Nordstrom
Annual Report 2000

Plain-text annual report

What makes Nordstrom unique? T R O P E R L A U N N A 0 0 0 2 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. FC 16.937 x 10.875 • DCS2 • 150 lpi varn BUMP 5523 5523 Cyan Mag Yelo Blk Financial Highlights Dollars in thousands except per share amounts Fiscal Year Net sales Earnings before income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends paid per share 2000 $5,528,537 167,018 101,918 0.78 0.78 0.35 1999 % Change $5,149,266 332,057 202,557 1.47 1.46 0.32 7.4 (49.7) (49.7) (46.9) (46.6) 9.4 Stock Prices Fiscal Year First Quarter Second Quarter Third Quarter Fourth Quarter 2000 1999 high low high low 34.50 30.00 19.50 21.00 18.25 16.56 14.19 14.88 44.81 39.38 33.13 28.00 34.63 30.38 23.13 21.31 Nordstrom, Inc. common stock is traded on the New York Stock Exchange NYSE Symbol-JWN. ) % 1 1 ( . % 3 0 . ) % 7 0 ( . % 6 0 . % 0 4 . ) % 7 2 ( . 5 7 1 3 $ , 6 1 4 3 $ , 1 9 5 3 $ , 6 9 8 3 $ , 4 1 1 4 $ , 8 5 4 4 $ , 5 6 8 4 $ , 9 4 0 5 $ , 9 4 1 5 $ , 9 2 5 5 $ , % 4 1 . % 4 1 . % 7 2 . % 4 4 . %6.0 5.0 4.0 3.0 2.0 1.0 0 (1.0) (2.0) (3.0) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Net Sales Dollars in Millions Comparable Store Sales 0 9 5 8 , 4 2 2 9 , 2 8 2 9 , 8 9 9 9 , 3 1 7 0 1 , 4 5 7 1 1 , 4 1 6 2 1 , 3 9 5 3 1 , 7 8 4 4 1 , 6 5 0 6 1 , 2 8 0 $ . 2 8 0 $ . 6 8 0 $ . 3 2 1 $ . 0 0 1 $ . 0 9 0 $ . 0 2 1 $ . 1 4 1 $ . 6 4 1 $ . 8 7 0 $ . $1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0 $6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total Square Footage In Thousands Diluted Earnings Per Share 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. IFC 16.937 x 10.875 • DCS2 • 150 lpi Table of Contents 14 Management’s Discussion and Analysis 19 Consolidated Statements of Earnings 20 Consolidated Balance Sheets 21 Consolidated Statements of Shareholders’ Equity 22 Consolidated Statements of Cash Flows 23 Notes to Consolidated Financial Statements 38 Ten-Year Statistical Summary 40 Management and Independent Auditors’ Reports 41 Officers of the Corporation 42 Directors and Committees 43 Retail Store Facilities 45 Shareholder Information View this entire report online. Please visit www.nordstrom.com to see this report and obtain the latest available information. It’s written all over our faces. 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 01 8.375 x 10.875 • PDF • 150 lpi VARN Cyan Mag Yelo Blk “Through this door pass the most courteous people in the world.” Sign inside Nordstrom employee entrance, many locations When you hear the word Nordstrom, what immediately comes to mind? A great new outfit? Your favorite weekend sweater? That perfect pair of shoes? Perhaps. But chances are, the first thing that comes to mind is a person. The person who showed you the outfit. Sold you the sweater. Helped you find those shoes. A friendly person. A knowledgeable person. A person with whom you somehow just, well, clicked. This person you can picture so vividly represents the very foundation of our company. The essence of our culture. What sets us apart. This, of course, is the Nordstrom salesperson. They come in all shapes and sizes. All colors and creeds. All ages and lifestyles. Each is very different. Yet all share one common trait. These are people who genuinely like other people. Who enjoy sharing a smile, or a story. Who actually experience a sense of joy in seeing someone walk away happy. Obviously, we are very proud of our folks on the front lines, whether they’re fitting you in a pair of shoes, fulfilling an order on our Web site or answering a question about your Nordstrom Visa® account. They are the ones we rely on to uphold the standards that have been set, and who will continue to build upon these standards, one customer at a time. Mickey Shapiro, a top shoe salesperson in our Old Orchard store in Skokie, Illinois, has been with Nordstrom but a short time, yet has already made his mark. Actually, Mickey has been in the shoe business for years, having previously run his own shoe store on Michigan Avenue in Chicago. His vast experience offers him the opportunity to help the less-experienced members of the team, who regularly seek out Mickey for advice. Hard telling who enjoys it more. Jeanne Breinholt is the manager of the Nordstrom Rack at Sugarhouse Square in Utah. In her Nordstrom career, she has worked in many different departments throughout the store, and was once recognized as a Customer Service All-Star while selling cosmetics. Jeanne really relishes her current role, however, in that it allows her the chance to mentor the Nordstrom leaders of tomorrow. 2 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 02 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. A ND SUBSI DIA RIES 3 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 03 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES 4 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 04 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk “We’re thankful to have customers that care enough about our store and merchandise to tell us how they feel.” Pete Nordstrom, investors conference, December 6, 2000 in New York City Over the past year, you undoubtedly noticed some changes at Nordstrom. Changes in the way we presented ourselves. In our selection of merchandise. In the look and feel of our stores. All of these changes represented an attempt to address certain customers’ desire for more updated fashion options. And, at the same time, to expand our customer base. Many customers liked what they saw. Many did not. In the business of fashion, change is not only essential, it’s a driving force. But it’s clear to us now that in our efforts to move quickly and adjust our merchandise offering and presentation, we confused many of our most loyal customers. And many of our employees, as well. Like many of our customers, Nita Hawkins has, in her words, "a passion for fashion." This passion translates into keen interest in trends and great product knowledge. The beneficiaries, of course, are Nita’s customers, who enjoy sharing with her their love of style, and trust her to help them look their very best. Nita has been with Nordstrom going on nine years now, and currently works in Studio 121 at Perimeter Mall in Atlanta. She has achieved Pacesetter each of her eight years with the company and is a two-time Customer Service All-Star. If that weren’t enough, Nita even got to live out her dream of being a runway model during a Nordstrom fashion show in San Diego. Yolanda Larson is the manager of the Studio 121 department at our Fashion Valley store in San Diego. Her Nordstrom career started in 1992 when she helped open the Mall of America store near Minneapolis. In fact, she became an All-Star that very first year. Yolanda has also been a Pacesetter. Perhaps more telling, however, is the fact that she currently has seven Pacesetters on her staff, a true testament to her incredible leadership abilities. 5 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 05 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk “The number one thing about Nordstrom? It has to be our people. Their performance. Their actions. Our job is to support those folks.” Blake Nordstrom, investors conference, December 6, 2000, New York City It has become apparent to all of us within the company that we must direct our focus to our greatest asset: our people on the front lines. History has proven that when we follow their lead, and address their needs, they feel empowered to address the needs of our customers. They become confident in their own ability to follow through. And gain a sense of ownership for everything they do. Well under way are initiatives designed to reconnect all company resources with the selling floor. A big part of this, of course, is providing our sales staff with the right mix of merchandise. In order for our salespeople to be effective, to truly serve the customer, we must deliver relevant and desirable fashion. Fashion that people want to wear. Clothing that makes them feel confident, appropriate and attractive. In other words, we must fill our stores with the styles our customers are seeking for their everyday lives, whether fashion- forward and contemporary, or classic and traditional. The key is creating the right balance. We believe it all comes back to placing the decision-making process as close to the customer as possible. To this end, all those who directly support our frontline personnel — department managers, store managers, buyers — have been challenged to focus their time and energy prioritizing and acting upon feedback we receive from our salespeople and customers. We have adapted our merchandising team to be more responsive to regional preferences, while at the same time leveraging our size and expertise on a national level. 