Nordstrom Reports Third Quarter Results and Announces Expanded Share Repurchase And Approval of Quarterly Dividend
SEATTLE, Nov. 19 /PRNewswire-FirstCall/ -- Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $165.7 million, or $0.68 per diluted share for the third quarter ended November 3, 2007. For the same period last year, net earnings and earnings per diluted share were $135.7 million and $0.52, respectively. Total sales in the third quarter were $1.97 billion, an increase of 5.3 percent compared to sales of $1.87 billion during the same period in fiscal 2006. Third quarter same-store sales increased 2.2 percent.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001011/NORDLOGO)
Our results include $20.9 million, net of tax, or $0.09 per diluted share, for the sale of the Faconnable business, which closed during the third quarter. Third quarter adjusted earnings per diluted share of $0.59, which excludes the gain on the sale of Faconnable, increased 13 percent compared to the same quarter last year. Included in our earnings per diluted share is a $0.01 benefit of a reduction in weighted average shares outstanding resulting from our stock repurchase program during the quarter.
The 53rd week in fiscal 2006 created a timing shift in the 4-5-4 calendar for fiscal 2007, which has 52 weeks. This timing shift positively impacted sales results for the third quarter of 2007.
THIRD QUARTER HIGHLIGHTS
Our focus continues to be to grow market share by providing customers with a well-edited selection of designer, luxury, and quality fashion merchandise. We will also continue to strive to offer friendly, knowledgeable, welcoming service, both in our stores and online with an integrated offering and experience. The company is focused on improving results through existing and new stores and Nordstrom.com.
-- Same-store sales increased 2.2 percent for the quarter, within the
company's revised low to mid-single digit same-store sales outlook.
Merchandise categories with performance above the same-store average
for the quarter were designer product across categories, accessories,
and men's apparel.
-- Gross profit, as a percent of sales, decreased 38 basis points compared
to last year's third quarter. Merchandise margin rate was unfavorably
impacted by increased markdowns. During the quarter, the company made
good progress in aligning inventory levels to business trends. We
believe inventories will be in-line by year-end.
-- Selling, general and administrative expenses, as a percent to sales,
decreased 70 basis points versus the same period of the prior year
primarily due to reduced performance based incentives.
-- The company opened three stores in the third quarter in Natick, Mass.,
Novi, Mich., and Denver, Colo. and a Nordstrom Rack store in Tukwila,
Wash. These stores have generated a great response from customers and
to date have exceeded expectations.
SHARE REPURCHASE & CAPITAL STRUCTURE
The company's board of directors has authorized an additional $1.0 billion in share repurchase to bring the total authorization to $2.5 billion. The increased share repurchase authorization reflects management and the board's continued confidence in the company's long-term growth potential, financial outlook and positive cash flow generation. In advance of the revised authorization, management and the board of directors conducted a review of the company's capital structure and concluded that Nordstrom should add a moderate amount of leverage, recognizing the greater capacity for debt associated with the credit card business and the general under-leverage position of the balance sheet relative to current operating cash flows. Management plans to establish a new balance sheet leverage target, which should lower the company's weighted average cost of capital and still support the current range of credit ratings (low single "A" with S&P, "Baa1" with Moody's).
Nordstrom repurchased approximately 16.4 million shares of its common stock during the third quarter for approximately $750 million. The amount spent during the third quarter represents roughly half of the $1.5 billion share repurchase program that was authorized at the beginning of the quarter. Repurchases under the revised program may be made through the end of 2009. The actual number and timing of share repurchases will be subject to market conditions and applicable SEC rules.
CAPITAL INVESTMENT UPDATE
Nordstrom's board of directors recently approved the company's budget for capital expenditures for the 2008 through 2012 fiscal years. The total amount planned is for $3.0 billion over the five years, with approximately 80% of the capital allocated to new stores, store relocations and store remodels.
