Nordstrom Reports Third Quarter 2009 Earnings

http://www.businesswire.com/news/home/20091112006051/en

SEATTLE--(Business Wire)--
Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $83 million, or $0.38
per diluted share, for the third quarter ended October 31, 2009. For the same
quarter last year, Nordstrom reported net earnings of $71 million, or $0.33 per
diluted share.

Third quarter same-store sales decreased 1.2 percent compared with the same
period in fiscal 2008. Net sales in the third quarter were $1.87 billion, an
increase of 3.5 percent compared with net sales of $1.80 billion during the same
period in fiscal 2008.

THIRD QUARTER SUMMARY

Performance during the third quarter exceeded the internal sales and earnings
plans for the company. Although there is continued uncertainty around consumer
spending, the company experienced an improving trend in same-store sales in each
month of the quarter while effectively managing inventory and expenses.

* Full-line same-store sales in the third quarter decreased 4.2 percent and
sales for Nordstrom Direct increased 16.4 percent compared with the same period
in fiscal 2008. A number of the company`s merchandise categories generated
positive same-store sales during the quarter. Highlights for full-line stores
and Nordstrom Direct combined included Fashion Jewelry, Women`s Better Apparel
and Shoes. The Mid-Atlantic and the South regions were the top-performing
geographic areas for full-line stores relative to the third quarter of 2008,
while the Mid-Atlantic and Northeast regions achieved the largest sequential
improvements over the second quarter of 2009. During the third quarter, the
company opened one Nordstrom full-line store in Cincinnati.
* Nordstrom Rack had positive performance with a same-store sales increase of
3.0 percent in the third quarter compared with the same period in fiscal 2008.
This is the third consecutive quarter of positive same-store sales results.
During the third quarter, the company opened six Nordstrom Rack stores.
* Gross profit, as a percentage of net sales, increased approximately 90 basis
points compared with last year`s third quarter. The improvement in merchandise
margin, as a percentage of net sales, was partially offset by the impact of an
increase in performance-related expense included in buying and occupancy costs.
The company continued to carefully manage inventory levels, with quarter-end
inventory per square foot declining 10.7 percent from the same period in the
prior year. At the same time, the company had better-than-expected sales
improvement, with sales per square foot declining 1.2 percent for the quarter.
The company believes it is well positioned to have a solid flow of fresh
merchandise throughout the holiday season.
* Retail selling, general and administrative expenses increased $10 million
compared with last year`s third quarter. While fixed expenses decreased, they
were more than offset by an increase in performance-related expense due to
higher than planned sales and earnings results. Retail selling, general and
administrative expenses also were impacted by an additional $12 million from
stores opened since the third quarter of 2008. The company opened 4 full-line
stores and 13 Nordstrom Rack stores since the third quarter of 2008, increasing
retail square footage by 1.0 million, or 4.5 percent.
* Credit selling, general, and administrative expenses increased $4 million
compared with last year's third quarter. Based on current credit trends, the
company increased its reserve for bad debt by $6 million. This was partially
offset by $2 million in improvements in Operational and Marketing expenses.

CAPITAL INVESTMENT AND EXPANSION UPDATE

The company`s capital expenditures, net of property incentives, are expected to
total between $325 and $375 million in fiscal year 2010, compared to
approximately $280 million in fiscal year 2009. The company expects to open 3
full-line stores and approximately 15 Nordstrom Rack stores in 2010. In 2011,
the company expects to open 2-3 full-line stores and 13-15 Nordstrom Rack
stores.

During the third quarter of 2009, Nordstrom opened the following stores:

Location Store Name Square Footage

Full-Line Stores
Cincinnati, Ohio Kenwood Towne Centre 144,000

Nordstrom Rack Stores
Austin, Texas Gateway Center 35,000
Los Angeles, California Beverly Connection 30,000
Maple Grove, Minnesota Arbor Lakes 34,000
Pasadena, California Hastings Village 42,000
San Jose, California Westfield Oakridge 30,000
Southlake, Texas The Shops of Southlake 36,000

On November 6, 2009, Nordstrom opened a Nordstrom Rack store at Millenia
Crossing in Orlando, Florida. Also in the fourth quarter, the company plans to
open a Nordstrom Rack store at Rookwood Pavilion in Cincinnati, Ohio.