6 After raising her family, Elaine Hahs came to work at our Mall of America store with no selling experience. She did, however, come equipped with an easy smile and genuine interest in others. In the nine years since she joined the company she has gained tons of experience, but cites those innate personal skills as the real reason she has been the number one salesperson in our Encore department the last seven years in a row. Elaine has also been honored as a Customer Service All-Star. As you can tell from Sidney Johnson’s picture on the facing page, he is a pretty friendly and likeable guy. Unfortunately, our customers don’t have the pleasure of seeing Sidney’s sunny smile. You see, Sidney is a Customer Service Representative at nordstrom.com, whose job it is to take orders and assist customers over the phone. Regardless, his helpful nature comes shining through. But don’t let his pleasant demeanor fool you, he’ll relentlessly track down an item for a customer if that’s what it takes to make her happy. 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 06 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. A ND SUBSI DIA RIES 7 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 07 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES 8 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 08 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk Shelton Cole works in our Men’s Clothing department at Tacoma Mall, but his career at Nordstrom has taken him to both Chicago and Las Vegas as a four- time winner of the Hart Schaffner & Marx annual contest as the company’s number one seller of their suits. He also took part in an international clothing seminar in Taiwan at the request of one of his loyal customers. Shelton has twice been honored as a Customer Service All-Star. Like many Nordstrom employees, David Ben Ami often receives letters from customers grateful for the service he provided. What may surprise you, however, is that David works in our Credit Office — and the letters he’s gotten are from people he called because they were behind on their payments or had other issues with their accounts. They wrote, in short, because David showed compassion for the situation and conveyed a sincere desire to help. Regardless of the challenge, David’s sense of fairness and compassion always come across loud and clear. In today’s highly competitive and constantly evolving retail environment, we need to provide our people with the tools they need to compete. A top priority in the company today is our perpetual inventory management system. When fully operational, it will enable a salesperson to track down an item for a customer from anywhere in the company in the time it takes to ring up the sale. Without a doubt, there are plenty of opportunities to improve our performance within our existing operations. We are currently coordinating our efforts behind the scenes to maximize efficiency. And in keeping with our plan to direct our attention and energies to the point-of-sale, some of the savings realized behind the scenes will be funneled back to the sales floor. In effect, reinvesting in our people and level of service they provide, thus reinforcing our primary point of difference. “It’s no secret that Nordstrom’s customer service ethic is what built this company’s reputation. And, after all, without that reputation we would be just another store.” Bruce Nordstrom, excerpt from employee newsletter, spring 2000 Looking ahead, there are a number of new opportunities to explore; all will be scrutinized from a more strategic and financial perspective. This past year, we had several successful full-line store openings, topped by our store on Michigan Avenue in Chicago, which achieved the highest first-day sales in the history of Nordstrom. Already in 2001, we opened a new store at North East Mall in suburban Dallas and replaced our Valley Fair store in San Jose. This fall brings new full-line stores to Columbus, Ohio; Tampa, Florida and Chandler, Arizona. 9 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 09 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk Our Nordstrom Rack continues to play a vital role in keeping our full-line store merchandise selection fresh, while offering a comprehensive selection of off-price and special-purchase items. In addition, this division has proven to be a great training ground for new employees. Ten Nordstrom Racks were opened in 2000, and eight are scheduled to open in 2001. Last year we also completed the purchase of Façonnable. This acquisition builds on our extensive history of effective and profitable partnership with this highly respected French designer, wholesaler and retailer of high quality men’s and women’s apparel and accessories. We continue to see value in reaching out to our customers through our Internet and catalog businesses, as well. Indeed, there are many channels that offer an opportunity to connect with our customers. In the end, we believe our success as an organization will depend on our ability to consistently provide the Nordstrom experience regardless of market or medium. “Our success is solely dependent upon our ability to support one another and share that expression of courtesy and respect to each and every customer who comes in contact with Nordstrom.” Blake Nordstrom, from message to employees in company newsletter, December 2000 The executive team has been in place since September, although most have been Nordstrom employees for over 20 years. In fact, most of our executive team members got their start right on our selling floor, and through hard work, talent and commitment to core company values, find themselves in a position to help guide the company to reach its fullest potential. To a person, they are all dedicated to doing whatever it takes to support the true leaders of our company — those in direct, daily contact with our customers. As you may know, 2001 marks our 100th year in business. Everyone at Nordstrom can look back with pride to the many successes and phenomenal growth the company has achieved. We can also gaze upon a future full of possibilities. The groundwork has been laid. Through the efforts of so many great employees over the years, we have attempted to develop a truly special bond with our customers. The attitude and actions of our people are not part of some marketing strategy, per se, but they are what set us apart in the marketplace. Our future is in their hands, and therein lies our best opportunity for success. C e l e b r a t i n g 1 0 0 y e a r s 10 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 10 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk Executive Team Blake Nordstrom President, Nordstrom, Inc. Joined Nordstrom in 1975 Jammie Baugh Executive Vice President, Human Resources Joined Nordstrom in 1974 Gail Cottle Executive Vice President and President, Nordstrom Product Group Joined Nordstrom in 1969 Linda Toschi Finn Executive Vice President, Marketing Joined Nordstrom in 1975 Kevin Knight Executive Vice President and President, Nordstrom Credit and Customer Relationship Marketing Joined Nordstrom in 1998 Pete Nordstrom Executive Vice President and President, Full-line Stores Joined Nordstrom in 1976 Dan Nordstrom Chief Executive Officer, Nordstrom.com Joined Nordstrom in 1975 Joel Stinson Executive Vice President, Chief Administrative Officer Joined Nordstrom in 1976 Delena Sunday Executive Vice President, Diversity Affairs Joined Nordstrom in 1980 Sue Wilson Tabor Executive Vice President and President, Nordstrom Rack Joined Nordstrom in 1967 The Chief Financial Officer was not named at press time. 11 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 11 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Rita Noguchi manages the Narrative department at our Arden Fair store in Sacramento. But it’s safe to say she doesn’t have a staff so much as she has a fan club. The fact that each member of her team made Pacesetter this past year, including the #1 Narrative Pacesetter in the company, only serves to reinforce the unique relationship she has with her team and the role she plays as mentor and motivator. Rita also achieved Pacesetter status herself once — while working part time, no less. When Ada Day walked through the employee entrance to interview for a job at Nordstrom she noticed a sign above the door. It read "Through these doors pass the most courteous people in the world" and she immediately knew it was the place she wanted to be. As the Concierge at our Short Hills store in New Jersey, Ada