42-year-
old Harvard-educated medical
doctor, made a splash at No-
vartis after taking the top job.
He promised a technology-led
reboot of the company’s re-
search and development and
moved quickly to shed lower-
growth businesses.
Dr. Narasimhan is deeply in-
vested in the success of Zol-
gensma, which forms a pillar
of his strategy to pivot the
company toward cutting-edge
medicines. The $8.7 billion ac-
quisition of AveXis, which de-
veloped Zolgensma and where
the manipulation occurred,
was one of his first big bets as
CEO.
The drug is one of the first
gene therapies to go on sale in
the U.S., but it has also at-
tracted scrutiny for its price
tag—$2.1 million for the one-
time treatment. It treats spinal
muscular atrophy in small
children by providing a work-
ing version of the faulty gene
that causes the condition.
The FDA has said it can stay
on the market since the data
manipulation issue doesn’t
change its view that Zol-
gensma is safe and effective.
The data manipulation dis-
closure has caused a firestorm
in Washington, when drug
prices have become a hot-but-
ton political issue. Five sena-
tors, including Democratic
presidential candidates Sens.
Elizabeth Warren of Massa-
chusetts and Bernie Sanders of
Vermont, recently wrote a let-
ter to the FDA, urging the
agency to make a forceful re-
sponse to Novartis.
FDA officials are expected
to meet with congressional
staff to discuss the issue in the
coming week, according to an
agency official.
BYDENISEROLAND
ANDTOMBURTON
Novartis
CEO Under
Fire Over
Drug Data
‘We tried to do
all of the right
things,’
Novartis CEO
Vas
Narasimhan
told analysts.BUSINESS NEWS
rently have a CEO. It is run
jointly by Pete Nordstrom and
Erik Nordstrom, who share the
title of co-president. A third
brother, Blake Nordstrom, who
also was a co-president, died
unexpectedly in January after
disclosing he had cancer.
Pete focuses on merchan-
dising and the off-price Rack
division. Erik concentrates on
the full priced stores and e-
commerce. They divvy up cor-
porate functions.
The brothers make all major
decisions together, often hash-
ing out issues in a Monday
morning meeting, said former
and current employees.
The family’s enduring pres-
ence created the cult of cus-
tomer service that endeared
Nordstrom to generations of
shoppers, former employees
said. But it also bred insular-
ity. In meetings internally and
with suppliers, executives can
be polite to a fault, unwilling
to make tough decisions or
push for a better deal, the peo-
ple said.
“There is a saying inside
the company, ‘Nordstromour business.”
Nordstrom’s recent stum-
bles have left some analysts
puzzled.
“It’s an enigma why their
business isn’t better,” said
Chuck Grom, a senior analyst
with Gordon Haskett Research
Advisors. “They have one of
the best websites. They don’t
have too many stores.”
Nordstrom took pains to
avoid some of the mistakes
that other department stores
made. It didn’t overexpand and
today has just 118 U.S. depart-
ment stores and 248 off-price
Rack stores. While other
chains have been closing hun-
dreds of locations, Nordstrom
continues to build stores.
Although slow to jump into
e-commerce—only about 6% of
its sales were digital a decade
ago, according to a former em-
ployee—Nordstrom moved ag-
gressively.
It bought the flash-sale
website HauteLook in 2011 and
Trunk Club, an online clothing
subscription service, in 2014.
It rolled out new services that
melded e-commerce and physi-cal stores, such as same-day
shipping for online orders that
pulled items from local stores
in select markets. And it
changed its compensation to
reward employees not just for
sales they make at a store but
also for online sales in the sur-
rounding market.
In 2013, before many retail-
ers fully understood the threat
of Amazon.com Inc. and other
digital newcomers, Nordstrom
posted signs in its corporate
offices that urged employees
to think like a startup. It
poached dozens of employees
from Amazon.
Today, e-commerce ac-
counts for nearly one-third of
the company’s $15.9 billion in
annual sales, far higher than
most of its rivals.
The investments haven’t al-
ways paid off. In 2016, Nord-
strom wrote down the value of
Trunk Club by more than half
of the $350 million purchase
price.
From 2013 through 2018,
earnings before interest and
taxes fell 38%, while revenue
climbed by nearly one-third.Nordstrom Inc. invested
heavily in e-commerce, didn’t
open too many cavernous
stores and has been quick to
experiment with new types of
shopping formats, including
stores that don’t carry any
clothes.
Yet it is suffering the same
fate as department stores that
innovated less, with year-over-
year sales and profits expected
to fall for the second consecu-
tive quarter when it reports
results on Wednesday. Its
stock is the second-worst-per-
forming in the S&P 500 retail
index behind shares of Macy’s
Inc., falling 52% over the past
12 months through Friday’s
close. During that period, the
index was roughly flat.
Its performance has led
some directors to push for
bringing in an outsider to re-
place the two great-grandsons
of the founder who run the
company, as The Wall Street
Journal previously reported.
Unwilling to relinquish stew-
ardship of the 118-year-old re-
tailer, the family is considering
a proposal that would boost its
roughly one-third stake to over
50%, though it isn’t yet clear if
the board will be receptive.
Also unclear is whether a
fresh set of eyes would solve
Nordstrom’s woes. Some of its
problems stem from the fact
that it operates department
stores in malls where fewer
people are shopping as they
buy more online and from up-
start brands. Other depart-
ment stores, including Macy’s
and J.C. Penney Co., are suf-
fering, too.
Nordstrom has had only one
nonfamily CEO since it was
founded in 1901. John Whit-
acre spent two decades work-
ing his way up the company
ranks before he was named
CEO in 1997. He resigned in
2000.
“John had the clear support
of the family and yet it was
still a challenging dynamic,”
said Kathy Gersch, who was
Nordstrom’s vice president of
finance during that time.
Nordstrom doesn’t cur-BYSUZANNEKAPNERNordstrom Falters Despite Efforts
The retailer is building stores while other chains have been closing locations. A off-price Rack store in New York that recently opened.RICHARD B. LEVINE/ZUMA PRESSOutofStyle
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