FISCAL YEAR 2009 OUTLOOK

The company is updating its outlook for the 2009 fiscal year due to the improved
performance in the third quarter, as well as the improved outlook for the
remainder of the year. For the 2009 fiscal year, Nordstrom expects earnings per
diluted share in the range of $1.83 to $1.88, increased from the previous range
of $1.50 to $1.65. The company`s revised expectations for fiscal 2009 compared
with fiscal 2008 are as follows:

Same-store Sales 6 percent to 7 percent decrease
Credit Card Revenues $70 to $75 million increase
Gross Profit (%) 10 to 20 basis point increase
Retail Selling, General and Admin. Expense ($) $15 to $40 million decrease
Credit Selling, General and Admin. Expense ($) $55 to $60 million increase
Total Selling, General and Admin. Expense (%) 80 to 90 basis point increase
Interest Expense, net $5 to $10 million increase
Effective Tax Rate 36.5 percent to 37.0 percent
Earnings per Diluted Share $1.83 to $1.88
Diluted Shares Outstanding 219.4 million

CONFERENCE CALL INFORMATION

The company`s senior management will host a conference call to discuss third
quarter results at 4:45 p.m. Eastern Standard Time today. To listen, please dial
517-308-9140 (passcode: NORD). A telephone replay will be available beginning
approximately one hour after the conclusion of the call by dialing 402-998-0454
(passcode: 6673) until the close of business on November 19, 2009. Interested
parties may also listen to the live call over the Internet by visiting the
Investor Relations section of the company`s corporate Web site at
http://investor.nordstrom.com. An archived webcast will be available in the
Webcasts section through February 10, 2010.

ABOUT NORDSTROM

Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with
183 stores located in 28 states. Founded in 1901 as a shoe store in Seattle,
today Nordstrom operates 112 full-line stores, 68 Nordstrom Racks, two Jeffrey
boutiques, and one clearance store. Nordstrom also serves customers through its
online presence at http://www.nordstrom.com and through its catalogs. Nordstrom,
Inc`s common stock is publicly traded on the NYSE under the symbol JWN.

Certain statements in this news release contain "forward-looking" information
(as defined in the Private Securities Litigation Reform Act of 1995) that
involve risks and uncertainties, including, but not limited to, anticipated
financial outlook for the fiscal year ending January 30, 2010, anticipated
annual same-store sales rate, anticipated store openings, anticipated capital
expenditures for fiscal year 2010 and trends in company operations. Such
statements are based upon current beliefs and expectations of the company`s
management and are subject to significant risks and uncertainties. Actual future
results may differ materially from historical results or current expectations
depending upon factors including but not limited to the impact of deteriorating
economic and market conditions and the resultant impact on consumer spending
patterns, the company`s ability to respond to the business environment and
fashion trends, the company`s ability to safeguard its brand and reputation,
effective inventory management, efficient and proper allocation of the company`s
capital resources,successful execution of the company`s store growth strategy
including the timely completion of construction associated with newly planned
stores, relocations and remodels, all of which may be impacted by the financial
health of third parties, the company`s compliance with applicable banking and
related laws and regulations impacting the company`s ability to extend credit to
its customers, trends in personal bankruptcies and bad debt write-offs,
availability and cost of credit, impact of the current regulatory environment
and financial system reforms, changes in interest rates, disruptions in the
company`s supply chain, the company`s ability to maintain its relationship with
vendors and developers who may be experiencing economic difficulties, the
geographic locations of the company`s stores, the company`s ability to maintain
its relationships with its employees and to effectively train and develop its
future leaders, the company`s compliance with information security and privacy
laws and regulations, employment laws and regulations and other laws and
regulations applicable to the company, successful execution of the company`s
information technology strategy, successful execution of the company`s
multi-channel strategy, risks related to fluctuations in world currencies,
weather conditions and hazards of nature that affect consumer traffic and
consumers' purchasing patterns, the effectiveness of planned advertising,
marketing, and promotional campaigns, and the company`s ability to control
costs. Our SEC reports, including our Form 10-K for the fiscal year ended
January 31, 2009 and its Form 10-Q for the fiscal quarter ended August 1, 2009
contain other information on these and other factors that could affect our
financial results and cause actual results to differ materially from any
forward-looking information we may provide. The company undertakes no obligation
to update or revise any forward-looking statements to reflect subsequent events,
new information or future circumstances.

NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - 3rd Quarter
(unaudited; amounts in millions, except per share data)

Quarter Quarter
ended ended
10/31/09 11/1/08

Net sales $ 1,868 $ 1,805
Credit card revenues 95 74
Total revenues 1,963 1,879
Cost of sales and related buying & occupancy costs (1,210 ) (1,185 )
Selling, general and administrative expenses:
Retail stores, direct and other segments (500 ) (490 )
Credit segment (81 ) (77 )
Earnings before interest and income taxes 172 127
Interest expense, net (38 ) (33 )
Earnings before income taxes 134 94
Income tax expense (51 ) (23 )
Net earnings $ 83 $ 71
Earnings per share
Basic $ 0.38 $ 0.33
Diluted $ 0.38 $ 0.33

Weighted average shares outstanding
Basic 217.1 215.6
Diluted 220.7 218.1

NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - Year-to-Date
(unaudited; amounts in millions, except per share data)

Nine months Nine months
ended ended
10/31/09 11/1/08

Net sales $ 5,719 $ 5,971
Credit card revenues 268 216
Total revenues 5,987 6,187
Cost of sales and related buying & occupancy costs (3,735 ) (3,852 )
Selling, general and administrative expenses:
Retail stores, direct and other segments (1,478 ) (1,528 )
Credit segment (250 ) (184 )
Earnings before interest and income taxes 524 623
Interest expense, net (105 ) (98 )
Earnings before income taxes 419 525
Income tax expense (150 ) (192 )
Net earnings $ 269 $ 333
Earnings per share
Basic $ 1.24 $ 1.54
Diluted $ 1.23 $ 1.52

Weighted average shares outstanding
Basic 216.5 216.9
Diluted 219.0 219.8

NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)

10/31/09 1/31/09 11/1/08
Assets
Current assets:
Cash and cash equivalents $ 484 $ 72 $ 68
Accounts receivable, net 2,016 1,942 1,918
Merchandise inventories 1,193 900 1,278
Current deferred tax assets, net 230 210 196
Prepaid expenses and other 84 93 100
Total current assets 4,007 3,217 3,560
Land, buildings and equipment, net 2,239 2,221 2,215
Goodwill 53 53 53
Other assets 217 170 236
Total assets $ 6,516 $ 5,661 $ 6,064

Liabilities and Shareholders` Equity
Current liabilities:
Commercial paper $ - $ 275 $ 102
Accounts payable 980 563 805
Accrued salaries, wages and related benefits 255 214 202
Other current liabilities 520 525 503
Current portion of long-term debt 356 24 425
Total current liabilities 2,111 1,601 2,037
Long-term debt, net 2,259 2,214 2,215
Deferred property incentives, net 470 435 417
Other liabilities 246 201 233
Commitments and contingencies
Shareholders` equity:
Common stock, no par value: 1,000 shares
authorized; 217.3, 215.4, and 215.4 shares
issued and outstanding 1,051 997 990
Retained earnings 388 223 192
Accumulated other comprehensive loss (9 ) (10 ) (20 )
Total shareholders` equity 1,430 1,210 1,162
Total liabilities and shareholders` equity $ 6,516 $ 5,661 $ 6,064

NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)

Nine months Nine months
ended ended
Operating Activities 10/31/09 11/1/08
Net earnings $ 269 $ 333
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization of buildings and equipment, net 234 222
Amortization of deferred property incentives and other, net (31 ) (30 )
Stock-based compensation expense 24 21
Deferred income taxes, net (45 ) (59 )
Tax benefit from stock-based payments 4 4
Excess tax benefit from stock-based payments (5 ) (4 )
Provision for bad debt expense 175 106
Change in operating assets and liabilities:
Accounts receivable (119 ) (62 )
Merchandise inventories (264 ) (301 )
Prepaid expenses and other assets (13 ) 18
Accounts payable 401 280
Accrued salaries, wages and related benefits 41 (66 )
Other current liabilities (1 ) (83 )
Deferred property incentives 86 87
Other liabilities 45 (12 )
Net cash provided by operating activities 801 454

Investing Activities
Capital expenditures (281 ) (439 )
Change in accounts receivable originated at third parties (129 ) (171 )
Other, net 1 2
Net cash used in investing activities (409 ) (608 )