QUARTERLY DIVIDEND
Our board of directors has declared a quarterly dividend of $0.135 per share, payable on December 14, 2007, to shareholders of record on November 30, 2007.
2007 OUTLOOK
For the fiscal year ending February 2, 2008, the company anticipates earnings per diluted share in the range of $2.87 to $2.91. Our outlook includes the effects of the company's securitization transaction backed by the co-branded Visa and private label receivables, the gain on the sale of Faconnable, share repurchases through the third quarter, and other non- comparable items. Outlined in the table below are the anticipated relative effects on earnings per diluted share from non-comparable operating items expected for the remaining quarter of the 2007 fiscal year.
Updated full-year 2007 operating plan versus the prior year:
Fiscal 2007
Same-store Sales 3% to 4% increase
Gross Profit (%) approximately flat
Selling, General and
Admin. Expense (%) 10 to 25 basis point increase
Interest Expense, net $20 to $25 million increase
Other Income $25 to $35 million increase
Effective Tax Rate 38.6%
Earnings per Diluted Share (which
includes the gain on the sale
of Faconnable) $2.87 to $2.91
Diluted Shares Outstanding 250.0 million
Prior Year Earnings per
Diluted Share $2.55
Actual and planned performance for the quarters of fiscal 2007:
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter 2007
(Actual) (Actual) (Actual)(2) (Plan) (Plan)
Same-store sales: 9.5 % 5.9 % 2.2 % approximately 3% to 4%
flat
Earnings per
diluted share:
(a) Expected
results from
comparable
operations: $0.59 $0.79 $0.57 $0.93 to $2.88 to
$0.97 $2.92
(b) Impact of
including non-
comparable events:
1. Securitization
transaction (1) ($0.01) ($0.03) ($0.02) ($0.01) ($0.06)
2. 53rd week
timing shift &
calendar $0.02 ($0.03) $0.03 ($0.02) -
3. 2006 Visa /
MasterCard
settlement - ($0.02) - - ($0.02)
4. 2006 53rd
week results - - - ($0.02) ($0.02)
5. Gain on sale
of Faconnable (2) - - $0.09 - $0.09
Reported results
(combine a+b
above) $0.60 $0.71 $0.68 $0.88 to $2.87 to
$0.92 $2.91
(1) Notes on the $850 million securitization transaction:
-- With the completion of the securitization transaction, the company
began a new accounting treatment for the co-branded Visa receivables
and securitized debt, which is secured by both the co-branded Visa and
private label receivables. In the first quarter, pre-existing co-
branded Visa receivables totaling $943 million were recorded on the
balance sheet initially at fair value with no allowance for credit
losses. Normal write-offs for uncollectible Visa receivables and
other costs net, estimated at $20 million, will be recorded in Other
Income over the eight month period following the transaction. This
period is equal to the average repayment life of the acquired
receivables. This expense activity is expected to reduce annual
earnings per diluted share by $0.06 and will be non-recurring in
future periods beyond the 2007 fiscal year.
-- Income and expenses from our co-branded Visa receivables that were
previously reported net in Other income (under securitization
accounting guidance) are reclassified in our earnings statement. In
fiscal 2007, bad debt and write-off expense is expected to increase
approximately $25 to $35 million and impact the SG&A rate by 30 to 40
basis points, with an accelerated portion in the second quarter.
Interest expense, partially offset by interest income, is expected to
increase approximately $20 to $25 million. Other income is expected to
increase $35 to $45 million. The net combination of these expenses and
income is anticipated to reduce annual earnings per diluted share by
$0.01.
(2) Notes on the sale of Faconnable:
-- We closed the sale of the Faconnable business in the third quarter of
2007, and the company realized a gain of $33.9 million on that sale.
The gain on the sale of Faconnable, net of tax of $13 million, had an
impact of $0.09 on earnings per diluted share.