is called upon to live up to this mantra every day, helping people with everything and anything they may need — even comforting a frightened 4-year-old until her parents were located at the other end of the mall. It’s just part of the job. And with Ada, it just comes naturally. It’s no wonder she has twice been honored as a Customer Service All-Star. 12 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 12 8.375 x 10.875 • PDF • 150 lpi PMS 5773 Cyan Mag Yelo Blk Dear Customers, Shareholders and Employees, The year 2001 represents a significant event in the history of Nordstrom. It was 100 years ago that my great-grandfather first opened the doors of a modest little shoe store in Seattle. Reaching this milestone presents a fitting opportunity to reflect upon the past and look toward the future. Everyone at Nordstrom is proud of this company’s accomplishments over the last century, but we recognize that our commitment to serving our customers must be renewed every day. Our performance in 2000 did not meet our expectations, and chances are it didn’t meet yours. In response, we have narrowed our focus to include the following priorities: • Achieving a balanced mix of merchandise, appropriately tailored by market, to better serve our broad base of customers • Utilizing information technology as a selling tool – in the form of a perpetual inventory system – to help us offer not only the right merchandise, but the right amount of merchandise, in every store • Identifying efficiencies in back-of-the-house areas of our business to both control costs and offer greater support to the selling floor • Managing our growth – maintaining focus on our existing business while capitalizing on favorable expansion opportunities Some of these initiatives will have an impact on our business this year; some will produce benefits realized over time. The bottom line: even in the face of a changing economy, we are confident that by concentrating on doing what’s right for our customers, we will also do what’s right for our shareholders. We have many reasons to be optimistic — over 45,000 to be exact. After all, our people continue to be our greatest asset. They are the ones who maintain and build upon our reputation. They understand it is their business, their customer, their legacy. I am also enthusiastic about our executive team, which I am working with very closely. Each of these individuals has experienced remarkable success as a leader and mentor. They fully understand the importance of supporting those individuals within the Company who are in direct contact with the customer, and giving them the tools they need to be competitive and provide better service. Our aim is not only to live up to, but to exceed, the extraordinary standards that have been set, so that the next 100 years at Nordstrom will be no less remarkable than the first. To achieve this, we will work to demonstrate, on a daily basis, a level of service that will justify your ongoing goodwill and support. Of course, we also welcome your input, which has always been key to helping improve our business. Sincerely, Blake W. Nordstrom President 13 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 13 8.375 x 10.875 • PDF • 150 lpi Cyan Mag Yelo Blk Management’s Discussion and Analysis The following discussion and analysis reviews the past three stores in Atlanta, Georgia; Hurst, Texas; Plano, Texas; years and provides additional information on future Glendale, California; Troy, Michigan; Honolulu, Hawaii; expectations and trends. Some of the information in this Spokane, Washington; Oak Brook, Illinois; Scottsdale, annual report, including anticipated store openings and Arizona; and Chandler, Arizona. As a result of the planned capital expenditures, are forward-looking acquisition of Façonnable, S.A. in October 2000, the statements, which are subject to risks and uncertainties. Company also operates 20 Façonnable boutiques located Actual future results and trends may differ materially primarily in Europe. depending upon a variety of factors, including, but not limited to, the Company’s ability to predict fashion trends and consumer apparel buying patterns, the Company’s ability to maintain and control proper inventory levels, the Company’s ability to control costs and expenses, trends in Results of Operations Net Sales The Company achieved a 7.4% increase in sales in 2000 as compared to 1999 (the fiscal year ended January 31, 2000). Certain components of the percentage change in sales by personal bankruptcies and bad debt write-offs, employee relations, adverse weather conditions and other hazards of year are as follows: nature such as earthquakes and floods, the Company’s ability Fiscal Year 2000 1999 1998 to continue its expansion plans, and the impact of ongoing Sales in comparable stores 0.3% (1.1%) (2.7%) competitive market factors. This discussion and analysis should be read in conjunction with the basic consolidated Nordstrom.com Total increase 32.2% 7.4% 9.2% 2.0% 35.5% 3.8% financial statements and the Ten-Year Statistical Summary. Overview Comparable store sales (sales in stores open at least one full fiscal year at the beginning of the fiscal year) were During 2000 (the fiscal year ended January 31, 2001), essentially flat in 2000, with increases in shoes, cosmetics Nordstrom, Inc. and its subsidiaries (collectively, the and accessories being offset primarily by decreases in "Company") achieved increases in net sales compared to the women’s apparel. The Company believes the decreases in prior year, but also incurred higher costs in several expense women’s apparel are primarily attributable to a change in the categories. Other factors contributing to lower overall merchandise mix in the women’s apparel areas, which did profitability were non-recurring charges related to the write- not result in sales increases as planned. In 1999, off of an investment in an Internet grocery and consumer comparable store sales decreased primarily due to missed goods delivery company (approximately $33 million pre-tax), fashion product offering opportunities in the women’s, kids’ the write-off of certain abandoned and impaired information and juniors’ apparel divisions. The decrease in comparable technology projects (approximately $10 million pre-tax) and store sales in 1998 over 1997 was primarily attributable to the incurrence of certain severance and other costs related to the reduction of inventory levels, which resulted in lower, but a change in management (approximately $13 million pre- more profitable, sales. tax). During 2000, the Company opened 6 full-line stores in Atlanta, Georgia; Frisco, Texas; Broomfield, Colorado; Roseville, California; Chicago, Illinois; and Boca Raton, Florida. The Company also opened 10 Nordstrom Rack The Company has continued to expand its store base over the past several years with store openings. New stores are generally not as productive as older, more established stores, because the customer base and traffic patterns of each new location are developed over time. 14 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 14 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Nordstrom.com continued to contribute to the Company’s The increase in 2000, as a percentage of net sales, includes sales growth with revenues of $311 million, $235 million third quarter charges of approximately $10 million (pre-tax) and $215 million in 2000, 1999 and 1998, respectively. related to the write-off of abandoned and impaired The Company’s average price point has varied slightly over information technology projects, and approximately $13 the past three years, due primarily to changes in the million (pre-tax) of employee severance and other costs merchandise mix. Inflation in overall merchandise costs and related to a change in management. In addition, increased prices has not been significant during the past three years. costs in the areas of selling, credit, sales promotion, and Gross Profit Gross profit (net sales less cost of sales and related buying and occupancy expenses) as a percentage of net sales declined to 34.0% in 2000, as compared to 34.8% in 1999, and 33.8% in 1998. The decline in 2000 is attributable to lower than anticipated sales, which also resulted in increased markdowns in order to liquidate excess inventory. The 1999 improvement reflects changes in the Company’s buying processes and vendor programs, which was partially offset by increased occupancy costs related to new stores and remodeling projects. information services accounted for the majority of the increase in the expense. The 1999 increase, as a percentage of net sales, was partially due to a charge of approximately $10 