UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission file number 001-15059

Nordstrom, Inc.

Registrant’s telephone number, including area code: 206-628-2111

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act 12b-2). YES þ NO o

     As of July 30, 2004 the aggregate market value of the Registrant’s voting and non-voting stock held by non-affiliates of the Registrant was approximately $4.8 billion using the closing sales price on that day of $43.90.

     On March 4, 2005, 136,787,020 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of Nordstrom, Inc. Annual Report to Shareholders for fiscal year ended January 29, 2005 are incorporated into Parts I, II and IV

2. Portions of Proxy Statement for 2005 Annual Meeting of Shareholders scheduled to be held on May 24, 2005 are incorporated into Part III

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TABLE OF CONTENTS

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PART I

Item 1. Business.

Nordstrom incorporated in the State of Washington in 1946 as the successor to a retail shoe business that started in 1901. As of January 29, 2005, we operated 94 Full-Line Nordstrom stores, selling a wide selection of apparel, shoes and accessories for women, men and children.

We also operated 49 stores under the name “Nordstrom Rack” and one clearance store under the name “Last Chance.” The Nordstrom Rack stores purchase merchandise directly from manufacturers, as well as serving, in part, as outlets for clearance merchandise from our large specialty stores.

In addition, we also operated one free-standing shoe store under the name “Nordstrom” and five U.S. specialty boutiques under the name “Façonnable”. Since our acquisition of Façonnable, S.A.S. of Nice, France in October 2000, we also operated 31 Façonnable boutiques located in Europe. Façonnable is a wholesaler and retailer of high quality men’s and women’s apparel and accessories.

Our products are also offered through our catalogs and on the Internet at www.nordstrom.com and our Credit Operations offer a Nordstrom private label card and a co-branded Nordstrom VISA credit card, which generate income through finance charges and securitization-related gains.

In 2004, we opened two Full-Line stores (Charlotte, NC and Miami, FL). In March 2005, we opened one Full-Line store in Atlanta, GA. We are scheduled to open three additional Full-Line stores in 2005, located in Dallas, TX; San Antonio, TX; and Irvine, CA. We relocated one Rack store, in Portland, OR, in February 2005. In 2006, we are scheduled to open one Full-Line store, located in Palm Beach Gardens, FL, and relocate one Full-Line store, in Canoga Park, CA.

The west coast and the east coast of the United States are the markets in which we have the largest presence. An economic downturn or other significant event within one of these markets may have a material effect on our operating results.

We purchase merchandise from many suppliers, no one of which accounted for more than 2% of 2004 net purchases. We believe that we are not dependent on any one supplier, and consider our relations with our suppliers to be satisfactory.

We have approximately 131 registered trademarks and trademark applications. The loss or abandonment of the Federally registered names “Nordstrom” or “Façonnable” would materially impact our business. The loss or abandonment of the names “Brass Plum”, “Baby N”, “Caslon”, “Classiques Entier”, “Frenchi”, “Halogen”, “John W. Nordstrom”, and “Preview International” may impact our business, but not in a material manner. With the exception of the above-mentioned names, the loss or abandonment of any particular trademark or trademark application would have little, if any, impact on our business.

Due to our anniversary sale in July and the holidays in December, sales are higher in the second and fourth quarters of the fiscal year than in the first and third quarters. During the fiscal year ended January 29, 2005, we regularly employed on a full or part-time basis an average of 49,700 employees. Due to the seasonal nature of our business, employment increased to approximately 53,500 employees in July 2004 and 54,500 in December 2004.

We offer our customers a liberal return policy at our Full-Line stores. Nordstrom Rack stores accept returns up to 30 days from the date of purchase. In general, our return policy is somewhat more generous than industry standards. We accrue for estimated sales returns based on our historical knowledge of return trends. We strive to maintain our inventory at optimum levels that enable us to maximize sales while minimizing markdowns.

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Item 1. Business (continued).

Our business is highly competitive. In each of our operating areas, our stores compete with other national, regional and local retail establishments that carry similar lines of merchandise, including department stores, specialty stores, boutiques, and mail order and Internet businesses. Our specific competitors vary from market to market. We believe the principal methods of competing in our industry include customer service, value, quality of product, fashion, advertising, store location and depth of selection.

We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”). You may read and copy any material we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our Internet website is http://www.nordstrom.com. We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements of changes in beneficial ownership of securities on Form 4 and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

We have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) and Corporate Governance Guidelines, as required by the listing standards of the New York Stock Exchange and the rules of the SEC. We have posted on our website our Code of Ethics, our Corporate Governance Guidelines, and our Committee Charters for the Audit, Compensation, Corporate Governance and Nominating, Executive, and Finance committees. These items are also available in print to any shareholder upon request to:

Nordstrom, Inc. Investor Relations
P.O. Box 2737
Seattle, Washington, 98111
(206) 303-3200
invrelations@nordstrom.com

Certain other information required under Item 1 is contained within the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Management’s Discussion and Analysis
Note 1: Nature of Operations and Summary of Significant Accounting Policies in Notes to Consolidated Financial Statements
Note 16: Segment Reporting in Notes to Consolidated Financial Statements
Note 18: Nordstrom.com in Notes to Consolidated Financial Statements
Retail Store Facilities open at January 29, 2005

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Executive Officers of the Registrant (as of March 4, 2005)

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Executive Officers of the Registrant (as of March 4, 2005) (continued)

Laurie M. Black was named Executive Vice President and President of Nordstrom Rack in December 2001. Prior thereto she served as Vice President and Corporate Merchandise Manager from May 2000 to December 2001, as Vice President and Northwest Divisional Merchandise Manager from April 1999 to April 2000, and as Vice President and Northwest/Southwest Divisional Merchandise Manager from February 1997 to March 1999. Ms. Black has been employed by the Company since July 1978.

Mark S. Brashear was named Executive Vice President and President of Façonnable in December 2001. Prior thereto he served as Executive Vice President and Southwest General Manager from February 2001 to December 2001, as Division Vice President and Strategic Planning Manager of the Southwest Business Unit from April 1999 to February 2001, and as Strategic Planning Manager for California and the Southwest from February 1998 to April 1999. Mr. Brashear has been employed by the Company since September 1985.

Peter F. Collins was appointed as the Company’s Principal Accounting Officer on February 23, 2005. He also serves as the Company’s Divisional Vice President/Corporate Controller since April 2004. From July 2002 to March 2004, Mr. Collins was employed at Albertson’s, Inc. first as Group Vice President – Corporate Accounting and Reporting, and from January 2003 as Group Vice President and Controller. Mr. Collins has also served in various positions within Arthur Andersen LLP from 1986 through 2002, including partner from 1998 through 2002.

Paul F. Favaro joined the Company and was named Executive Vice President, Strategy and Development, in February 2005. In March 2003, Mr. Favaro founded Agilis, Inc., a consulting firm in Chicago, Illinois that provides advice on strategy and organization issues to the top management of large companies. Mr. Favaro ceased providing consulting services to Agilis when he joined the Company. In September 2003, Mr. Favaro became an adjunct professor of strategy and management at Northwestern University’s Kellogg School of Management. From August 1987 through December 2003, Mr. Favaro was an associate partner with Marakon Associates, an international strategy consulting firm.