Financing Activities
Commercial Paper:
(Repayments) proceeds from commercial paper borrowings, net (135 ) 102
Repayment of commercial paper classified as long-term (140 ) -
Proceeds from long-term borrowings, net 399 150
Principal payments on long-term borrowings (24 ) (8 )
Decrease in cash book overdrafts - (45 )
Proceeds from exercise of stock options 15 13
Proceeds from employee stock purchase plan 13 16
Excess tax benefit from stock-based payments 5 4
Cash dividends paid (104 ) (104 )
Repurchase of common stock - (264 )
Other, net (9 ) -
Net cash provided by (used in) financing activities 20 (136 )
Net increase (decrease) in cash and cash equivalents 412 (290 )
Cash and cash equivalents at beginning of period 72 358
Cash and cash equivalents at end of period $ 484 $ 68

NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions, except percentages)

Retail Stores, Direct and Other Segments
Our Retail Stores segment includes our full-line and Rack stores; our Direct segment includes our online store; and our Other segment includes our product development group and corporate center operations. The following tables summarize the combined results of our Retail Stores, Direct and Other segments for the quarter and nine months ended October 31, 2009 compared with the quarter and nine months ended November 1, 2008:

Quarter Quarter
Ended Ended
10/31/09 % of sales1 11/1/08 % of sales1
Net sales $ 1,868 100.0 % $ 1,805 100.0 %

Cost of sales and related buying (1,198 ) (64.2 %) (1,174 ) (65.1 %)

& occupancy costs
Gross profit 670 35.8 % 631 34.9 %
Other revenues (1 ) N/A - N/A

Selling, general and administrative (500 ) (26.8 %) (490 ) (27.1 %)

expenses
Earnings before interest and income taxes 169 9.0 % 141 7.8 %
Interest expense, net (27 ) (1.5 %) (20 ) (1.1 %)
Earnings before income taxes $ 142 7.6 % $ 121 6.7 %

Nine Months Nine Months
Ended Ended
10/31/09 % of sales1 11/1/08 % of sales1
Net sales $ 5,719 100.0 % $ 5,971 100.0 %

Cost of sales and related buying & occupancy costs (3,698 ) (64.7 %) (3,817 ) (63.9 %)
Gross profit 2,021 35.3 % 2,154 36.1 %
Other revenues (1 ) N/A (1 ) N/A

Selling, general and administrative expenses (1,478 ) (25.8 %) (1,528 ) (25.6 %)
Earnings before interest and income taxes 542 9.5 % 625 10.5 %
Interest expense, net (74 ) (1.3 %) (59 ) (1.0 %)
Earnings before income taxes $ 468 8.2 % $ 566 9.5 %

1Subtotals and totals may not foot due to rounding.

NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; amounts in millions)

Credit Segment
Our Credit segment earns finance charges and late fee income through operation of the Nordstrom private label and Nordstrom VISA credit cards. The following tables summarize the results of our Credit segment for the quarter and nine months ended October 31, 2009 compared with the quarter and nine months ended November 1, 2008:

Quarter Quarter
ended ended
10/31/09 11/1/08

Credit card revenues $ 96 $ 74
Interest expense (11 ) (13 )
Net credit card income 85 61
Cost of sales - loyalty program (12 ) (11 )
Selling, general and administrative expenses:
Operational and marketing expense (25 ) (27 )
Bad debt expense (56 ) (50 )
Loss before income taxes $ (8 ) $ (27 )

Nine months Nine months
ended ended
10/31/09 11/1/08

Credit card revenues $ 269 $ 217
Interest expense (31 ) (39 )
Net credit card income 238 178
Cost of sales - loyalty program (37 ) (35 )
Selling, general and administrative expenses:
Operational and marketing expense (75 ) (78 )
Bad debt expense (175 ) (106 )
Loss before income taxes $ (49 ) $ (41 )

NORDSTROM, INC.

ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings,
and other forums which may be considered non-GAAP financial measures within the
meaning of Regulation G of the Securities and Exchange Commission. The following
disclosure provides additional information regarding our Adjusted Debt to
EBITDAR as of October 31, 2009:

Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe
that our debt levels are best analyzed using this measure. Our goal today is to
manage debt levels at a point which we believe will help us maintain an
investment grade credit rating as well as operate with an efficient capital
structure for our size, growth plans and industry. Investment grade credit
ratings are important to maintaining access to a variety of short-term and
long-term sources of funding, and we rely on these funding sources to continue
to grow our business. We believe a higher ratio, among other factors, could
result in rating agency downgrades. In contrast, we believe a lower ratio would
result in a higher cost of capital and could negatively impact shareholder
returns. As of October 31, 2009, our Adjusted Debt to EBITDAR was 2.8 compared
to 2.3 as of November 1, 2008. The increase was primarily the result of a
decrease in earnings before interest and income taxes for the 12 months ended
October 31, 2009 compared with the 12 months ended November 1, 2008.

Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP
and should not be considered a substitute for debt to net earnings, net earnings
or debt as determined in accordance with GAAP. In addition, Adjusted Debt to
EBITDAR does have limitations:

* Adjusted Debt is our best estimate of the total company debt we would incur if
we had purchased the property associated with our operating leases;
* EBITDAR does not reflect our cash expenditures, or future requirements for
capital expenditures or contractual commitments, including leases, or the cash
requirements necessary to service interest or principal payments on our debt;
and
* Other companies in our industry may calculate Adjusted Debt to EBITDAR
differently than we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, we analyze Adjusted Debt to EBITDAR in
conjunction with other GAAP financial and performance measures impacting
liquidity, including operating cash flows, capital spending and net earnings.
The closest GAAP measure is debt to net earnings, which was 7.8 and 5.0 for the
third quarter of 2009 and 2008, respectively. The following is a reconciliation
of debt to net earnings and Adjusted Debt to EBITDAR:

20091 20081

Debt2 $ 2,615 $ 2,742
Add: rent expense x 83 320 284
Adjusted Debt $ 2,935 $ 3,026

Net earnings 337 545
Add: income tax expense 205 334
Add: interest expense, net 138 128
Earnings before interest and income taxes 680 1,007

Add: depreciation and amortization of buildings and equipment 314 288
Add: rent expense 40 36
EBITDAR $ 1,034 $ 1,331

Debt to Net Earnings 7.8 5.0
Adjusted Debt to EBITDAR 2.8 2.3

1The components of adjusted debt are as of October 31, 2009 and November 1,
2008, while the components of EBITDAR are for the 12 months ended October 31,
2009 and November 1, 2008.

2Debt includes $102 of commercial paper borrowings outstanding as of November 1,
2008. There were no outstanding commercial paper borrowings as of October 31,
2009.

3The multiple of eight times rent expense used to calculate adjusted debt is our
best estimate of the debt we would record for our leases which are classified as
operating if we had purchased the property.

NORDSTROM, INC.

FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings,
and other forums which may be considered non-GAAP financial measures within the
meaning of Regulation G of the Securities and Exchange Commission. The following
disclosure provides additional information regarding our free cash flow for the
nine months ended October 31, 2009 and November 1, 2008:

Free cash flow is one of our key liquidity measures, and we believe that our
cash levels are more appropriately analyzed using this measure. Free cash flow
is not a measure of liquidity under GAAP and should not be considered a
substitute for operating cash flows as determined in accordance with GAAP. In
addition, free cash flow does have limitations:

* Free cash flow does not necessarily represent funds available for
discretionary use and is not necessarily a measure of our ability to fund our
cash needs; and
* Other companies in our industry may calculate free cash flow differently than
we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, we analyze free cash flow in conjunction
with other GAAP financial and performance measures impacting liquidity,
including operating cash flows. The closest GAAP measure is net cash provided by
operating activities, which was $801 and $454 for the nine months ended October
31, 2009 and November 1, 2008. The following is a reconciliation of our net cash
provided by operating activities and free cash flow:

Nine months Nine months

ended
ended
10/31/09 11/1/08

Net cash provided by operating activities $ 801 $ 454
Less: Capital expenditures (281 ) (439 )
Change in accounts receivable originated at third parties (129 ) (171 )
Cash dividends paid (104 ) (104 )
Decrease in cash book overdrafts - (45 )
Free cash flow $ 287 $ (305 )

Nordstrom, Inc.
Investor Contact:
Rob Campbell, 206-303-3290
or
Media Contact:
Colin Johnson, 206-373-3036

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