UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) February 17, 2011

 

 

NORDSTROM, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

 

 

 

WASHINGTON		001-15059		91-0515058
(STATE OR OTHER JURISDICTION		(COMMISSION		(I.R.S. EMPLOYER
OF INCORPORATION)		FILE NUMBER)		IDENTIFICATION NO.)

 

1617 SIXTH AVENUE, SEATTLE, WASHINGTON		98101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE (206) 628-2111

INAPPLICABLE

(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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ITEM 2.02 Results of Operations and Financial Condition

On February 17, 2011, Nordstrom, Inc. issued an earnings release announcing its results of operations for the quarter and year ended January 29, 2011, its financial position as of January 29, 2011, and its cash flows for the year ended January 29, 2011. A copy of this earnings release is attached as Exhibit 99.1.

ITEM 7.01 Regulation FD Disclosure

On February 17, 2011, Nordstrom, Inc. issued an earnings release announcing its results of operations for the quarter and year ended January 29, 2011, its financial position as of January 29, 2011, and its cash flows for the year ended January 29, 2011. A copy of this earnings release is attached as Exhibit 99.1.

ITEM 8.01 Other Events.

On February 17, 2011, Nordstrom, Inc. issued a press release announcing that it has entered into an agreement to acquire HauteLook. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

ITEM 9.01 Financial Statements and Exhibits

 

99.1		Nordstrom earnings release dated February 17, 2011 relating to the Company’s results of operations for the quarter and year ended January 29, 2011, its financial position as of January 29, 2011, and its cash flows for the year ended January 29, 2011.
99.2		Press release of Nordstrom, Inc., dated February 17, 2011.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: February 17, 2011

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EXHIBIT INDEX

 

EXHIBIT NUMBER		DESCRIPTION
99.1		Nordstrom earnings release dated February 17, 2011 relating to the Company’s results of operations for the quarter and year ended January 29, 2011, its financial position as of January 29, 2011, and its cash flows for the year ended January 29, 2011.
99.2		Press release of Nordstrom, Inc., dated February 17, 2011.

Exhibit 99.1

 

FOR RELEASE:		INVESTOR CONTACT:		Rob Campbell
February 17, 2011 at 1:05 p.m. PT				Nordstrom, Inc.
				(206) 233-6550
		MEDIA CONTACT:		Colin Johnson
				Nordstrom, Inc.
				(206) 373-3036

Nordstrom Reports Fourth Quarter and Fiscal Year 2010 Earnings;

Achieves Record Sales for Fiscal Year 2010

SEATTLE, Wash. (February 17, 2011) – Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $232 million, or $1.04 per diluted share, for the fourth quarter ended January 29, 2011. This represented an increase of 35 percent compared with net earnings of $172 million, or $0.77 per diluted share, for the same quarter last year.

Fourth quarter same-store sales increased 6.7 percent compared with the same period in fiscal 2009. Net sales in the fourth quarter were $2.82 billion, an increase of 10.9 percent compared with net sales of $2.54 billion during the same period in fiscal 2009. Additionally, total net sales of $9.31 billion for fiscal 2010 were the highest in the company’s history.

FOURTH QUARTER SUMMARY

Nordstrom’s fourth quarter performance was a continuation of the positive trends experienced during 2010.

 

•

Multi-channel same-store sales increased 7.2 percent compared with the same period in fiscal 2009. Top-performing multi-channel merchandise categories included jewelry, dresses and shoes. The South and Midwest regions were the top-performing geographic areas for full-line stores relative to the fourth quarter of 2009.

 

•

Nordstrom Rack net sales increased $93 million, or 24.1 percent compared with the same period in fiscal 2009. Same-store sales increased 3.9 percent compared with the same period in fiscal 2009.

 

•

Gross profit, as a percentage of net sales, increased 34 basis points compared with last year’s fourth quarter. The improvement was mainly driven by the ability to leverage buying and occupancy expenses during the quarter. The company ended the quarter with sales per square foot up 6.0 percent and inventory per square foot up 3.8 percent compared with the fourth quarter of 2009. Nordstrom ended the year with inventory turn of 5.6, an all-time high for the company.

 

•

Retail selling, general and administrative expenses increased $66 million compared with last year’s fourth quarter. Higher sales volume and new stores accounted for the majority of this increase, with the remainder coming primarily from increased investments in marketing and technology. The company continues to make investments to improve the customer experience both online and within the stores.