million (pre-tax) primarily associated with the restructuring of the Company’s information technology services area in order to improve its efficiency and effectiveness. The Company also experienced substantially increased operating expenses of approximately $23 million, associated with the increased sales activity of Nordstrom.com and Nordstromshoes.com. These increases were partially offset by lower bad debt expense due to the improved credit quality of the Company’s Selling, General and Administrative credit card receivables. Selling, general and administrative expenses as a percentage of net sales were 31.6% in 2000, 29.6% in 1999, and 28.3% in 1998. PERCENTAGE OF 2000 SALES BY MERCHANDISE CATEGORY 4% Children’s Apparel and Accessories 3% Other 18% Men’s Apparel and Furnishings 35% Women’s Apparel 19% Shoes 21% Women’s Accessories 15 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 15 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Interest Expense, Net expenses, partially offset by higher service charge income. Interest expense, net increased 24.4% in 2000 primarily Net earnings for 1999 were slightly lower than 1998 as the due to higher average borrowings to finance capital Company’s sales and gross margin improvements were offset expenditures, the purchase of Façonnable, S.A. and the by increases in selling, general and administrative expenses. repurchase of shares. In 1999, interest expense, net increased 7% as a result of higher average borrowings to finance share repurchases. The Company repurchased 3.9 million and 10.2 million shares at an aggregate cost of approximately $86 million and $303 million in 2000 and 1999, respectively. Liquidity and Capital Resources The Company finances its working capital needs, capital expenditures, the purchase of Façonnable, and share repurchase activity with cash provided by operations and borrowings. For the fiscal year ended January 31, 2001, net cash Service Charge Income and Other, Net provided by operating activities decreased approximately Service charge income and other, net primarily represents $198 million compared to the fiscal year ended January 31, income from the Company’s credit card operations, offset by 2000, primarily due to lower net earnings and an increase in miscellaneous expenses. accounts receivable and merchandise inventories, partially Service charge income and other, net increased in 2000 due offset by an increase in accounts payable. The increase in to higher service charge and late fee income associated with accounts payable was primarily due to a change in the increases in credit sales and the number of credit accounts, Company’s policy to pay its vendors based on receipt of and higher accounts receivable securitization gains. Service goods rather than the invoice date. For the fiscal year ended charge income and other, net was flat in 1999. January 31, 2000, net cash provided by operating activities Write-off of Investment The Company held common shares in Streamline.com, Inc., an Internet grocery and consumer goods delivery company, at a cost of approximately $33 million. Streamline ceased its operations effective November 2000. During the year, the Company wrote off the entire investment in Streamline. Net Earnings decreased approximately $223 million compared to the fiscal year ended January 31, 1999, primarily due to the non- recurring benefit of prior year reductions in inventories and customer receivable account balances. For the fiscal year ended January 31, 2001, net cash used for investing activities increased approximately $119 million compared to the fiscal year ended January 31, 2000, primarily due to an increase in capital expenditures to fund Net earnings for 2000 were lower than in 1999 due primarily new stores and remodels. Additionally, approximately $84 to the write-off of the Streamline investment ($20 million million of cash, net of cash acquired, was used to purchase after-tax, $.15 per share), non-recurring charges related to Façonnable, S.A. ("Façonnable"), of Nice, France, a designer, the write-down of abandoned and impaired information and wholesaler and retailer of high quality men’s and women’s technology projects ($6 million after-tax, $.05 per share), apparel and accessories. The purchase also provides for and employee severance and other costs ($8 million after- contingent payments to the principals that may be paid in tax, $.06 per share). Net earnings, excluding non-recurring fiscal 2006 based on the performance of the subsidiary and charges would have been $136 million and $209 million in the continued active involvement of the principals in 2000 and 1999, respectively. In addition, the Company Façonnable. The contingent payments will be expensed experienced higher selling, general and administrative when it becomes probable that the performance targets will 16 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 16 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES be met. Assuming Façonnable performed at 100% of the the Company has made commitments for stores opening in plan, the contingent payments would be approximately $20 2001 and beyond, it is possible that some stores may not be million. For the fiscal year ended January 31, 2000, net opened as scheduled because of delays inherent in the cash used in investing activities decreased approximately development process, or because of the termination of store $68 million compared to the fiscal year ended January 31, site negotiations. 1999, primarily due to an increase in funds provided by In addition to its cash flow from operations, the Company developers to defray part of the Company’s costs of has $500 million available under its revolving credit facility. constructing new stores. Management believes that the Company’s current financial The Company’s capital expenditures aggregated strength and credit position enable it to maintain its existing approximately $652 million over the last three years, net of stores and to take advantage of attractive growth developer reimbursements, principally to add new stores and opportunities. The Company has senior unsecured debt facilities and to improve existing stores and facilities. Over ratings of Baa1 and A- and commercial paper ratings of P-2 3.4 million square feet of retail store space has been added and A-2 from Moody’s and Standard and Poor’s, respectively. during this time period, representing an increase of 27% The Company owns a 49% interest in a limited partnership since January 31, 1998. which is constructing a new corporate office building in The Company plans to spend approximately $1.2 billion, net which the Company will be the primary occupant. In of developer reimbursements, on capital projects during the accordance with Emerging Issues Task Force Issue No. next three years, including new stores, the remodeling of 97-10 "The Effect of Lessee Involvement in Asset existing stores, new systems and technology, and other Construction", the Company is considered to be the owner of items. At January 31, 2001, approximately $428 million the property. Construction in progress includes capitalized has been contractually committed for the construction of new costs related to this building of $57 million as of January stores, buildings or the remodel of existing stores. Although 31, 2001. The Company is a guarantor of a $93 million SQUARE FOOTAGE BY MARKET AREA AT JANUARY 31, 2001 1,568,000 9.8% Rack 126,000 0.8% Other 4,036,000 25.1% East Coast 4,878,000 30.4% Southwest 2,506,000 15.6% Central States 2,942,000 18.3% Northwest 17 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 17 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES credit facility of the limited partnership of which $53 million Recent Accounting Pronouncements is outstanding as of January 31, 2001 and included in other Statement of Financial Accounting Standards ("SFAS") No. long-term debt. 133, "Accounting for Derivative Instruments and Hedging The holders of the minority interest of Nordstrom.com, LLC, Activities," as amended by SFAS No. 137 and 138, requires through their ownership interests in its managing member the Company to recognize all derivatives as either assets or Nordstrom.com, Inc., have the right to sell their shares of liabilities in the statement of financial position and to Nordstrom.com, Inc. to the Company for the greater of the measure those instruments at fair value. Adoption of this fair value of the shares or $80 million in the event that standard in the fiscal year beginning February 1, 2001, did certain events do not occur. This put right will terminate not have a material impact on the Company’s consolidated without any further