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Executive Officers of the Registrant (as of March 4, 2005) (continued)

Linda Toschi Finn was named Executive Vice President Marketing in September 2000. Prior thereto she served as Vice President and Marketing Director for the Full-Line Store Group from October 1999 to September 2000 and as Vice President of Sales and Promotion from February 1998 to October 1999. Ms Finn has been employed by the Company since May 1975.

Kevin T. Knight was named Executive Vice President of the Company in September 2000. He also serves as Chairman and Chief Executive Officer of Nordstrom fsb, President of Nordstrom Credit, Inc., and, as of February 2000, President of Nordstrom Credit Group. Mr. Knight served as Vice President of the Company from April 1998 through September 2000, as President of Nordstrom fsb from June 1998 to June 1999, and as General Manager of the credit business from April 1998 through February 2000. Prior to joining the Company in April 1998, he served as Senior Vice President of Retailer Financial Services, a unit of General Electric Capital Corporation.

Michael G. Koppel was named Executive Vice President and Chief Financial Officer in May 2001. From August 1999 to May 2001, he served as Vice President, Corporate Controller and Principal Accounting Officer. Prior thereto Mr. Koppel served as Chief Operating Officer of CML Group, a specialty retail holding company, and as Chief Financial Officer of Lids Corporation, a mall based specialty retailer from 1997 through 1998, and from 1984 through 1997 he held a number of financial positions with the May Department Stores.

Daniel F. Little was named Executive Vice President and Chief Administrative Officer in March 2003. From July 2002 until March 2003, he served as Vice President of Supply Chain Strategy. Prior thereto, Mr. Little spent nine years working in various assignments with Colgate-Palmolive, most recently as Manufacturing General Manager for Personal Care Products in Europe.

David L. Mackie was named Vice President Real Estate and Corporate Secretary in December 2002. Prior thereto, he served as Vice President Real Estate and Director of Legal Affairs from June 2001 to December 2002 and as Vice President Real Estate from April 1989 to May 2001. Mr. Mackie has been employed by the Company since September 1983.

Blake W. Nordstrom was named President of the Company in August 2000. Prior thereto, he served as Executive Vice President and President of Nordstrom Rack from February 2000 to August 2000, and as Co-President of the Company from June 1995 to February 2000. Mr. Nordstrom has been employed by the Company since June 1976.

Bruce A. Nordstrom was named Chairman of the Board of Directors in August 2000. He has served as a Director of the Company since 1966, and served as Co-Chairman of the Board of Directors from 1971 until 1995. Mr. Nordstrom is the grandson of the Company founder and, with his cousins John N. Nordstrom and James F. Nordstrom and his former brother-in-law John A. McMillan, he assumed leadership of the Company from the second generation in 1968.

Erik B. Nordstrom was named Executive Vice President Full-Line Stores in August 2000. Prior thereto, he served as Executive Vice President and Northwest General Manager from February 2000 to August 2000, and as Co-President of the Company from June 1995 to February 2000. Mr. Nordstrom has been employed by the Company since July 1979.

James (Jamie) F. Nordstrom, Jr. was named Executive Vice President of the Company and President of the Nordstrom Direct division in February 2005. Prior thereto he served as Corporate Merchandise Manager, Children’s Shoes, from May 2000 to February 2005, as a project manager for the design and implementation of the Company’s inventory management system from August 1999 to May 2000, and as a Store Manager in Los Angeles, California, from December 1997 to August 1999. Mr. Nordstrom has been employed by the Company since 1986.

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Executive Officers of the Registrant (as of March 4, 2005) (continued)

Peter E. Nordstrom was named Executive Vice President and President of Full-Line Stores in September 2000. Prior thereto, he served as Executive Vice President and Director of Full-Line Store Merchandise Strategy from February 2000 to September 2000, and as Co-President of the Company from June 1995 to February 2000. Mr. Nordstrom has been employed by the Company since August 1978.

James R. O’Neal was named Executive Vice President and President of Nordstrom Product Group in December 2001. Prior thereto, he served as Executive Vice President and General Manager of the East Coast from August 2000 until December 2001, and as Executive Vice President and Southwest General Manager from November 1997 to December 2001. Mr. O’Neal has been employed by the Company since June 1980.

Delena M. Sunday was named Executive Vice President Human Resources and Diversity Affairs in November 2002. Prior thereto, she served as Executive Vice President of Diversity Affairs from September 2000 to November 2002, and as Vice President of Diversity Affairs from February 1998 to September 2000. Ms. Sunday has been employed by the Company since April 1980.

The officers are appointed annually by the Board of Directors following each year’s Annual Meeting of Shareholders. Officers serve at the discretion of the Board of Directors.

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Item 2. Properties.

The following table summarizes the number of retail stores owned or operated by us, and the percentage of total store area represented by each listed category at January 29, 2005:

We also operate 6 merchandise distribution centers located throughout the U.S., which are utilized by the Retail Stores segment, all of which are owned. The Catalog/Internet segment utilizes one fulfillment center, which is owned on leased land. Our administrative offices in Seattle, Washington are a combination of leased and owned space. We lease the office building in the Denver, Colorado metropolitan area that serves as the principal offices of Nordstrom fsb and Nordstrom Credit, Inc.

Certain other information required under this item is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Note 10: Land, Buildings and Equipment in Notes to Consolidated Financial Statements
Note 11: Long-Term Debt in Notes to Consolidated Financial Statements
Note 12: Leases in Notes to Consolidated Financial Statements
Retail Store Facilities open at January 29, 2005

Item 3. Legal Proceedings.

Cosmetics

We were originally named as a defendant along with other department store and specialty retailers in nine separate but virtually identical class action lawsuits filed in various Superior Courts of the State of California in May, June and July 1998 that were consolidated in Marin County Superior Court. In May 2000, plaintiffs filed an amended complaint naming a number of manufacturers of cosmetics and fragrances and two other retailers as additional defendants. Plaintiffs’ amended complaint alleges that the retail price of the “prestige” or “Department Store” cosmetics sold in department and specialty stores was collusively controlled by the retailer and manufacturer defendants in violation of the Cartwright Act and the California Unfair Competition Act.

Plaintiffs seek treble damages and restitution in an unspecified amount, attorneys’ fees and prejudgment interest, on behalf of a class of all California residents who purchased cosmetics and fragrances for personal use from any of the defendants during the four years prior to the filing of the amended complaint. Defendants, including us, have answered the amended complaint denying the allegations. The defendants have produced documents and responded to plaintiffs’ other discovery requests, including providing witnesses for depositions.