 

•

The Credit segment continues to improve. Customer payment rates are increasing, resulting in improved delinquency and write-off trends. Delinquencies as a percentage of credit card receivables at the end of the fourth quarter were 3.0 percent, which was reduced from 3.5 percent at the end of the third quarter of 2010 and reduced from 5.3 percent at the end of the fourth quarter of 2009. As a result, the reserve for bad debt was reduced by $15 million.

 

•

Earnings before interest and taxes increased $96 million to $406 million, or 13.9 percent of total revenues, from $310 million, or 11.8 percent of total revenues, in last year’s fourth quarter.

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FULL YEAR RESULTS

For the fiscal year ended January 29, 2011, net earnings were up $172 million to $613 million, an increase of 39 percent compared with net earnings of $441 million for the fiscal year ended January 30, 2010. Earnings per diluted share for the same periods were $2.75 and $2.01, respectively.

Full year same-store sales increased 8.1 percent compared with fiscal 2009. Net sales for the year were a record $9.31 billion, an increase of 12.7 percent compared with prior year net sales of $8.26 billion.

CAPITAL INVESTMENT AND EXPANSION UPDATE

In fiscal 2011, the company’s capital expenditures, net of property incentives, are expected to total between $400 and $440 million, compared with approximately $304 million in fiscal 2010.

During the fourth quarter of 2010, the company opened a 36,000-square-foot Nordstrom Rack store at Arrowhead Crossing in Peoria, Arizona. In 2011, Nordstrom has announced plans to open the following stores:

 

Location		Store Name		Square Footage (000’s)		Timing
Nordstrom Full-Line Stores
Newark, Delaware		Christiana Mall		122		April 8
Nashville, Tennessee		The Mall at Green Hills		149		September 16
St. Louis, Missouri		Saint Louis Galleria		143		September 23
Nordstrom Rack Stores
Aventura, Florida		The Promenade Shops		35		March 3
Austin, Texas		Sunset Valley Village		34		March 10
Arlington, Texas		The Parks at Arlington Mall		32		March 17
Fremont, California		Pacific Commons		35		March 24
Charlotte, North Carolina		Carolina Pavilion		43		March 31
Lakewood, Colorado		Belmar		35		April 28
Boulder, Colorado1		Twenty Ninth Street		35		April 28
Cherry Hill, New Jersey		Towne Place at Garden State Park		36		May 5
Washington, D.C.		Friendship Center		41		May 19
Annapolis, Maryland		Annapolis Harbour Center		32		May 19
West Covina, California		West Covina Mall		37		Fall
Redondo Beach, California		South Bay Center		35		Fall
Tucson, Arizona		The Corner		33		Fall
Indianapolis, Indiana		Rivers Edge		35		Fall
Sugar Land, Texas		The Market at Town Center		35		Fall
Henderson, Nevada2		Stephanie Street Center		35		Fall
Burlington, Massachusetts		Middlesex Commons		38		Fall
Tigard, Oregon		Cascade Plaza		45		Fall
Lenexa, Kansas		Orchard Corners		40		Fall

 

1	Nordstrom plans to relocate its Nordstrom Rack store at Flatiron Marketplace in Broomfield, Colorado to the Twenty Ninth Street shopping center in Boulder, Colorado.

2	Nordstrom plans to relocate its Nordstrom Rack store at Silverado Ranch Plaza in Las Vegas, Nevada to Stephanie Street Center in Henderson, Nevada.

FISCAL YEAR 2011 OUTLOOK

In fiscal 2011, Nordstrom plans to build from its strong financial framework to improve profitability, enhance free cash flow, increase return on invested capital and maintain a healthy balance sheet. For the 2011 fiscal year, Nordstrom expects same-store sales to increase 2 to 4 percent, which yields earnings per share in the range of $2.95 to $3.10 for the full year.