FOURTH QUARTER 2007 OUTLOOK
For the fourth quarter of 2007, earnings per diluted share are expected in the range of $0.88 to $0.92, including a $0.05 negative impact from the non- comparable items described in the performance table earlier.
The timing shift from the fiscal 2006 53rd week is expected to have a negative impact on the fourth quarter 2007 sales results. During the quarter, the impact of the shift will be more significant than it was in the first three quarters of 2007, as a week of holiday shopping is shifting from December to November. When compared to the planned same-store sales rate of approximately flat for the 2007 fourth quarter, the monthly same-store sales rates in November are expected to be above the anticipated quarterly rate. In December, the monthly same-store sales rate is expected to be below the anticipated quarterly rate.
CONFERENCE CALL INFORMATION:
Company management will be hosting a conference call and webcast to discuss third quarter results at 4:30 p.m. (ET) today. To participate, please dial 212-547-0138 ten minutes prior to the call (passcode: NORD). A telephone replay will be available by dialing 866-396-6249 beginning approximately one hour after the conclusion of the call until 2:59 a.m. (ET) on November 23, 2007. Interested parties may also access the call in listen-only mode over the Internet by visiting the Investor Relations section of the company's corporate Web site at http://www.nordstrom.com. An archived version of the webcast will be available at this location until December 17, 2007.
Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 157 US stores located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 101 full-line stores, 51 Nordstrom Racks, two Jeffrey boutiques, one free-standing shoe store, and two clearance stores. In addition, Nordstrom serves customers through its online presence at http://www.nordstrom.com and through its catalogs. Nordstrom, Inc. 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 involves risks and uncertainties, including anticipated results for the fiscal year ending February 2, 2008 and our fourth quarter, anticipated monthly, quarterly and annual same-store sales rate, planned capital structure and targeted leverage position, capital investments, the timing and amounts of share repurchases, and trends in company operations. Actual future results and trends may differ materially from historical results or current expectations depending upon factors including, but not limited to, our ability to respond to the business environment and fashion trends, effective inventory management, the impact of economic and competitive market forces, successful execution of our store growth strategy including the timely completion of construction associated with newly planned stores, relocations, and remodels,, our 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 our multi-channel strategy, our ability to safeguard our brand and reputation, efficient and proper allocation of our capital resources, successful execution of our technology strategy, the impact of terrorist activity or war on our customers and the retail industry, trends in personal bankruptcies and bad debt write-offs, changes in interest rates, our ability to maintain our relationships with our employees, our ability to control costs, weather conditions and hazards of nature that affect consumer traffic and consumers' purchasing patterns, and the timing and amounts of share repurchases by the company. Our SEC reports, including our Form 10-K for the fiscal year ended February 3, 2007, 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.
Investor Contact: Media Contact:
Chris Holloway, 206-303-3290 Michael Boyd, 206-373-3038
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - 3rd Quarter
(unaudited; amounts in thousands, except per share data and percentages)
Quarter % of sales(1) Quarter %of sales(1)
ended (except as ended (except as
11/3/07 indicated) 10/28/06 indicated)
Net sales $1,970,444 100.0% $1,872,103 100.0%
Cost of sales and
related buying
& occupancy costs (1,228,506) (62.3%) (1,160,123) (62.0%)
Gross profit 741,938 37.7% 711,980 38.0%
Selling, general and
administrative
expenses (552,632) (28.0%) (538,210) (28.7%)
Gain on sale of
Faconnable 33,925 1.7% - -
Operating income 223,231 11.3% 173,770 9.3%
Interest expense, net (20,408) (1.0%) (11,419) (0.6%)
Other income, net 68,779 3.5% 58,819 3.1%
Earnings before income
tax expense 271,602 13.8% 221,170 11.8%
Income tax expense (105,878) (39.0%)(2) (85,497) (38.7%)(2)
Net earnings $165,724 8.4% $135,673 7.2%
Earnings per share
Basic $0.69 $0.53
Diluted $0.68 $0.52
ADDITIONAL DATA
Weighted average shares outstanding
Basic 241,521 256,757
Diluted 245,344 261,616
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income taxes.