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Item 3. Legal Proceedings (continued)

We entered into a settlement agreement with the plaintiffs and the other defendants on July 13, 2003. In furtherance of the settlement agreement, the case was refiled in the United States District Court for the Northern District of California on behalf of a class of all persons who currently reside in the United States and who purchased “Department Store” cosmetics from the defendants during the period May 29, 1994 through July 16, 2003. The Court gave preliminary approval to the settlement and a summary notice of class certification and the terms of the settlement were disseminated to class members. On March 8, 2005 the Court orally approved the settlement, which will result in the plaintiffs’ claims and the claims of all class members being dismissed, with prejudice, in their entirety once the Court has entered the approval order and if no appeals are filed from that order. In connection with the settlement agreement, the defendants will provide class members with certain free products and pay the plaintiffs’ attorneys’ fees, awarded by the Court of $24 million. Our share of the cost of the settlement will not have a material adverse effect on our financial condition, results of operations or cash flows.

Other

We are involved in various routine legal proceedings incidental to the ordinary course of business. In management’s opinion, the outcome of pending legal proceedings, separately and in the aggregate, will not have a material adverse effect on our business or consolidated financial condition.

Item 4. Submission of Matters to a Vote of Security Holders.

     None

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

Our Common Stock, without par value, is traded on the New York Stock Exchange under the symbol “JWN.” The approximate number of holders of Common Stock as of March 4, 2005 was 96,800 based upon the number of registered and beneficial shareholders, as well as the number of employee stockholders in the Nordstrom 401(k) Plan and Profit Sharing.

Issuer Purchases of Equity Securities

(dollars in millions except per share amounts)

In February 2005, the Board of Directors authorized $500.0 million of additional share repurchases. The actual number and timing of share repurchases will be subject to market conditions and applicable SEC rules.

Certain other information required under this item with respect to stock prices and dividends is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Consolidated Statements of Shareholders’ Equity
Note 13: Stock-Based Compensation in Notes to Consolidated Financial Statements
Note 21: Selected Quarterly Data (unaudited) in Notes to Consolidated Financial Statements

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Item 6. Selected Financial Data.

The information required under this item is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Management’s Discussion and Analysis
Note 2: Cumulative Effect of Accounting Change in Notes to Consolidated Financial Statements
Note 17: Impairment in Notes to Consolidated Financial Statements
Note 18: Nordstrom.com in Notes to Consolidated Financial Statements
Eleven-Year Statistical Summary

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The information required under this item is included in the following section of our 2004 Annual Report to Shareholders, which section is incorporated by reference herein from Exhibit 13.1 of this report:

Management’s Discussion and Analysis
Note 1: Nature of Operations and Summary of Significant Accounting Policies in Notes to Consolidated Financial Statements
Note 9: Investment in Asset Backed Securities – Co-branded Nordstrom VISA Credit Card Receivables in Notes to Consolidated Financial Statements

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are exposed to market risk from changes in interest rates. In seeking to minimize risk, we manage exposure through our regular operating and financing activities. We do not use financial instruments for trading or other speculative purposes and are not party to any leveraged financial instruments.

Interest rate exposure is managed through our mix of fixed and variable rate borrowings. Short-term borrowing and investing activities generally bear interest at variable rates, but because they have maturities of three months or less, we believe that the risk of material loss is low, and that the carrying amount approximated fair value.

The table below presents information about our financial instruments that are sensitive to changes in interest rates, which consist of debt obligations and interest rate swaps for the year ended January 29, 2005. For debt obligations, the table presents principal amounts, at book value, by maturity date, and related weighted average interest rates. For interest rate swaps, the table presents notional amounts and weighted average interest rates by expected (contractual) maturity dates. Notional amounts are the predetermined dollar principal on which the exchanged interest payments are based.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk (continued)

Foreign Currency Exchange Risk

The majority of our revenue, expense and capital expenditures are transacted in U.S. dollars. However, we periodically enter into foreign currency purchase orders for apparel and shoes denominated in Euros. We use forward contracts to hedge against fluctuations in foreign currency prices. The fair value of our outstanding forward contracts at January 29, 2005 was not material. The use of derivatives is limited to only those financial instruments that have been authorized by our Chief Financial Officer and Treasurer.

In addition, the functional currency of Façonnable, S.A.S. of Nice, France is the Euro. Assets and liabilities of Façonnable are translated into U.S. dollars at the exchange rate prevailing at the end of the period. Income and expenses are translated into U.S. dollars at an average exchange rate during the period. Foreign currency gains and losses from the translation of Façonnable’s balance sheet and income statement are included in other comprehensive earnings. Foreign currency gains or losses from certain intercompany loans are recorded in service charge income and other, net.

We considered the potential impact of a hypothetical 10% adverse change in foreign exchange rates and we believe that such a change would not have a material impact on our cash flows of financial instruments that are sensitive to foreign currency exchange risk. The model measured the change in cash flows arising from the 10% adverse change in foreign exchange rates, and covered long-term debt denominated in Euros.

Certain other information required under this item is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Note 1: Nature of Operations and Summary of Significant Accounting Policies in Notes to Consolidated Financial Statements
Note 11: Long-Term Debt in Notes to Consolidated Financial Statements
Note 12: Leases in Notes to Consolidated Financial Statements

Item 8. Financial Statements and Supplementary Data.

The information required under this item is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Management Responsibility for Financial Information
Management’s Report on Internal Control Over Financial Reporting
Auditors’ Report on Internal Control Over Financial Reporting
Auditors’ Report on Consolidated Financial Statements

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

     None

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Item 9A. Controls and Procedures.

As of the end of the period covered by this Annual Report on Form 10-K, we performed an evaluation under the supervision and with the participation of management, including our President and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our President and our Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures are effective in the timely recording, processing, summarizing and reporting of material financial and non-financial information.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In coming to the conclusion that our internal control over financial reporting was effective as of January 29, 2005, our management considered, among other things, the control deficiencies related to the cash flow statement classification of property incentives and the balance sheet classification of leased assets that were previously treated as sale-leaseback transactions, which resulted in a restatement of our previously issued financial statements, as disclosed in Note 25 of our 10-K/A for the year ended January 31, 2004. After reviewing and analyzing the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 99, “Materiality”, Accounting Principles Board Opinion No. 20, “Accounting Changes”, and Public Company Accounting Oversight Board Auditing Standard No. 2 “An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements” and taking into consideration that the restatement adjustments did not impact our net sales, net earnings, diluted earnings per share, total cash flows or shareholders’ equity for any prior period, our management concluded that the control deficiencies that resulted in the restatement of the prior period financial statements was not a material weakness. Following our identification of these control deficiencies, we have corrected our process for preparing our statements of cash flows by performing a more thorough review of the classifications of our cash flows to comply with SFAS No. 95 “Statement of Cash Flows” and SFAS No. 102 “Statement of Cash Flows – Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale – An Amendment of FASB Statement No. 95.” We have also corrected our process for evaluating sale-leasebacks by incorporating a more thorough review of SFAS No. 98 “Accounting for Leases” and SFAS No. 66 “Accounting for Sales of Real Estate” to any potential sale-leasebacks. In addition, we will continue to monitor GAAP developments and changes in our business to reduce the risk of classification errors in our statements of cash flows and balance sheets.