action by either party if the Company financial statements. provides at least $100 million in additional funding to In September 2000, the FASB issued SFAS No. 140, Nordstrom.com, Inc. prior to July 1, 2002 or if "Accounting for Transfers and Servicing of Financial Assets Nordstrom.com, Inc. completes an initial public offering of and Extinguishments of Liabilities", a replacement of SFAS its common stock prior to September 1, 2002. If, and when, No. 125 with the same title. It revises the standards for redemption of these securities becomes probable, the securitizations and other transfers of financial assets and Company would begin to accrete the difference between the collateral and requires certain additional disclosures, but fair value of the securities and its redemption amount over otherwise retains most of SFAS No. 125’s provisions. SFAS the period remaining prior to redemption. No. 140 is effective for transfers after March 31, 2001, with The Board of Directors has authorized an aggregate of $1.1 certain disclosures required for periods ending on or after billion of share repurchases since May 1995. As of January December 31, 2000. Adoption of this standard is not 31, 2001, the Company had repurchased approximately 39 expected to have a material impact on the Company’s million shares of its common stock for approximately $1.0 consolidated financial statements. billion pursuant to these authorizations, and had remaining The Company adopted Emerging Issues Task Force Issue No. share repurchase authority of approximately $100 million. 00-10 "Accounting for Shipping and Handling Fees and Share repurchases have been financed, in part, through Costs" ("EITF No. 00-10") in the fourth quarter of fiscal additional borrowings, resulting in a planned increase in the 2000. EITF No. 00-10 addresses the income statement Company’s debt to capital ratio. At January 31, 2001, the classification for shipping and handling fees and costs. Company’s debt to capital ratio was .49. Adoption of this issue did not have a material impact on the In October 2000, the Company issued $300 million of Company’s consolidated financial statements for the fiscal 8.95% Senior Notes due in 2005. These proceeds were year ended January 31, 2001. used to reduce short-term indebtedness, to fund the In May 2000, the Emerging Issues Task Force reached a acquisition of Façonnable, and for general corporate consensus on Issue No. 00-14 "Accounting for Certain Sales purposes. A substantial portion of the Company’s total debt Incentives" ("EITF No. 00-14"). This EITF addresses the of $1.2 billion at January 31, 2001 finances the Company’s recognition, measurement and income statement credit card portfolio, which aggregated $716 million at that classification for certain sales incentives. The Company’s date. In January 1999, the Company issued $250 million of adoption of this EITF during the fourth quarter of fiscal 5.625% Senior Notes due in 2009, the proceeds of which 2000 did not have a material impact on the Company’s were used to repay short-term debt and for general corporate consolidated financial statements for the fiscal year ended purposes. January 31, 2001. 18 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 18 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Dollars in thousands except per share amounts Consolidated Statements of Earnings Year ended January 31, % of sales 2001 % of sales 2000 % of sales 1999 Net sales $5,528,537 100.0 $5,149,266 100.0 $5,049,182 100.0 Costs and expenses: Cost of sales and related buying and occupancy (3,649,516) (66.0) (3,359,760) (65.2) (3,344,945) (66.2) Gross profit 1,879,021 34.0 1,789,506 34.8 1,704,237 33.8 Selling, general and administrative (1,747,048) (31.6) (1,523,836) (29.6) (1,429,837) (28.3) Operating income Interest expense, net Write-down of investment Service charge income and other, net Earnings before income taxes 131,973 (62,698) (32,857) 130,600 167,018 2.4 (1.1) (0.6) 2.3 3.0 265,670 5.2 274,400 5.5 (50,396) (1.0) (47,091) (0.9) — 116,783 332,057 — 2.2 6.4 — — 110,414 337,723 2.1 6.7 Income taxes Net earnings Basic earnings per share Diluted earnings per share Cash dividends paid per share (65,100) (1.2) (129,500) (2.5) (131,000) (2.6) $101,918 1.8 $202,557 3.9 $20 6,723 4.1 $0.78 $0.78 $0.35 $1.47 $1.46 $0.32 $1.41 $1.41 $0.30 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 19 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 19 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Consolidated Balance Sheets Dollars in thousands January 31, Assets Current assets: Cash and cash equivalents Short-term investment Accounts receivable, net Merchandise inventories Prepaid income taxes and other Total current assets Land, buildings and equipment, net Available-for-sale investment Goodwill Trademarks and other intangible assets Other assets Total assets Liabilities and Shareholders’ Equity Current liabilities: Notes payable Accounts payable Accrued salaries, wages and related benefits Income taxes and other accruals Current portion of long-term debt Total current liabilities Long-term debt Deferred lease credits Other liabilities Shareholders’ equity: Common stock, no par; 250,000,000 shares authorized; 133,797,757 and 132,279,988 shares issued and outstanding Unearned stock compensation Retained earnings Accumulated other comprehensive earnings Total shareholders’ equity Total liabilities and shareholders’ equity 2001 2000 $25,259 — 721,953 945,687 120,083 1,812,982 1,599,938 — 39,495 103,978 52,110 $3,608,5 03 $83,060 466,476 234,833 153,613 12,586 950,568 1,099,710 275,252 53,405 $27,042 25,527 616,989 797,845 97,245 1,564,648 1,429,492 35,251 — — 32,690 $3,062,0 81 $70,934 390,688 211,308 135,388 58,191 866,509 746,791 194,995 68,172 330,394 (3,740) 900,090 2,824 1,229,568 247,559 (8,593) 929,616 17,032 1,185,614 $3,608,503 $3,062,081 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 20 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 20 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Consolidated Statements of Shareholders’ Equity Dollars in thousands except per share amounts Common Stock Shares Amount Unearned Compensation Retained Earnings Accum. Other Comprehensive Earnings Total Balance at February 1, 1998 152,518,104 $201,050 — $1,257,900 — $1,458,950 Net earnings Cash dividends paid ($.30 per share) Issuance of common stock Stock compensation Purchase and retirement — — — — 599,593 194,070 14,971 14,740 — — — $(4,703) 206,723 (44,059) — — — — — — 206,723 (44,059) 14,971 10,037 of common stock (11,197,600) — — (346,077) — (346,077) Balance at January 31, 1999 142,114,167 230,761 (4,703) 1,074,487 Net earnings Unrealized gain on investment Comprehensive net earnings Cash dividends paid ($.32 per share) Issuance of common stock Stock compensation Purchase and retirement — — — — — — — — 341,947 40,274 9,577 7,221 — — — — — (3,890) 202,557 — — (44,463) — — — 1,300,545 — 202,557 $17,032 — — — — 17,032 219,589 (44,463) 9,577 3,331 of common stock (10,216,400) — — (302,965) — (302,965) Balance at January 31, 2000 132,279,988 247,559 (8,593) 929,616 101,918 17,032 1,185,614 — 101,918 Net earnings Other comprehensive earnings: Unrealized loss on investment during period, net of tax Reclassification of realized loss, net of tax Foreign currency translation adjustment Comprehensive net earnings Cash dividends paid ($.35 per share) Issuance of common stock for: Stock option plans Employee stock purchase plan Business acquisition Stock compensation, net Purchase and retirement of common stock — — — — — — — — — — — — — — — — — — — — — — (45,935) — — — — (23,461) (23,461) 6,429 2,824 — — — — — — — 6,429 2,824 87,710 (45,935) 4,039 2,211 77,696 3,742 (85,509) 181,910 165,842 4,039 2,211 5,074,000 77,696 (14,075) (1,111) 4,853 (3,889,908) — — (85,509) Balance at January 31, 2001 133,79 7,757 $330,39 4 $(3,74 0) $900,0 9 0 $2,8 2 4 $1, 229,568 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 21 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 21 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Consolidated Statements of Cash Flows Dollars in thousands Year ended January 31, Operating Activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of buildings and equipment Amortization of goodwill Amortization of trademark and other intangible assets Amortization of deferred lease credits and other, net Stock-based compensation expense Write-down of investment Change in operating assets and liabilities, net of effects from acquisition of business Accounts receivable, net Merchandise inventories Prepaid income taxes and other Accounts payable Accrued salaries, wages and related benefits Income tax