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The company’s expectations for fiscal 2011 are as follows:

 

Same-store sales		2 to 4 percent increase
Credit card revenues		$0 to $10 million increase
Gross profit (%)		10 basis point decrease to 10 basis point increase
Retail selling, general and administrative expense ($)		$120 to $160 million increase
Credit selling, general and administrative expense ($)		$0 to $10 million decrease
Total selling, general and administrative expense (%)		45 to 65 basis point decrease
Interest expense, net		$0 to $5 million decrease
Effective tax rate		39.0 percent
Earnings per diluted share		$2.95 to $3.10
Diluted shares outstanding		223.3 million

In 2011, the company will report same-store sales for the total company, Nordstrom and Nordstrom Rack, which is consistent with our branding. “Nordstrom” (formerly referred to as “Multi-channel”) includes Nordstrom full-line stores and Direct. The consolidation of full-line and Direct sales reflects the company’s recognition that the customer does not differentiate between the two channels, and is consistent with how the company plans and manages the business.

CONFERENCE CALL INFORMATION

The company’s senior management will host a conference call to discuss fourth quarter results at 4:45 p.m. Eastern Standard Time today. To listen, please dial 517-308-9140 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 203-369-1322 (passcode: 6673) until the close of business on February 24, 2011. Interested parties may also listen to the live call over the Internet by visiting the Investor Relations section of the company’s corporate Web site at http://investor.nordstrom.com. An archived webcast will be available in the webcasts section through May 18, 2011.

ABOUT NORDSTROM

Nordstrom, Inc. is one of the nation’s leading fashion specialty retailers, with 204 stores located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 115 Nordstrom full-line stores, 86 Nordstrom Racks, two Jeffrey boutiques and one clearance store. Nordstrom also serves customers through its online presence at www.nordstrom.com and through its catalogs. Nordstrom, Inc.’s common stock is publicly traded on the NYSE under the symbol JWN.

Certain statements in this news release contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the fiscal year ending January 28, 2012, anticipated annual same-store sales rate, anticipated store openings, anticipated capital expenditures for fiscal year 2011 and trends in company operations. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including but not limited to: the impact of deteriorating economic and market conditions and the resultant impact on consumer spending patterns; our ability to respond to the business environment and fashion trends; our ability to safeguard our brand and reputation; effective inventory management; efficient and proper allocation of our capital resources; successful execution of our store growth strategy including the timely completion of construction associated with newly planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties; our compliance with applicable banking and related laws and regulations impacting our ability to extend credit to our customers; trends in personal bankruptcies and bad debt write-offs; availability and cost of credit; impact of the current regulatory environment and financial system reforms; changes in interest rates; disruptions in our supply chain; our ability to maintain our relationships with vendors and developers who may be experiencing economic difficulties; the geographic locations of our stores; our ability to maintain relationships with our employees and to effectively train and develop our future leaders; our compliance with information security and privacy laws and regulations, employment laws and regulations and other laws and regulations applicable to us; successful execution of our information technology strategy; successful execution of our multi-channel strategy; risks related to fluctuations in world currencies; public health concerns and the resulting impact on consumer spending patterns, supply chain, and employee health; weather conditions and hazards of nature that affect consumer traffic and consumers’ purchasing patterns; the effectiveness of planned advertising, marketing and promotional campaigns; our ability to control costs; and the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances associated with option exercises or other matters. Our SEC reports, including our Form 10-K for the fiscal years ended January 30, 2010; our Form 10-Q for the fiscal quarters ended May 1, 2010, July 31, 2010 and October 30, 2010; and our Form 10-K for the fiscal year ended January 29, 2011, to be filed with the SEC on or about March 18, 2011, 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.

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NORDSTROM, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited; amounts in millions, except per share data)

 

		Quarter Ended								Year Ended
		1/29/11				1/30/10				1/29/11				1/30/10
Net sales		$	2,816			$	2,539			$	9,310			$	8,258
Credit card revenues			100				101				390				369
Total revenues			2,916				2,640				9,700				8,627
Cost of sales and related buying and occupancy costs			(1,758	)			(1,593	)			(5,897	)			(5,328	)
Selling, general and administrative expenses:
Retail			(697	)			(631	)			(2,412	)			(2,109	)
Credit			(55	)			(106	)			(273	)			(356	)
Earnings before interest and income taxes			406				310				1,118				834
Interest expense, net			(33	)			(33	)			(127	)			(138	)
Earnings before income taxes			373				277				991				696
Income tax expense			(141	)			(105	)			(378	)			(255	)
Net earnings		$	232			$	172			$	613			$	441
Earnings per share
Basic		$	1.06			$	0.79			$	2.80			$	2.03
Diluted		$	1.04			$	0.77			$	2.75			$	2.01
Weighted average shares outstanding
Basic			218.8				217.7				218.8				216.8
Diluted			222.9				221.7				222.6				219.7