The information required under this item is included in the following sections of our 2004 Annual Report to Shareholders, which sections are incorporated by reference herein from Exhibit 13.1 of this report:

Management Responsibility for Financial Information
Management’s Report on Internal Control Over Financial Reporting
Auditors’ Report on Internal Control Over Financial Reporting
Auditors’ Report on Consolidated Financial Statements

Item 9B. Other Information

     None

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PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required under this item with respect to our Directors and compliance with Section 16(a) of the Exchange Act is included in the following sections of our Proxy Statement for our 2005 Annual Meeting of Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:

The information required under this item with respect to our Executive Officers is incorporated by reference from Part I, Item 1 of this report under “Executive Officers of the Registrant.”

Item 11. Executive Compensation.

The information required under this item is included in the following sections of our Proxy Statement for our 2005 Annual Meeting of Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required under this item is included in the following section of our Proxy Statement for our 2005 Annual Meeting of Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:

Item 13. Certain Relationships and Related Transactions.

The information required under this item is included in the following sections of our Proxy Statement for our 2005 Annual Meeting of Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:

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Item 14. Principal Accountant Fees and Services.

The information required under this item is included in the following section of our Proxy Statement for our 2005 Annual Meeting of Shareholders, which section is incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)1. Financial Statements

The following consolidated financial information and statements and the Independent Auditors’ Report are incorporated by reference herein from Exhibit 13.1 of this report:

(a)2. Financial Statement Schedules

Other schedules for which provision is made in Regulation S-X are not required, are inapplicable, or the information is included in our 2004 Annual Report to Shareholders as incorporated by reference herein from Exhibit 13.1 of this report.

(a)3. Exhibits

Exhibits are incorporated herein by reference or are filed with this report as set forth in the Index to Exhibits on pages 20 though 26 hereof. All other exhibits are omitted because they are not applicable, not required, or because the required information is included in our 2004 Annual Report to Shareholders.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 8, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND REPORT ON SCHEDULE

To the Board of Directors and Shareholders of Nordstrom, Inc.

We consent to the incorporation by reference in Registration Statement Nos. 033-18321, 333-63403, 333-40064, 333-40066, 333-79791, 333-101110, and 333-118756 on Form S-8 and in Registration Statement Nos. 333-59840 and 333-69281 on Form S-3 of our reports dated April 7, 2005, relating to the consolidated financial statements of Nordstrom, Inc. and subsidiaries (the Company), (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the change in accounting for goodwill and other intangible assets upon adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, for the year ended January 31, 2003, as discussed in Note 2 to the consolidated financial statements), the financial statement schedule, and management’s report on the effectiveness of internal control over financial reporting, appearing in and incorporated by reference in this Annual Report on Form 10-K of Nordstrom, Inc. and subsidiaries for the year ended January 29, 2005.

Our audits of the financial statements referred to in our aforementioned report also included the financial statement schedule of Nordstrom, Inc., listed in Item 15(a)2. This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

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NORDSTROM, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(Dollars in thousands)

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NORDSTROM, INC. AND SUBSIDIARIES

Exhibit Index

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Exhibit 13.1

management’s discussion and analysis

Management’s Discussion and Analysis

Nordstrom is a fashion specialty retailer offering a wide selection of high-quality apparel, shoes, cosmetics and accessories for women, men and children. Nordstrom offers classic and contemporary brand name and private label merchandise as well as exclusive couture designs. We offer our products through multiple retail channels including our Full-Line Nordstrom stores, our discount Nordstrom Rack stores, our Faconnable boutiques, our catalogs and on the Internet at www.nordstrom.com. Our stores are primarily located throughout the United States. In addition, our credit operations offer customers a variety of payment products and services including our loyalty program.

STRATEGIC INITIATIVES FOR 2005

Our long-term goal is to deliver industry-leading performance. We have two overarching initiatives in 2005 that will take us towards that goal.

Drive top-line growth — One of our top goals is to drive and sustain positive same-store sales into the future. Our ultimate success in accomplishing this goal starts and ends with the experience each customer has in our stores. We believe the foundation of that customer experience is based upon providing superior service and compelling products. These two key elements of our business will be an ongoing focus for our company as we work to sustain our same-store sales momentum.

Customers want fashion, and we strive to be a leader in the marketplace with products and trends. One of the core elements of what we do is give customers a reason to buy something new. We believe this is a core strength of our merchant team, but the dynamic nature of our business means that there will always be opportunities in this area to improve the speed and flexibility by which we respond to fashion trends. In addition, to maximize our inventory investment, we will continue to develop proficiency with our existing perpetual inventory tools.

In 2005, our service-focused initiative is to use our Personal Book system. Personal Book is a dynamic tool that helps our people build and strengthen customer relationships by better anticipating and responding to customer needs. With Personal Book, our salespeople are able to set and manage their customer follow-ups, organize and track customer preferences and easily reference customer purchases and contact information. The result is that our salespeople are able to tailor our service to the needs of each customer. We are able to stay connected with our customers and invite them back in for the new trends, merchandise, sales and events that interest them. Overall, Personal Book provides us with increased opportunities to exceed expectations, build customer loyalty and drive additional sales volume.

Improve operational efficiencies — In addition to delivering solid top-line results, we are continuing to focus on improving operational efficiencies. We focus on managing the costs which do not impact customer service. Our current expense initiatives focus on the areas of logistics, information technology, and merchandising. In addition, we expect planned system enhancements to result in additional opportunities to streamline our processes and reduce costs over the next few years. Our planning processes are also more rigorous, challenging our organization to make better business decisions.

OVERVIEW

For the year we are pleased to report improved profitability for the company and our investors, with diluted earnings per share up 57.4% to $2.77. Our strong business performance in the latter half of 2003 and throughout 2004 generated significant increases in our operating cash flows, which we have used to invest in our business, prepay debt and repurchase common stock. Key highlights include:

• Total net sales were $7.1 billion, which is the first time in our history that sales have exceeded $7.0 billion. Also, in 2004, same-store sales increased 8.5% (see our GAAP sales reconciliation on page 21). This was our third consecutive year with same-store sales increases and indicates that our existing store base continues to gain market share.

• Gross profit increased from 34.6% of sales in 2003 to 36.1% in 2004. Continued improvement in merchandise management and sales growth leverage on our buying and occupancy expenses were the primary drivers. In 2004, inventory turn was 4.51, up from 4.10 in 2003.

• With our strong sales performance in 2004, management was focused on ensuring that fixed costs were controlled and that variable costs fluctuated at a rate consistent with the sales growth. Such disciplined expense management resulted in significant improvement in selling, general and administrative expense as a percentage of sales and maximized the flow through of incremental sales to earnings.

• Pre-tax earnings as a percentage of sales increased from 6.2% in 2003 to 9.1% in 2004, demonstrating that we were able to transform top-line growth into significant incremental earnings.

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Percentage of 2004 Sales by Merchandise Category

RESULTS OF OPERATIONS

Segment results are discussed in each of the following sections as applicable.

Net sales (in millions)

See our GAAP sales reconciliation on page 21.