liabilities and other accruals Other liabilities 2001 2000 1999 $101,918 $202,557 $206,723 203,048 429 822 (12,349) 7,594 32,857 (102,945) (128,744) (3,889) 67,561 16,736 3,879 (7,184) 193,718 — — (6,387) 3,331 — (29,854) (47,576) (11,777) 51,053 14,942 965 7,154 180,655 — — (3,501) 10,037 — 77,313 75,776 15,357 18,324 17,156 (4,828) 8,296 Net cash provided by operating activities 179,733 378,126 601,308 Investing Activities Capital expenditures Additions to deferred lease credits Payment for acquisition, net of cash acquired Investments in unconsolidated affiliates Other, net (321,454) 92,361 (83,828) — (5,602) (305,052) 114,910 — — (9,332) (306,737) 74,264 — (32,857) (2,251) Net cash used in investing activities (318,523) (199,474) (267,581) Financing Activities Increase (decrease) in notes payable Proceeds from issuance of long-term debt Principal payments on long-term debt Capital contribution to subsidiary from minority shareholders Proceeds from issuance of common stock Cash dividends paid Purchase and retirement of common stock Net cash provided by (used in) financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year 12,126 308,266 (58,191) — 6,250 (45,935) (85,509) 137,007 (1,783) 27,042 (7,849) — (63,341) 16,000 9,577 (44,463) (302,965) (184,984) 544,165 (101,106) — 14,971 (44,059) (346,077) (393,041) (117,090) (214,389) 241,431 216,637 24,794 Cash and cash equivalents at end of year $25,259 $27,04 2 $241,4 31 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 22 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 22 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Notes to Consolidated Financial Statements Dollars in thousands except per share amounts terminate without any further action by either party if the Company provides at least $100,000 in additional funding Note 1: Summary of Significant Accounting Policies to Nordstrom.com, Inc. prior to July 1, 2002 or if The Company: Nordstrom, Inc. is a fashion specialty retailer offering a wide selection of high-quality apparel, shoes and accessories for women, men and children, through 120 stores located in the United States, including 77 large specialty stores, 38 clearance stores, 3 Façonnable boutiques and 2 free-standing shoe stores. As a result of the Nordstrom.com, Inc. completes an initial public offering of its common stock prior to September 1, 2002. If, and when, redemption of these securities becomes probable, the Company would begin to accrete the difference between the fair value of the securities and its redemption amount over the period remaining prior to redemption. acquisition of Façonnable, S.A. (“Façonnable”) in October Basis of Presentation: The consolidated financial statements 2000 (Note 2), the Company also operates 20 Façonnable include the accounts of Nordstrom, Inc. and its subsidiaries, boutiques located primarily in Europe. Approximately 32% the most significant of which are Nordstrom Credit, Inc., of the company’s retail square footage is located in the state Nordstrom fsb (formerly known as Nordstrom National Credit of California. The Company purchases a significant percentage of its merchandise from foreign countries, principally in the Far East. An event causing a disruption in imports from the Far East could have a material adverse impact on the Company’s operations. In connection with the purchase of foreign merchandise, the Company has outstanding letters of credit totaling $62,051 at January 31, 2001. On November 1, 1999, the Company established a subsidiary to operate its Internet commerce and catalog businesses, Nordstrom.com LLC. The Company contributed certain assets and liabilities associated with its Internet commerce and catalog businesses, and $10,000 in cash. Venture funds associated with Benchmark Capital and Madrona Investment Group collectively contributed $16,000 in cash to the new entity. At January 31, 2001, the Company owns approximately 81.4% of Nordstrom.com LLC, with Benchmark Capital and Madrona Investment Group Bank) and Nordstrom.com LLC for the entire fiscal year. In addition, the consolidated financial statements include the operating results of Façonnable from the date of acquisition (Note 2). All significant intercompany transactions and balances are eliminated in consolidation. The presentation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results could differ from those estimates. Revenue Recognition: The Company adopted Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” in the fiscal year ended January 31, 2000. Revenues are recorded net of estimated returns and exclude sales tax. Revenue is recorded at the point of sale for retail stores. Catalog and e-commerce sales are recorded upon delivery to the customer and include shipping revenue. collectively holding the remaining minority interest. The Buying and Occupancy Costs: Buying costs consist primarily minority interest holders have the right to sell their shares of of salaries and expenses incurred by the Company’s Nordstrom.com LLC, through their ownership interests in its merchandise managers, buyers and private label product managing member Nordstrom.com, Inc., to the Company for development group. Occupancy costs include rent, the greater of the fair value of the shares or $80,000 in the depreciation, property taxes and operating costs related to event that certain events do not occur. This put right will the Company’s retail and distribution facilities. 23 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 23 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Shipping and Handling Costs: The Company’s shipping and practices, installments maturing in more than one year or handling costs include payments to third-party shippers and deferred payment accounts receivable are included in costs incurred to store, move and prepare merchandise for current assets. shipment. The costs are included in selling, general and administrative expenses. Merchandise Inventories: Merchandise inventories are stated at the lower of cost (first-in, first-out basis) or market, using Advertising: Costs for newspaper, television, radio and other the retail method. media are generally expensed as incurred. Direct response advertising costs, consisting primarily of catalog book production and printing costs, are capitalized and amortized over the expected life of the catalog, not to exceed six months. Net capitalized direct response advertising costs were $5,697 and $3,938 at January 31, 2001 and 2000, and are included in prepaid income taxes and other on the consolidated balance sheets. Total advertising expenses were $190,991, $160,957 and $145,841 in 2000, 1999 and 1998. Land, Buildings and Equipment: For buildings and equipment acquired prior to February 1, 1999, depreciation is computed using a combination of accelerated and straight- line methods. The straight-line method was adopted for all property placed into service after February 1, 1999 in order to better reflect the utilization of the assets over time. The effect of this change on net earnings for 1999 was not material. Lives used for calculating depreciation and amortization rates for the principal asset classifications are as follows: buildings, 5 to 40 years; store fixtures and Store Preopening Costs: Store opening and preopening costs equipment, 3 to 15 years; leasehold improvements, life of are charged to expense when incurred. lease or applicable shorter period; software, 3 to 7 years. Cash Equivalents: The Company considers all short-term Capitalization of Interest: The interest-carrying costs of investments with a maturity at date of purchase of three capital assets under development or construction are months or less to be cash equivalents. capitalized based on the Company’s weighted average Cash Management: The Company’s cash management system borrowing rate. provides for the reimbursement of all major bank Intangible Assets: Goodwill, trademarks and other intangible disbursement accounts on a daily basis. Accounts payable at assets are being amortized over their estimated useful lives January 31, 2000 includes $7,605 of checks not yet on a straight-line basis ranging from 10 to 35 years. presented for payment drawn in excess of cash balances. Accumulated amortization of goodwill was $429 and of Investments: Short-term and available-for-sale investments consist of available-for-sale equity securities which are trademarks and other intangible assets was $822 at January 31, 2001. recorded at market value based on quoted market prices Asset Impairment: The Company reviews its intangibles and using the specific identification method. Unrealized gains other long-lived assets annually to determine potential and