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - Year to Date
(unaudited; amounts in thousands, except per share data and percentages)
Nine Months % of sales(1) Nine Months % of sales(1)
ended (except as ended (except as
11/3/07 indicated) 10/28/06 indicated)
Net sales $6,313,814 100.0% $5,929,794 100.0%
Cost of sales and
related buying
& occupancy
costs (3,957,178) (62.7%) (3,729,759) (62.9%)
Gross profit 2,356,636 37.3% 2,200,035 37.1%
Selling, general and
administrative
expenses (1,722,780) (27.3%) (1,611,982) (27.2%)
Gain on sale
of Faconnable 33,925 0.5% - -
Operating income 667,781 10.6% 588,053 9.9%
Interest expense,
net (44,431) (0.7%) (34,953) (0.6%)
Other income, net 194,946 3.1% 173,508 2.9%
Earnings before
income tax
expense 818,296 13.0% 726,608 12.3%
Income tax
expense (315,345) (38.5%)(2) (280,950) (38.7%)(2)
Net earnings $502,951 8.0% $445,658 7.5%
Earnings per share
Basic $2.01 $1.70
Diluted $1.98 $1.67
ADDITIONAL DATA
Weighted average shares outstanding
Basic 250,164 261,920
Diluted 254,475 266,893
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income taxes.
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in thousands)
11/3/07 2/3/07 10/28/06
Assets
Current assets:
Cash and cash
equivalents $ 107,913 $ 402,559 $ 208,715
Accounts receivable,
net 1,734,043 684,376 667,748
Investment in asset
backed securities - 428,175 313,656
Merchandise
inventories 1,242,163 997,289 1,228,230
Current deferred
tax assets, net 190,264 169,320 169,858
Prepaid expenses
and other 68,409 60,474 65,711
Total current assets 3,342,792 2,742,193 2,653,918
Land, buildings and
equipment, net 1,910,193 1,757,215 1,748,395
Goodwill 53,613 51,714 51,714
Acquired tradename - 84,000 84,000
Other assets 180,854 186,456 170,355
Total assets $5,487,452 $4,821,578 $4,708,382
Liabilities and Shareholders' Equity
Current liabilities:
Commercial paper $ 392,000 $ - $ -
Accounts payable 738,037 576,796 758,402
Accrued salaries,
wages and related
benefits 265,657 339,965 253,440
Other current
liabilities 437,884 433,487 385,767
Income taxes payable 42,422 76,095 42,970
Current portion of
long-term debt 209,019 6,800 106,572
Total current
liabilities 2,085,019 1,433,143 1,547,151
Long-term debt, net 1,489,916 623,652 624,631
Deferred property
incentives, net 354,814 356,062 351,733
Other liabilities 249,666 240,200 223,262
Commitments and contingent liabilities
Shareholders' equity:
Common stock, no par
value: 1,000,000 shares
authorized; 232,034,
257,313 and 256,904
shares issued and
outstanding 927,527 826,421 791,678
Retained earnings 407,758 1,350,680 1,171,364
Accumulated other
comprehensive loss (27,248) (8,580) (1,437)
Total shareholders'
equity 1,308,037 2,168,521 1,961,605
Total liabilities and
shareholders'
equity $5,487,452 $4,821,578 $4,708,382
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in thousands)
Nine Months Nine Months
ended ended
11/3/07 10/28/06
Operating Activities
Net earnings $ 502,951 $ 445,658
Adjustments to reconcile net
earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization of
buildings and equipment 202,523 205,816
Gain on sale of Faconnable (33,925) -
Amortization of deferred property
incentives and other, net (30,190) (25,255)
Stock-based compensation expense 20,875 25,075
Deferred income taxes, net (33,443) (49,755)
Tax benefit of stock-based payments 27,203 29,691
Excess tax benefit from
stock-based payments (25,228) (25,384)
Provision for bad debt expense 71,334 10,715
Change in operating assets
and liabilities:
Accounts receivable (1,143,339) (38,652)
Investment in asset
backed securities 420,387 242,204
Merchandise inventories (282,554) (235,623)