2004 VS 2003 NET SALES

In general, retailers’ sales results were mixed in 2004. Our net sales increased as our customers responded to our merchandise offerings. Both our Full-Line and Rack stores had overall and same-store sales increases. All of our geographic regions and major merchandise categories also reported overall and same-store sales increases. The strongest performing categories were Accessories, Women’s Shoes and Women’s Better Apparel, followed by Women’s Designer and Men’s Apparel.

Total net sales also benefited from the six Full-Line stores and two Rack stores opened since February 2003, increasing our retail square footage 5% during the last two years.

Sales at Nordstrom Direct increased 28.3% due to strong Internet sales and improved fulfillment of customer orders. Internet sales increased 53.1% due to an increase in the rate of website visits that result in sales and increased Internet advertising. Catalog net sales decreased in 2004 by 3%, which is consistent with our strategy to shift catalog customers to the Internet.

2003 VS 2002 NET SALES

We had significant sales growth in 2003 as net sales increased 8.5% over the prior year. This overall growth resulted from same-store sales increases and store openings. Same-store sales on a 4-5-4 basis increased 4.1% due to increases at both our Full-Line stores and Rack stores. Additionally, we opened twelve Full-Line and six Rack stores since February 2002. We also closed one Rack store. The net impact was an increase to our retail square footage of 12%.

Sales at Nordstrom Direct increased 15.4% due to improved fulfillment of customers orders and strong Internet sales. During 2003, Internet sales increased approximately 46% while catalog sales declined by 9%.

In 2003, merchandise division sales growth was led by Women’s Designer Apparel, Accessories and Cosmetics, followed by Men’s Apparel and Women’s and Men’s Shoes.

2005 FORECAST OF NET SALES

In 2005, we plan to open four Full-Line stores, increasing retail square footage by approximately 3%. We expect 2005 same-store sales to increase 1 to 3%. In 2005, we will expand the integration of our merchandise offerings across our full-price channels. Our goal for the next several years is to build a multi-channel merchandise offering that creates a superior and seamless experience for our customers.

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Gross Profit

2004 VS 2003 GROSS PROFIT

In 2004, the improvement in gross profit as a percentage of net sales was primarily a result of meeting our customers’ desire for fresh, compelling merchandise, which increased the sales of regular priced merchandise. In addition, gross profit benefited from our ongoing improvement in managing inventory and by holding buying costs and the fixed portion of occupancy expenses flat.

Contributing to our gross profit rate improvement was the continuous improvement we are making utilizing our perpetual inventory system investment, which we made in 2003. We have better visibility into sales trends and on-hand content, allowing us to more effectively manage our merchandise; the result was a significant improvement in our inventory turnover rate. Increased sell-through of regular priced merchandise reduced the markdowns necessary to sell slow moving goods. We maintained our inventory at levels consistent with the prior year, even though our sales and square footage grew in 2004. The overall improvements in merchandise management have generated higher margins on our inventory investments.

2003 VS 2002 GROSS PROFIT

Gross profit as a percentage of net sales improved in 2003 due to strong sales, substantially lower markdowns and improved shrink results, as well as an improvement in expenses related to our private label business.

Merchandise division gross profit was led by Accessories, Women’s Specialized Apparel, Women’s Contemporary/Juniors Apparel and Men’s Apparel.

Average inventory per square foot declined due to improved merchandise management at both our Full-Line and Rack stores. Buying and occupancy expenses benefited from leverage on a higher sales base resulting in a small improvement on a percentage of sales basis.

2005 FORECAST OF GROSS PROFIT

In 2005, we expect to see a 10 to 20 basis point improvement in our gross profit rate performance from ongoing merchandise margin improvement as well as buying and occupancy efficiencies.

Selling, General and Administrative Expenses

2004 VS 2003 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

We continued to use our infrastructure to support increased sales. In 2004, our selling, general and administrative expenses as a percentage of net sales improved 110 basis points. We were able to control and leverage our fixed general and administrative expenses, especially non-selling labor. While selling expense increased in 2004, primarily from higher costs linked to increased sales, we experienced a slight rate improvement in selling expense as a percentage of net sales.

2003 VS 2002 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

The 2002 selling, general and administrative expense includes an impairment charge of $15.6 million related to the write-down of an information technology investment in a supply chain software application in our private label division. We believe that excluding this charge provides a more comparable basis from which to evaluate performance between years. Without this charge, 2002 selling, general and administrative expenses as a percentage of net sales would have been 29.7%.

Excluding the effects of the 2002 impairment charge, selling, general and administrative expenses as a percentage of net sales decreased in 2003 to 29.4% from 29.7% in the prior year. This improvement was primarily the result of leverage on better-than-planned sales and overall expense improvements.

2005 FORECAST OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In 2005, selling, general and administrative expenses as a percentage of net sales are expected to improve 40 to 60 basis points as we continue to take steps to improve the effectiveness and efficiency of our business processes.

Interest Expense, Net

2004 VS 2003 INTEREST EXPENSE, NET

We prepaid debt of $198.2 million in 2004 and $105.7 million in 2003. We incurred debt prepayment costs of $20.9 million in 2004 and $14.3 million in 2003. The decrease in our interest expense, net in 2004 was due to the reduction in our 2004 average outstanding debt, partially offset by the increase in the prepayment costs.

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management’s discussion and analysis

2003 VS 2002 INTEREST EXPENSE, NET

Interest expense, net increased in 2003 because of debt prepayment costs of $14.3 million in 2003 and lower capitalized interest. The debt prepayment costs were partially offset by lower interest expense resulting from the reduced debt balance outstanding. Capitalized interest decreased as the completion of several software projects in early 2003 reduced our software development balance.

2005 FORECAST OF INTEREST EXPENSE, NET

Interest expense for 2005 is expected to decrease as we re-pay the remaining $96.0 million of our 6.7% medium-term notes due in July 2005. We expect to see a year-over-year reduction in interest expense of approximately $26 million. A portion of the forecasted interest expense is based on variable interest rates, which could fluctuate.

Minority Interest Purchase and Reintegration Costs

During 2002, we purchased the outstanding shares of Nordstrom.com, Inc. series C preferred stock for $70.0 million. The minority interest purchase and reintegration costs resulted in a one-time charge of $53.2 million. No tax benefit was recognized as there was no possibility of a future tax benefit. The impact of not recognizing this income tax benefit increased our 2002 effective tax rate to 47% before the cumulative effect of accounting change.

Other Income Including Finance Charges, Net (in millions)

2004 VS 2003 OTHER INCOME INCLUDING FINANCE CHARGES, NET

Our overall other income including finance charges, net increased $17.9 million, primarily from our co-branded VISA credit card program growth. Since 2002, we marketed this credit card to our in-store customers and the inactive Nordstrom private label credit card holders. These marketing efforts showed success in 2004, as the co-branded VISA credit card holders used the cards more extensively in 2004, resulting in a 45.7% volume increase.

2003 VS 2002 OTHER INCOME INCLUDING FINANCE CHARGES, NET

We continued to see improvements in our 2003 other income including finance charges, net primarily due to growth in the co-branded VISA program. Our income benefited from substantial increases in our VISA credit card volume and receivables during the year, as well as a small improvement in the cost of funds and bad debt write-offs. This increase was partially offset by a decline in finance charge and late fee income resulting from a decline in our private label accounts receivable.