losses from changes in market value are reflected in impairment. The Company estimates the undiscounted accumulated other comprehensive earnings, net of related future cash flows expected to result from the use of the asset deferred taxes. Realized gains and losses and declines in and its eventual disposition. If the sum of the expected value of the investments judged to be other than temporary, future cash flows is less than the carrying amount of the are included in net earnings. asset, an impairment charge would be recognized. Customer Accounts Receivable: In accordance with industry Deferred Lease Credits: Deferred lease credits are amortized 24 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 24 PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES on a straight-line basis primarily over the life of the year ended January 31, 2001. applicable lease. In September 2000, the FASB issued SFAS No. 140 Fair Value of Financial Instruments: The carrying amount of “Accounting for Transfers and Servicing of Financial Assets cash equivalents and notes payable approximates fair value and Extinguishments of Liabilities” (“SFAS No. 140”), a because of the short maturity of these instruments. The fair replacement of SFAS No. 125 with the same title. It revises value of the Company’s investment in marketable equity the standards for securitizations and other transfers of securities is based upon the quoted market price and was financial assets and collateral and requires certain additional approximately $60,778 at January 31, 2000. The fair value disclosures, but otherwise retains most of SFAS No. 125’s of long-term debt (including current maturities), using provisions. SFAS No. 140 is effective for transfers after quoted market prices of the same or similar issues with the March 31, 2001. Adoption of the accounting provisions of same remaining term to maturity, is approximately this standard will not have a material impact on the $1,031,000 and $715,500 at January 31, 2001 and 2000. Company’s consolidated financial statements. The Company Derivatives Policy: The Company limits its use of derivative financial instruments to the management of foreign currency has complied with all SFAS No. 140 disclosure requirements. and interest rate risks. The effect of these activities is not Reclassifications: Certain reclassifications of prior year and material to the Company’s financial condition or results of quarterly balances have been made for consistent operations. The Company has no material off-balance sheet presentation with the current year. credit risk, and the fair value of derivative financial instruments at January 31, 2001 and 2000 is not material. Note 2: Acquisition Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and No. 138, requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Adoption of this standard, in the fiscal year beginning February 1, 2001, did not have a material impact on the Company’s consolidated financial statements. On October 24, 2000, the Company acquired 100% of Façonnable, S.A., of Nice, France, a designer, wholesaler and retailer of high quality men’s and women’s apparel and accessories. The Company paid $87,685 in cash and issued 5,074,000 shares of common stock of the Company for a total consideration, including expenses, of $169,380. The acquisition is being accounted for under the purchase method of accounting, and, accordingly, Façonnable’s results of operations have been included in the Company’s results of operations since October 24, 2000. The purchase price has Recent Accounting Pronouncements: In July 2000, the been allocated to Façonnable’s assets and liabilities based Company adopted Financial Accounting Standards Board on their estimated fair values as of the date of acquisition. Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation” (“FIN No. 44”), which provides guidance for certain issues that arose in applying Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”). Adoption of this Interpretation did not have a material impact on the Company’s consolidated financial statements for the fiscal The purchase also provides for contingent payments that may be paid in fiscal 2006 based on the performance of the subsidiary and the continued active involvement of the principals in Façonnable, S.A. The contingent payments will be recorded as compensation expense when it becomes probable that the performance targets will be met. 25 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 25 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES The following unaudited pro forma information presents the Note 4: Interest Expense, Net results of the Company’s operations assuming the Façonnable acquisition occurred at the beginning of each period presented: The components of interest expense, net are as follows: Year ended January 31, 2001 2000 1999 Short-term debt $12,682 $2,584 $10,707 Year ended January 31, 2001 2000 Long-term debt 58,988 Net sales Net earnings $5,575,000 $5,205,000 Total interest expense 71,670 101,000 199,000 Less: Interest income (1,330) (3,521) (1,883) 56,831 59,415 43,601 54,308 Basic earnings per share Diluted earnings per share 0.75 $0.75 1.39 $1.39 Capitalized interest (7,642) (5,498) (5,334) Interest expense, net $62,698 $50,396 $47,091 The pro forma financial information is not necessarily Note 5: Income Taxes indicative of the operating results that would have occurred had the acquisition been consummated as of the beginning of each period presented, nor is it necessarily indicative of Income taxes consist of the following: Year ended January 31, 2001 2000 1999 future operating results. Current income taxes: A summary of the Façonnable acquisition is as follows: Federal $79,778 $130,524 $113,270 State and local 11,591 21,835 19,672 Fair value of assets acquired Intangible assets recorded Liabilities assumed Total consideration Note 3: Employee Benefits Total current $48,677 144,724 (24,021) $169,380 income taxes 91,369 152,359 132,942 Deferred income taxes: Current (11,215) (18,367) (1,357) Non-current (15,054) (4,492) (585) Total deferred income taxes (26,269) (22,859) (1,942) The Company provides a profit sharing plan for employees. Total income taxes $65,100 $129,500 $131,000 The plan is fully funded by the Company and is non- contributory except for voluntary employee contributions A reconciliation of the statutory Federal income tax rate to made under Section 401(k) of the Internal Revenue Code. the effective tax rate is as follows: Under this provision of the plan, the Company provides matching contributions up to a stipulated percentage of employee contributions. Prior to 2000, the Company’s contributions to the profit sharing portion of the plan vested over a seven-year period. Effective January 1, 2000, the Company’s subsequent contributions to the plan vest immediately. The Company’s contribution is established each year by the Board of Directors and totaled $31,330, $47,500 and $50,000 in 2000, 1999 and 1998. Year ended January 31, 2001 2000 1999 Statutory rate 35.00% 35.00% 35.00% State and local income taxes, net of Federal income taxes 3.93 Other, net .05 4.06 (.06) 4.03 (0.24) Effective tax rate 38.98% 39.00% 38.79% 26 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 26 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Deferred income tax assets and liabilities result from Diluted earnings per share is computed on the basis of the temporary differences in the timing of recognition of revenue weighted average number of common shares outstanding and expenses for tax and financial reporting purposes. during the year plus dilutive common stock equivalents Significant deferred tax assets and liabilities, by nature of (primarily stock options and restricted stock). the temporary differences giving rise thereto, are as follows: Options with an exercise price greater than the average January 31, 2001 2000 market price were not included in the computation of diluted Accrued expenses Compensation and benefits accruals Merchandise inventories Realized loss on investment $28,658 $29,276 earnings per share. These options totaled 7,409,387 2,798,966 and 1,146,113 shares in 2000, 1999 and 43,803 26,290 12,751 35,651 1998. 