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NORDSTROM, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; amounts in millions)

 

		1/29/11				1/30/10
Assets
Current assets:
Cash and cash equivalents		$	1,506			$	795
Accounts receivable, net			2,026				2,035
Merchandise inventories			977				898
Current deferred tax assets, net			236				238
Prepaid expenses and other			79				88
Total current assets			4,824				4,054
Land, buildings and equipment (net of accumulated depreciation of $3,520 and $3,316)			2,318				2,242
Goodwill			53				53
Other assets			267				230
Total assets		$	7,462			$	6,579
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$	846			$	726
Accrued salaries, wages and related benefits			375				336
Other current liabilities			652				596
Current portion of long-term debt			6				356
Total current liabilities			1,879				2,014
Long-term debt, net			2,775				2,257
Deferred property incentives, net			495				469
Other liabilities			292				267
Commitments and contingencies
Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 218.0 and 217.7 shares issued and outstanding			1,168				1,066
Retained earnings			882				525
Accumulated other comprehensive loss			(29	)			(19	)
Total shareholders’ equity			2,021				1,572
Total liabilities and shareholders’ equity		$	7,462			$	6,579

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NORDSTROM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; amounts in millions)

 

		Year Ended
		1/29/11				1/30/10
Operating Activities
Net earnings		$	613			$	441
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization of buildings and equipment, net			327				313
Amortization of deferred property incentives and other, net			(54	)			(42	)
Deferred income taxes, net			2				(58	)
Stock-based compensation expense			42				32
Tax benefit from stock-based compensation			15				6
Excess tax benefit from stock-based compensation			(16	)			(7	)
Provision for bad debt expense			149				251
Change in operating assets and liabilities:
Accounts receivable			(74	)			(159	)
Merchandise inventories			(80	)			(1	)
Prepaid expenses and other assets			1				(38	)
Accounts payable			72				168
Accrued salaries, wages and related benefits			37				120
Other current liabilities			42				81
Deferred property incentives			95				96
Other liabilities			6				48
Net cash provided by operating activities			1,177				1,251
Investing Activities
Capital expenditures			(399	)			(360	)
Change in credit card receivables originated at third parties			(66	)			(182	)
Other, net			3				1
Net cash used in investing activities			(462	)			(541	)
Financing Activities
Repayments of commercial paper borrowings, net			—				(275	)
Proceeds from long-term borrowings, net of discounts			498				399
Principal payments on long-term borrowings			(356	)			(25	)
Increase in cash book overdrafts			37				9
Cash dividends paid			(167	)			(139	)
Repurchase of common stock			(84	)			—
Proceeds from exercise of stock options			35				21
Proceeds from employee stock purchase plan			13				13
Excess tax benefit from stock-based compensation			16				7
Other, net			4				3
Net cash (used in) provided by financing activities			(4	)			13
Net increase in cash and cash equivalents			711				723
Cash and cash equivalents at beginning of year			795				72
Cash and cash equivalents at end of year		$	1,506			$	795

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NORDSTROM, INC.

STATEMENTS OF EARNINGS BY SEGMENT

(unaudited; amounts in millions, except percentages)

Retail

Our Retail business includes our multi-channel operations, which are composed of our Nordstrom full-line and online stores, and our Nordstrom Rack and Jeffrey stores; and also includes unallocated corporate center expenses. The following tables summarize the results of our Retail business for the quarter and year ended January 29, 2011 compared with the quarter and year ended January 30, 2010:

 

		Quarter Ended 1/29/11				% of sales1				Quarter Ended 1/30/10				% of sales1
Net sales		$	2,816				100.0%			$	2,539				100.0%
Cost of sales and related buying and occupancy costs			(1,739	)			(61.7%	)			(1,575	)			(62.0%	)
Gross profit			1,077				38.3%				964				38.0%
Selling, general and administrative expenses			(697	)			(24.8%	)			(631	)			(24.9%	)
Earnings before interest and income taxes			380				13.5%				333				13.1%
Interest expense, net			(28	)			(1.0%	)			(23	)			(0.9%	)
Earnings before income taxes		$	352				12.5%			$	310				12.2%
		Year Ended 1/29/11				% of sales1				Year Ended 1/30/10				% of sales1
Net sales		$	9,310				100.0%			$	8,258				100.0%
Cost of sales and related buying and occupancy costs			(5,831	)			(62.6%	)			(5,273	)			(63.9%	)
Gross profit			3,479				37.4%				2,985				36.1%
Other revenues			—				N/A				(1	)			N/A
Selling, general and administrative expenses			(2,412	)			(25.9%	)			(2,109	)			(25.5%	)
Earnings before interest and income taxes			1,067				11.5%				875				10.6%
Interest expense, net			(106	)			(1.1%	)			(97	)			(1.2%	)
Earnings before income taxes		$	961				10.3%			$	778				9.4%