Prepaid expenses (10,084) (10,092)
Other assets (28,481) (4,203)
Accounts payable 131,625 213,294
Accrued salaries, wages
and related benefits (66,536) (34,861)
Other current liabilities (60) (22,559)
Income taxes payable (21,902) (38,647)
Deferred property incentives 41,839 13,779
Other liabilities 2,487 11,328
Net cash (used in) provided
by operating activities (254,518) 712,529
Investing Activities
Capital expenditures (358,119) (187,748)
Proceeds from sale of Faconnable 215,761 -
Proceeds from sale of assets 12,205 -
Purchases of short-term investments - (109,550)
Sales of short-term investments - 163,550
Other, net 3,471 (6,380)
Net cash used in investing activities (126,682) (140,128)
Financing Activities
Proceeds from commercial paper 392,000 -
Proceeds from long-term borrowings 1,220,000 100,000
Principal payments on long-term debt (176,838) (306,465)
Increase (decrease) in cash book
overdrafts 23,036 (21,511)
Proceeds from exercise of stock options 32,102 38,917
Proceeds from employee stock purchase plan 17,591 16,300
Excess tax benefit from stock-based payments 25,228 25,384
Cash dividends paid (102,912) (83,139)
Repurchase of common stock (1,339,999) (595,521)
Other, net (3,654) (307)
Net cash provided by (used in)
financing activities 86,554 (826,342)
Net decrease in cash and cash equivalents (294,646) (253,941)
Cash and cash equivalents at
beginning of period 402,559 462,656
Cash and cash equivalents at
end of period $ 107,913 $ 208,715
NORDSTROM, INC.
GAAP TO NON-GAAP RECONCILIATIONS
(unaudited; dollar amounts in thousands, except per share and per square foot
amounts)
GAAP and Non-GAAP Financial Measures:
For the quarter ended November 3, 2007, the company reports adjusted pre- tax margin, adjusted net earnings and adjusted earnings per diluted share, which exclude the gain on the sale of Faconnable and adjusted inventory per square foot which excludes inventory related to the Faconnable business. These adjusted amounts are non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission and are not measures of operating performance calculated in accordance with generally accepted accounting principles ("GAAP"). As a result, these measures should not be considered in isolation of, or as a substitute for pre-tax margin, net earnings, earnings per diluted share, or inventory per square foot. Adjusted pre-tax margin, adjusted net earnings, adjusted earnings per diluted share, and adjusted inventory per square foot as the company calculates them, may not be comparable to similarly titled measures employed by other companies. Management believes that because the gain on sale of Faconnable is non- recurring in nature, the use of these non-GAAP financial measures enable management and investors to evaluate, and compare from period to period, the company's results from operations in a more meaningful and consistent manner. Management uses pre-tax margin, net earnings, earnings per diluted share, and inventory per square foot excluding this non-recurring item as an internal measure of business operating performance. A reconciliation of reported GAAP amounts to the adjusted non-GAAP financial measures is included below.
Adjustment due to
sale
GAAP of Faconnable As Adjusted
Pre-tax margin 13.8 % (1.7)% 12.1 %
Increase in net
earnings 22 % (15)% 7 %
Earnings per
diluted share 0.68 (0.09) 0.59
Increase in
inventory per
square foot over
last year 0 % 2 % 2 %
SOURCE Nordstrom, Inc.
11/19/2007
CONTACT: investors, Chris Holloway, +1-206-303-3290, or media, Michael
Boyd, +1-206-373-3038, both of Nordstrom, Inc.
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Web site: http://www.nordstrom.com