2005 FORECAST OF OTHER INCOME INCLUDING FINANCE CHARGES, NET

In 2005, other income including finance charges, net is expected to increase approximately $12 million as we continue to see growth in our VISA credit card volume and corresponding income.

Diluted Earnings per Share

2004 VS 2003 DILUTED EARNINGS PER SHARE

In 2004, earnings per share increased to $2.77 from $1.76 in 2003. This increase was driven by a strong increase in overall and same-store sales, improvements in gross profit through better inventory management, and sales leverage on buying and occupancy and selling, general and administrative expenses.

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2003 VS 2002 DILUTED EARNINGS PER SHARE

Our earnings per share in 2002 included the write down of a supply chain software application, the Nordstrom.com minority interest purchase and reintegration costs and the cumulative effect of an accounting change associated with the adoption of FAS 142, for a total impact of $71.0 million or $0.53 per share. We believe that excluding these charges provides a more comparable basis from which to evaluate performance between 2003 and 2002. Without the impact of these charges, 2002 earnings per share would have been $1.19.

Our earnings per share in 2003 increased to $1.76 from $0.66 in 2002. Excluding the prior year charges noted above, 2003 earnings per share increased $0.57 or 47.9%. This increase was primarily driven by a strong increase in overall and same-store sales, significant improvement in gross profit rate and a moderate decrease in selling, general and administrative expenses as a percentage of sales.

2005 FORECAST OF DILUTED EARNINGS PER SHARE

Based upon the factors discussed above, especially the expected 2005 same-store sales increase and the 2004 debt prepayment cost that will not recur in 2005, our diluted earnings per share is expected to increase 16% - 20% in 2005. As we saw in 2004, earnings trends should be consistent with same-store sales trends.

Fourth Quarter Results

Fourth quarter 2004 net earnings was $140.0 million compared with $104.3 million in 2003. Fourth quarter 2004 net earnings was reduced $4.7 million or $0.03 per share due to a non-cash expense adjustment related to a correction in our lease accounting policy. Our new policy is to record lease expense when we take possession of a location; in the past, lease expense started when our retail operations started.

Total sales for the quarter increased by 9.4% to $2.1 billion and same-store sales increased by 7.2%. This was the first time in our history that sales exceeded $2.0 billion in a quarter.

Gross profit as a percentage of net sales increased to 36.6% from 36.2% last year. The quarterly improvement in gross profit as a percentage of net sales was primarily the result of sales growth leverage on our buying and occupancy expenses. Selling, general and administrative expense as a percentage of sales improved 160 basis points from 28.5% to 26.9%, primarily from lower year-over-year incentive compensation costs in the quarter.

GAAP Sales Reconciliation (in millions)

We converted to a 4-5-4 Retail Calendar at the beginning of 2003 so our financial results are more comparable to other retailers. Sales performance numbers included in this document have been calculated on a comparative 4-5-4 basis. We believe that adjusting for the difference in days provides a more comparable basis from which to evaluate sales performance. The following reconciliation bridges the reported GAAP sales to the 4-5-4 comparable sales.

LIQUIDITY AND CAPITAL RESOURCES

Overall, cash and short-term investments decreased by $113.8 million to $402.4 million at the end of 2004, as we used our cash from operations for capital expenditures, additional debt prepayments and repurchases of common stock.

Operating Activities

Our operations are seasonal in nature. The second quarter, which includes our Anniversary Sale, accounts for approximately 27% of net sales, while the fourth quarter, which includes the holiday season, accounts for about 29% of net sales. Cash requirements are highest in the third quarter as we build our inventory for the holiday season.

2004 VS 2003 OPERATING ACTIVITIES

In 2004, cash flow from operating activities increased to $606.3 million, a $7.1 million increase. Higher net earnings was offset by our merchandise purchase and payment flow changes in 2004 as compared to 2003 and the timing of income tax payments. Toward the end of 2003 and into 2004, we have achieved a more even flow of merchandise purchases in relation to our sales trends. Our 2004 inventory turns have improved over the prior year; the payables leverage we achieved in 2004 is consistent with our merchandise purchase plan. Income tax payments have increased in 2004 as a result of our earnings growth.

2003 VS 2002 OPERATING ACTIVITIES

The increase in net cash provided by operating activities between 2003 and 2002 was primarily due to an increase in net earnings before noncash items, decreases in inventories and increases in accounts payable, partially offset by an increase in our investment in asset backed securities. Strong sales and effective inventory management left us with lower, appropriate inventory levels after the holidays. January receipts of new merchandise replenished our inventory levels resulting in an increase in accounts payable. Investment in asset backed securities increased as Nordstrom VISA credit sales increased during the year.

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2005 FORECAST FOR OPERATING ACTIVITIES

In 2005, cash flows provided by operating activities are expected to increase slightly as a result of increased earnings.

Investing Activities

In 2004, investing activities have primarily consisted of capital expenditures and the sales and purchases of high quality short-term investments. Capital expenditures in 2004 decreased slightly in comparison to 2003 as a planned reduction in store openings reduced our capital expenditures.

In 2004, 37% of our capital expenditures was for remodels and 28% was for new stores, half of which related to stores that opened in 2004 and the other half for stores opening in 2005. In addition, 22% of our capital expenditures was for information technology and 13% for other routine projects.

Our capital expenditures over the last three years totaled $833.3 million; we received property incentives of $151.1 million over that same period, which offsets a portion of the cash we used for capital expenditures. The capital expenditures added stores, enhanced existing facilities and improved our information systems. More than 2.3 million square feet of retail store space has been added during this period, representing an increase of 14% since January 31, 2002.

We plan to spend approximately $850-$875 million, net of property incentives of approximately $130 million, on capital projects during the next three years. We plan to use approximately 40% of this capital to build new stores, 30% on remodels, and 15% toward information technology. The remaining 15% is planned for other routine projects. Compared to the previous three years, this represents a 30% increase in capital expenditures, with more spending allocated to improving our existing facilities and less spending on information systems. We watch over our store locations so they meet our customer expectations for a high-quality shopping experience. We also analyze the useful lives assigned to our stores so we can match our depreciation with the actual use of these assets. In the information systems area, we completed the implementation of our “Point of Sale” system in 2004 and plan to continue to make investments to enhance our technology platform.

As of January 29, 2005, approximately $171.0 million has been contractually committed primarily for constructing new stores or remodeling existing stores.

Consistent with our investment policy, we utilize our high quality short-term investments to generate income on our available working capital.

Total Square Footage (in thousands)

Financing Activities

Financing activities primarily consist of principal payments on debt, dividend payments, repurchases of common stock and proceeds from the exercise of stock options.

During 2004, we retired $196.8 million of our 8.95% senior notes and $1.5 million of our 6.7% medium-term notes for a total cash payment of $220.1 million. After considering non-cash items related to these debt retirements, our pre-tax expense for debt buyback was $20.9 million.