 

1	Subtotals and totals may not foot due to rounding.

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NORDSTROM, INC.

STATEMENTS OF EARNINGS BY SEGMENT

(unaudited; amounts in millions, except percentages)

Credit

Our Credit business earns finance charges, interchange fees and late fee income through operation of the Nordstrom private label and Nordstrom VISA credit cards. The following tables summarize the results of our Credit business for the quarter and year ended January 29, 2011 compared with the quarter and year ended January 30, 2010:

 

		Quarter Ended								Year Ended
		1/29/11				1/30/10				1/29/11				1/30/10
Credit card revenues		$	100			$	101			$	390			$	370
Interest expense			(5	)			(10	)			(21	)			(41	)
Net credit card income			95				91				369				329
Cost of sales – loyalty program			(19	)			(18	)			(66	)			(55	)
Selling, general and administrative expenses:
Operational and marketing expenses			(31	)			(30	)			(124	)			(105	)
Bad debt expense			(24	)			(76	)			(149	)			(251	)
Earnings (loss) before income taxes		$	21			$	(33	)		$	30			$	(82	)

The following table illustrates the activity in our allowance for credit losses for the quarter and year ended January 29, 2011 and January 30, 2010:

 

		Quarter Ended								Year Ended
		1/29/11				1/30/10				1/29/11				1/30/10
Allowance at beginning of period		$	160			$	170			$	190			$	138
Bad debt provision			24				76				149				251
Write-offs			(44	)			(59	)			(211	)			(209	)
Recoveries			5				3				17				10
Allowance at end of period		$	145			$	190			$	145			$	190
Net write-offs as a percentage of average credit card receivables			7.2%				10.5%				9.2%				9.5%

 

		1/29/11				1/30/10
Allowance as a percentage of ending credit card receivables			6.9%				8.8%
Delinquent balances thirty days or more as a percentage of credit card receivables			3.0%				5.3%

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NORDSTROM, INC.

RETURN ON INVESTED CAPITAL (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings and other forums which may be considered non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. The following disclosure provides additional information regarding our Return on Invested Capital (ROIC) for the years ended January 29, 2011 and January 30, 2010:

We believe that ROIC is a useful financial measure for investors in evaluating our operating performance. When analyzed in conjunction with our net earnings and total assets and compared to return on assets (net earnings divided by average total assets), it provides investors with a useful tool to evaluate our ongoing operations and our management of assets from period to period. ROIC is one of our key financial metrics, and we also incorporate it into our executive incentive measures. We believe that overall performance as measured by ROIC correlates directly to shareholders’ return over the long term. For the 12 fiscal months ended January 29, 2011, our ROIC increased to 13.6% compared with 12.1% for the 12 fiscal months ended January 30, 2010. ROIC is not a measure of financial performance under GAAP, should not be considered a substitute for return on assets, net earnings or total assets as determined in accordance with GAAP, and may not be comparable with similarly titled measures reported by other companies. The closest measure calculated using GAAP amounts is return on assets, which increased to 8.6% from 7.1% for the 12 fiscal months ended January 29, 2011, compared with the 12 fiscal months ended January 30, 2010. The following is a comparison of return on assets to ROIC:

 

		12 fiscal months ended
		1/29/11				1/30/10
Net earnings		$	613			$	441
Add: Income tax expense			378				255
Add: Interest expense			128				138
Earnings before interest and income tax expense			1,119				834
Add: Rent expense			62				43
Less: Estimated depreciation on capitalized operating leases1			(32	)			(23	)
Net operating profit			1,149				854
Estimated income tax expense2			(439	)			(313	)
Net operating profit after tax (NOPAT)		$	710			$	541
Average total assets3		$	7,091			$	6,197
Less: Average non-interest-bearing current liabilities4			(1,796	)			(1,562	)
Less: Average deferred property incentives3			(487	)			(462	)
Add: Average estimated asset base of capitalized operating leases5			425				311
Average invested capital		$	5,233			$	4,484
Return on assets			8.6%				7.1%
ROIC			13.6%				12.1%

 

1	Capitalized operating leases is our best estimate of the asset base we would record for our operating leases as if we had classified them as capital or purchased the property. Asset base is calculated as described in footnote 5 below.

2	Based upon our effective tax rate multiplied by the net operating profit for the 12 fiscal months ended January 29, 2011 and January 30, 2010.

3	Based upon the trailing 12-month average.

4	Based upon the trailing 12-month average for accounts payable, accrued salaries, wages and related benefits, and other current liabilities.

5	Based upon the trailing 12-month average of the monthly asset base, which is calculated as the trailing 12-months rent expense multiplied by 8.

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NORDSTROM, INC.

ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings and other forums which may be considered non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. The following disclosure provides additional information regarding our Adjusted Debt to EBITDAR as of January 29, 2011 and January 30, 2010:

Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe that our debt levels are best analyzed using this measure. Our current goal is to manage debt levels to maintain an investment-grade credit rating as well as operate with an efficient capital structure for our size, growth plans and industry. Investment-grade credit ratings are important to maintaining access to a variety of short-term and long-term sources of funding, and we rely on these funding sources to continue to grow our business. We believe a higher ratio, among other factors, could result in rating agency downgrades. In contrast, we believe a lower ratio would result in a higher cost of capital and could negatively impact shareholder returns. As of January 29, 2011, our Adjusted Debt to EBITDAR was 2.2 compared with 2.5 as of January 30, 2010.

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

 

•

Adjusted Debt is not exact, but rather our best estimate of the total company debt we would hold if we had purchased the property and issued debt associated with our operating leases;

 

•

EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, including leases, or the cash requirements necessary to service interest or principal payments on our debt; and

 

•

Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, we analyze Adjusted Debt to EBITDAR in conjunction with other GAAP financial and performance measures impacting liquidity, including operating cash flows, capital spending and net earnings. The closest measure calculated using GAAP amounts is debt to net earnings, which was 4.5 and 5.9 for 2010 and 2009. The following is a comparison of debt to net earnings and Adjusted Debt to EBITDAR:

 

		20101				20091
Debt		$	2,781			$	2,613
Add: rent expense x 82			500				341
Less: fair value of interest rate swaps included in long-term debt			(25	)			—
Adjusted Debt		$	3,256			$	2,954
Net earnings			613				441
Add: income tax expense			378				255
Add: interest expense, net			127				138
Earnings before interest and income taxes			1,118				834
Add: depreciation and amortization of buildings and equipment, net			327				313
Add: rent expense			62				43
EBITDAR		$	1,507			$	1,190
Debt to Net Earnings			4.5				5.9
Adjusted Debt to EBITDAR			2.2				2.5

 

1	The components of adjusted debt are as of the end of 2010 and 2009, while the components of EBITDAR are for the 12 months ended January 29, 2011 and January 30, 2010.

2	The multiple of eight times rent expense used to calculate adjusted debt is our best estimate of the debt we would record for our leases that are classified as operating if they had met the criteria for a capital lease, or we had purchased the property.

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NORDSTROM, INC.

FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings and other forums which may be considered non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. The following disclosure provides additional information regarding our free cash flow for the years ended January 29, 2011 and January 30, 2010:

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

 

•

Free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs; and

 

•

Other companies in our industry may calculate free cash flow differently than we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, we analyze free cash flow in conjunction with other GAAP financial and performance measures impacting liquidity, including operating cash flows. The closest measure calculated using GAAP amounts is net cash provided by operating activities, which was $1,177 and $1,251 for the years ended January 29, 2011 and January 30, 2010. The following is a reconciliation of our net cash provided by operating activities and free cash flow:

 

		Year Ended
		1/29/11				1/30/10
Net cash provided by operating activities		$	1,177			$	1,251
Less: Capital expenditures			(399	)			(360	)
Change in credit card receivables originated at third parties			(66	)			(182	)
Cash dividends paid			(167	)			(139	)
Add: Increase in cash book overdrafts			37				9
Free cash flow		$	582			$	579
Net cash used in investing activities		$	(462	)		$	(541	)
Net cash (used in) provided by financing activities		$	(4	)		$	13