During 2003, we purchased $103.2 million of our 8.95% senior notes and $2.5 million of our 6.7% medium-term notes for a total cash payment of $120.8 million. Approximately $14.3 million of expense was recognized during 2003 related to these purchases.

In July 2005, we plan to re-pay the remaining $96.0 million of our 6.7% medium-term notes at maturity. No additional debt repurchases are planned for 2005.

In August 2004, our Board of Directors authorized $300.0 million of share repurchases, replacing a previous share repurchase authorization. We purchased 6.9 million shares in the open market for the entire authorized amount of $300.0 million at an average price of $43.43 per share.

In February 2005, our Board of Directors authorized $500.0 million of additional share repurchases. The actual number and timing of share repurchases will be subject to market conditions and applicable SEC rules.

Debt to Capital Ratio

Our recent strong operating results allowed us to repay debt, which contributed to a decrease in our debt to capital ratio from 43.0% at

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the end of 2003 to 36.5% at the end of 2004. Other factors that impacted this ratio in 2004 were the share repurchase described above and the volume of stock option activity. We believe that a debt to capital ratio in the range of 25% to 40% results in favorable debt ratings and sets us on a capital structure that provides appropriate flexibility while we maintain a reasonable cost of capital.

Off-Balance Sheet Financing

We transfer our Nordstrom co-branded VISA credit card receivables to a third-party trust that issued $200 million of VISA receivable backed securities to third parties in 2002. The outstanding balance of the co-branded VISA credit card receivables exceeds the receivable backed securities balance. As a result, we hold securities that represent our retained interests in the trust, recorded as investment in asset backed securities in our consolidated balance sheets. We do not record the $200.0 million of VISA receivable backed securities or the co-branded Nordstrom VISA credit card receivables transferred to the trust on our consolidated balance sheets.

This off-balance sheet financing allows us greater financial flexibility. Additionally, our exposure to credit losses on the underlying co-branded Nordstrom VISA credit card receivables is limited to our investment in asset backed securities.

Interest Rate Swaps

To manage our interest rate risk, we entered into an interest rate swap agreement in 2003, which had a $250.0 million notional amount expiring in 2009. Under the agreement, we receive a fixed rate of 5.63% and pay a variable rate based on LIBOR plus a margin of 2.3% set at six-month intervals (5.20% at January 29, 2005, based on the January 18, 2005 LIBOR rate); this reduced our net interest expense in 2004. The interest rate swap agreement had a fair value of ($7.8) million and ($8.1) million at January 29, 2005 and January 31, 2004. We have locked in our LIBOR rate until July 15, 2005.

Available Credit

In May 2004, we replaced our existing $300.0 million unsecured line of credit with a $350.0 million unsecured line of credit, which is available as liquidity support for our commercial paper program. Under the terms of the agreement, we pay a variable rate of interest based on LIBOR plus a margin of 0.31% (2.90% at January 29, 2005). The variable rate of interest increases to LIBOR plus a margin of 0.41% if more than $175.0 million is outstanding on the facility. The line of credit agreement expires in May 2007 and contains restrictive covenants, which include maintaining a leverage ratio. We also pay a commitment fee for the line based on our debt rating.

Also in May 2004, we renewed our variable funding note backed by Nordstrom private label card receivables, but we reduced the capacity by $50.0 million to $150.0 million due to better pricing on the unsecured line of credit. This note is renewed annually and interest is paid based on the actual cost of commercial paper plus specified fees. We also pay a commitment fee for the note based on the amount of the commitment.

We did not make any borrowings under our unsecured line of credit or our variable funding note backed by Nordstrom private label card receivables during 2004.

We also have universal shelf registrations on file with the Securities and Exchange Commission that permit us to offer an additional $450 million of securities to the public. These registration statements allow us to issue various types of securities, including debt, common stock, warrants to purchase common stock, warrants to purchase debt securities and warrants to purchase or sell foreign currency.

Debt Ratings

The following table shows our credit ratings at the date of this report.

These ratings could change depending on our performance and other factors. Our outstanding debt is not subject to termination or interest rate adjustments based on changes in our credit ratings.

Contractual Obligations (in millions)

The following table summarizes our contractual obligations and the expected effect on our liquidity and cash flows. We expect to fund these commitments primarily with operating cash flows generated in the normal course of business and credit available to us under existing and potential future facilities.

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management’s discussion and analysis

Long-term debt includes financing related to the $200.0 million off-balance sheet receivable backed securities due in April 2007. In addition to the required debt repayments disclosed above, we estimate total interest payments of approximately $628.5 million as of January 29, 2005, being paid over the remaining life of the debt. Purchase obligations primarily consist of purchase orders for unreceived goods or services and capital expenditure commitments.

This table excludes the short-term liabilities, other than the current portion of long-term debt, disclosed on our balance sheets as the amounts recorded for these items will be paid in the next year.

Other long-term liabilities consist of workers’ compensation and general liability insurance reserves and postretirement benefits. The repayment amounts presented above were determined based on historical payment trends. Other long-term liabilities not requiring cash payments, such as deferred property and lease credits, were excluded from the table above.

Dividends

In 2004, we paid dividends of $0.48 per share, our eighth consecutive annual dividend increase. We paid dividends of $0.41 and $0.38 per share in fiscal 2003 and 2002.

Liquidity

We maintain a level of liquidity to allow us to cover our seasonal cash needs and to minimize our need for short-term borrowings. We believe that our operating cash flows, existing cash and available credit facilities are sufficient to finance our cash requirements for the next 12 months. We plan to pay the remaining $96.0 million of our 6.7% medium-term notes due in July 2005 with existing cash and cash from operations.

Over the long term, we manage our cash and capital structure to maximize shareholder return, strengthen our financial position and maintain flexibility for future strategic initiatives. We continuously assess our debt and leverage levels, capital expenditure requirements, principal debt payments, dividend payouts, potential share repurchases, and future investments or acquisitions. We believe our operating cash flows, existing cash and available credit facilities, as well as any potential future borrowing facilities will be sufficient to fund these scheduled future payments and potential long term initiatives.

CRITICAL ACCOUNTING POLICIES

The preparation of our financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We regularly evaluate our estimates including those related to off-balance sheet financing, inventory valuation, sales return accruals, self-insurance liabilities, doubtful accounts, intangible assets, income taxes, post-retirement benefits, contingent liabilities and litigation. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. The following discussion highlights the policies we feel are critical.

Off-Balance Sheet Financing

Our co-branded Nordstrom VISA credit card receivables are transferred to a third-party trust on a daily basis. The balance of the receivables transferred to the trust fluctuates as new receivables are generated and old receivables are retired (through payments received, charge-offs, or credits from merchandise returns). The trust issues securities that are backed by the receivables. Certain of these securities or “beneficial interests” are sold to third-party investors and those remaining securities are issued to us.

We recognize gains or losses on the sale of the co-branded Nordstrom VISA receivables to the trust based on the difference between the face value of the receivables sold and the estimated fair value of the assets created in the securitization process. The fair value of the assets is calculated as the present value of their expected cash flows. The internal rate of returns used to calculate fair value represent the volatility and risk of the assets. Assumptions and judgments are made to estimate the fair value of our investment in asset backed securities. We have no other off-balance sheet transactions.