Exhibit 99.2

 

FOR IMMEDIATE RELEASE		Investor Contact:		Sandy Fabre
February 17, 2011				Nordstrom
				206-233-6563
		Media Contact:		Colin Johnson
				Nordstrom
				206-373-3036

NORDSTROM TO ACQUIRE HAUTELOOK

SEATTLE, February 17, 2011 — Nordstrom Inc. (NYSE:JWN) announced today it has entered into an agreement to acquire HauteLook, Inc., a leader in the online private sale marketplace. The Company said the acquisition will enable Nordstrom to participate in the fast-growing private sale marketplace and provide a platform to increase innovation and speed in the way it serves customers in all channels.

The acquisition will build on Nordstrom’s success in multi-channel retailing. Recently, these efforts have included implementing an enterprise-wide inventory management system, increasing its Direct business capabilities and integrating its online and store presence to provide customers with a seamless experience.

“We are excited to partner with HauteLook as we believe this acquisition further enhances our focus on serving customers online in new and compelling ways,” said Blake Nordstrom, president, Nordstrom, Inc. “While our focus on providing a superior in-store shopping experience is our roots, continuing to find ways to use technology to serve customers the way they want to be served is critical. This partnership gives Nordstrom and HauteLook shared growth opportunities as online shopping evolves.” Nordstrom added, “CEO Adam Bernhard and his team have built a fantastic business since launching HauteLook just over three years ago and we want them to continue to do what they do well. We think their highly talented team and culture of innovation will be a terrific complement to our business.”

HauteLook CEO Adam Bernhard said, “By joining forces with Nordstrom, we are giving customers a fuller range of options for the way they shop today.” Bernhard continued, “Our established membership base of well over four million shoppers is closely aligned with the Nordstrom customer. We feel fortunate to partner with a company that shares our commitment to providing customers with great brands and an exciting shopping experience.”

Nordstrom will acquire HauteLook for $180 million in Nordstrom stock with a portion subject to ongoing vesting requirements. In addition, the transaction includes a three-year earn-out of up to $90 million in Nordstrom stock subject to company performance and vesting requirements for the existing management team. The overall transaction structure provides significant incentive and retention mechanisms for HauteLook senior management. HauteLook will operate as an independent, wholly-owned subsidiary, be

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managed by its current leadership and the HauteLook brand and website will remain separate from Nordstrom.

The transaction is expected to be dilutive to Nordstrom in 2011 due to non-cash expenses related to the acquisition. The transaction is expected to close in the first quarter of 2011 and is subject to customary closing conditions, including customary regulatory and HauteLook shareholder approvals.

Guggenheim Securities, LLC is acting as exclusive financial advisor to Nordstrom and Gibson, Dunn & Crutcher LLP and Lane Powell PC are acting as its counsel. JP Morgan Securities Inc. is acting as exclusive financial advisor to HauteLook and Gunderson Dettmer is acting as its counsel.

HauteLook is a leader in the online private sale channel, offering limited time sale events on the world’s top fashion and lifestyle brands. Every day, HauteLook offers discounts of 50 to 75 percent off on great brands for women, men, kids, home, beauty, travel and local services. HauteLook launched in 2007 and is headquartered in Los Angeles. Membership is free and everyone is welcome. Visit www.HauteLook.com to learn more.

Nordstrom, Inc. is one of the nation’s leading fashion specialty retailers, with 204 stores located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 115 full-line stores, 86 Nordstrom Racks, two Jeffrey boutiques and one clearance store. Nordstrom also serves customers through its online presence at www.nordstrom.com and through its catalogs. Nordstrom, Inc.’s common stock is publicly traded on the NYSE under the symbol JWN.

Certain statements in this news release may contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995). Such statements are based upon the current beliefs and expectations of the company’s management. Actual future results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors. Risks and uncertainties include the possibility that the transaction may not be timely completed, if at all; that, prior to the completion of the transaction, HauteLook’s business may experience disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, customers or vendors; benefits to Nordstrom and its customers from the acquisition may not be realized to the extent anticipated; that the parties are unable to successfully implement the plans, strategies and objectives of management for post-acquisition operations; and other risks that are described in the Company’s Securities and Exchange Commission filings. Nordstrom undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

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