Inventory

Our inventory is stated at the lower of cost or market using the retail inventory method (first-in, first-out basis). Under the retail method, inventory is valued by applying a cost-to-retail ratio to the ending inventory’s retail value. As our inventory retail value is adjusted regularly to reflect market conditions, our inventory is valued at the lower of cost or market. Factors considered in determining markdowns include current and anticipated demand, customer preferences, age of the merchandise and fashion trends.

We also reserve for obsolescence based on historical trends and specific identification. Shrinkage is estimated as a percentage of sales for the period from the most recent semi-annual inventory count based on historical shrinkage results.

Revenue Recognition

We recognize revenues net of estimated returns and we exclude sales taxes. Our retail stores record revenue at the point of sale. Our catalog and Internet sales include shipping revenue and are recorded when the merchandise is delivered to the customer. Our sales return liability is estimated based on historical return rates.

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Vendor Allowances

We receive allowances from merchandise vendors for purchase price adjustments, cooperative advertising programs, cosmetic selling expenses and vendor sponsored contests. Purchase price adjustments are recorded as a reduction of cost of sales after an agreement with the vendor is executed and the related merchandise has been sold. Allowances for cooperative advertising programs and vendor sponsored contests are recorded in cost of sales and selling, general and administrative expenses as a reduction to the related cost when incurred. Allowances for cosmetic selling expenses are recorded in selling, general and administrative expenses as a reduction to the related cost when incurred. Any allowances in excess of actual costs incurred that are recorded in selling, general and administrative expenses are recorded as a reduction to cost of sales.

Self Insurance

We are self insured for certain losses related to health and welfare, workers’ compensation and general liability. We record estimates of the total cost of claims incurred as of the balance sheet date. These estimates are based on internal analysis of historical data and validated by independent actuarial estimates.

Allowance For Doubtful Accounts

Our allowance for doubtful accounts represents our best estimate of the losses inherent in our private label credit card receivable as of the balance sheet date. We evaluate the collectibility of our accounts receivable based on several factors, including historical trends of aging of accounts, write-off experience and expectations of future performance. We recognize finance charges on delinquent accounts until the account is written off. Delinquent accounts are written off when they are determined to be uncollectible, usually after the passage of 151 days without receiving a full scheduled monthly payment. Accounts are written off sooner in the event of customer bankruptcy or other circumstances that make further collection unlikely. Our write-off experience and aging trends have been consistent over the last two years.

Valuation of Long-Lived Assets

We review our intangibles and other long-lived assets annually for impairment or when events or changes in circumstances indicate the carrying value of these assets may not be recoverable. We estimate the fair value of an asset based on the future cash flows the asset is expected to generate. An impairment loss is recognized when the carrying value of the asset exceeds its fair value. Factors used in the valuation of long-lived assets include, but are not limited to, management’s plans for future operations, recent operating results and projected cash flows.

Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4.” SFAS 151 amends ARB No. 43, Chapter 4, “Inventory Pricing” to clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted material should be recognized as current period charges. In addition, this statement requires that fixed overhead production be allocated to the costs of conversion based on the normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005, and should be applied prospectively. We do not believe the adoption of SFAS 151 will have a material impact on our financial statements.

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS 123R requires us to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award. We have not yet quantified the effects of the adoption of SFAS 123R, but it is expected that the new standard will result in significant stock-based compensation expense. SFAS 123R will be effective for our third fiscal quarter beginning July 31, 2005.

Cautionary Statement

The preceding disclosures included forward-looking statements regarding our performance, liquidity, capital expenditures and adequacy of capital resources. These statements are based on our current assumptions and expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking statements are qualified by the risks and challenges posed by our ability to predict fashion trends, consumer apparel buying patterns, our ability to control costs, weather conditions, hazards of nature, trends in personal bankruptcies and bad debt write-offs, changes in interest rates, employee relations, our ability to continue our expansion plans, potential opportunities that may be related to the current changes in our industry, changes in governmental or regulatory requirements, and the impact of economic and competitive market forces, including the impact of terrorist activity or the impact of a war on us, our customers and the retail industry. As a result, while we believe there is a reasonable basis for the forward-looking statements, you should not place undue reliance on those statements. We undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances. This discussion and analysis should be read in conjunction with the consolidated financial statements and the eleven-year statistical summary.

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MANAGEMENT RESPONSIBILITY FOR FINANCIAL INFORMATION

We are responsible for the preparation, integrity and fair presentation of our financial statements and the other information that appears in the annual report. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include estimates based on our best judgment.

We maintain a comprehensive system of internal controls and procedures designed to provide reasonable assurance, at an appropriate cost-benefit relationship, that our financial information is accurate and reliable, our assets are safeguarded and our transactions are executed in accordance with established procedures.

Deloitte and Touche LLP, an independent registered public accounting firm, is retained to audit Nordstrom’s consolidated financial statements and management’s assessment of the effectiveness of the company’s internal control over financial reporting. Its accompanying reports are based on audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).

The Audit Committee, which is comprised of six independent directors, meets regularly with our management, our internal auditors and the independent registered public accounting firm to ensure that each is properly fulfilling its responsibilities. The Committee oversees our systems of internal control, accounting practices, financial reporting and audits to ensure their quality, integrity and objectivity are sufficient to protect shareholders’ investments.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities and Exchange Act of 1934 rules. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of January 29, 2005.

Management’s assessment of the effectiveness of our internal control over financial reporting as of January 29, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Michael G. Koppel
Executive Vice President and Chief Financial Officer

Blake W. Nordstrom
President

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auditors’ report on internal control over financial reporting

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Nordstrom, Inc.

We have audited management’s assessment, included in the accompanying Management’s Report, that Nordstrom, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of January 29, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of January 29, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 29, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended January 29, 2005 of the Company and our report dated April 7, 2005, expresses a unqualified opinion on those financial statements.

Deloitte & Touche LLP
Seattle, Washington
April 7, 2005

27

auditors’ report on consolidated financial statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Nordstrom, Inc.

We have audited the accompanying consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the “Company”) as of January 29, 2005 and January 31, 2004, and the related consolidated statements of earnings, shareholders’ equity, and cash flows for each of the three years in the period ended January 29, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Nordstrom, Inc. and subsidiaries as of January 29, 2005 and January 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 2005, in conformity with accounting principles generally accepted in the United States of America.

The Company changed its method of accounting for goodwill and other intangible assets upon adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, for the year ended January 31, 2003, as discussed in Note 2 to the consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of January 29, 2005, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 7, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Deloitte & Touche LLP
Seattle, Washington
April 7, 2005

28

consolidated statements of earnings

Consolidated Statements of Earnings
Amounts in thousands except per share amounts

Consolidated Statements of Earnings (% of sales)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

29

consolidated balance sheets

Amounts in thousands

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

30

consolidated statements of shareholders’ equity

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

31

consolidated statements of cash flows