24,461 Year ended January 31, 2001 2000 1999 — Net earnings $101,918 $202,557 $206,723 Other 23,098 15,595 Basic shares 131,012,412 137,814,589 146,241,091 Total deferred tax assets 134,600 104,983 Basic earnings per share $0.78 $1.47 $1.41 Land, buildings and equipment basis and Dilutive effect of stock options and depreciation differences (25,678) (22,982) restricted stock 100,673 610,255 617,180 Employee benefits (10,937) (11,008) Diluted shares 131,113,085 138,424,844 146,858,271 Unrealized gain on investment — (10,889) Diluted earnings per share $0.78 $1.46 $1.41 Other (3,748) (3,025) Total deferred tax liabilities (40,363) (47,904) Note 7: Investment Net deferred tax assets $94,237 $57,079 As of January 31, 2001, the Company has $34,357 of capital loss carryforwards available to be utilized within five years to reduce future capital gain income. No valuation allowance has been provided because management believes it is more likely than not that the full benefit of the carryforwards will be realized. Note 6: Earnings Per Share In September 1998, the Company purchased non-voting convertible preferred stock in Streamline.com, Inc., an Internet grocery and consumer goods delivery company, for total consideration of $22,857. In June 1999, Streamline completed an initial public offering of common stock. Upon completion of the offering, the Company’s investment was converted to common stock, which has been categorized as available-for-sale. In January 2000, Streamline merged with Beacon Home Direct, Inc., a privately-held company, in which the Company had previously purchased preferred stock In accordance with SFAS No. 128, “Earnings per Share,” for total consideration of $10,000. basic earnings per share is computed on the basis of the weighted average number of common shares outstanding during the year. Streamline ceased its operations effective November 22, 2000, due to failure to obtain additional capital to fund its operations. During 2000, the Company wrote off its entire 27 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 27 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NO RD STROM, INC. AND S UBSI DIA RIE S investment in Streamline, for a total pre-tax loss on the of the receivables sold, allocated based on their relative investment of $32,857. fair values. The fair values of the assets sold and Retained Interest were based on the present value of Note 8: Accounts Receivable estimated future cash flows that the Company will receive The components of accounts receivable are as follows: over the estimated life of the securitization. The future cash flows represent an estimate of the excess of finance charges January 31, Customers Other 2001 2000 and fees over the interest paid to the holders of the Class A $716,218 $611,858 22,266 20,969 and B certificates, credit losses and servicing fees. The estimates of future cash flow are based on the current Allowance for doubtful accounts (16,531) (15,838) performance trends of the receivable portfolio, which Accounts receivable, net $721,953 $616,989 assumes a weighted-average life of 5 months for the receivable balances, anticipated credit losses of 5.99% of Credit risk with respect to accounts receivable is new receivables, and a discount rate of 6.50%. concentrated in the geographic regions in which the Company operates stores. At January 31, 2001 and 2000, approximately 41% and 38% of the Company’s receivables were obligations of customers residing in California. Concentration of the remaining receivables is considered to be limited due to their geographical dispersion. Proceeds from collections reinvested in previous credit card securitizations totaled $485,422 in 2000. Gains on the sale of receivables to the trust totaled $5,356 in 2000. Additionally, Nordstrom fsb services the receivables in the trust, and recorded servicing fees of $8,564 in 2000. Interest income earned on the Class B certificate and other Bad debt expense totaled $20,368, $11,707 and $23,828 cash flows received from the Retained Interest totaled in 2000, 1999 and 1998. Other accounts receivable consists primarily of vendor debit $10,060 in 2000, and is included in service charge income and other on the consolidated statements of earnings. balances and cosmetic rebates receivable. The Company also recognizes gains and losses on the fair Nordstrom fsb, a wholly-owned subsidiary of the Company, issues both a proprietary and VISA credit card. On an on- going basis, the Company transfers substantially all of its VISA receivables to a master trust. The Company holds a Class B certificate, representing an undivided interest in the trust, which is subordinate to a Class A certificate held by a third party. The Company also owns the remaining undivided interests in the trust not represented by the Class A and Class B certificates (the “Retained Interest”). The Company’s investment in the Class B certificate totals $11,000 and $9,900 at January 31, 2001 and 2000, and is included in customer accounts receivable. The Company recognizes gains or losses on its securitization of VISA receivables based on the historical carrying amount value of the Retained Interest. The fair value of the Retained Interest is $42,052 and $32,567 at January 31, 2001 and 2000, and is included in customer accounts receivable. Assumptions used to measure future cash flows are based on the current performance trends of the receivable portfolio and include a weighted-average life of the receivables of 5 months, anticipated credit losses of 5.99% of new receivables, and a discount rate of 6.50%. If interest rates were to increase by 10% or credit losses were to increase by 10%, the effect on the Retained Interest is a decrease in fair value of approximately $339 or $371, respectively. A 20% increase in interest rates or a 20% increase in default rates would impact the Retained Interest by decreasing the fair value by $678 or $743, respectively. The total principal balance of the VISA receivables is 28 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 28 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES $251,109 as of January 31, 2001. Credit losses and At January 31, 2001, the net book value of property located delinquencies of these receivables are $12,955 and $7,471 in California is approximately $308,000. The Company for the year ended January 31, 2001. carries earthquake insurance in California with a $50,000 The following table illustrates historical and future default deductible. projections using net credit losses as a percentage of At January 31, 2001, the Company has contractual average outstanding receivables in comparison to actual commitments of approximately $428,000 for the performance: construction of new stores or remodeling of existing stores. Year ended January 31, 2001 Original projection Actual 5.99% N/A% 2000 5.39% 5.46% 1999 Note 10: Notes Payable 6.94% 6.09% A summary of notes payable is as follows: Year ended January 31, 2001 2000 1999 Pursuant to the terms of operative documents of the trust, in Average daily short- certain events the Company may be required to fund certain term borrowings $192,392 $45,030 $195,596 amounts pursuant to a recourse obligation for credit losses. Maximum amount Based on current cash flow projections, the Company does not believe any additional funding will be required. Note 9: Land, Buildings and Equipment Land, buildings and equipment consist of the following outstanding 360,480 178,533 385,734 Weighted average interest rate: During the year At year-end 6.6% 6.4% 5.8% 6.0% 5.5% 5.2% (at cost): January 31, 2001 2000 At January 31, 2001, the Company has an unsecured line of credit with a group of commercial banks totaling $500,000 Land and land improvements $60,871 $59,237 which is available as liquidity support for the Company’s Buildings 760,029 650,414 commercial paper program, and expires in July 2002. The Leasehold improvements 903,925 870,821 line of credit agreement contains restrictive covenants Capitalized software 38,642 20,150 which, among other things, require the Company to maintain Store fixtures and equipment 1,172,914 1,037,936 a certain minimum level of net worth and a coverage ratio (as 2,936,381 2,638,558 defined) of no less than 2 to 1. The Company pays a Less accumulated depreciation and amortization (1,554,081) (1,370,726) 1,382,300 1,267,832 Construction in progress 217,638 161,660 Land, buildings and equipment, net $1,599,938 $1,429,492 commitment fee for the unused portion of the line based on the Company’s debt rating. 29 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 29 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S Note 11: Long-Term Debt estimated to be July 2001. The Company is a guarantor of a A summary of long-term debt is as follows: $93,000 credit facility of the limited partnership. The credit facility provides for interest at either the LIBOR rate January 31, 2001 2000 plus .75%, or the greater of the Federal Funds rate plus .5% Senior debentures, 6.95%, and the prime rate, and matures in August 2002 (6.36% at due 2028 $300,000 $300,000 January 31, 2001). Senior notes, 5.625%, due 2009 Senior notes, 8.950%, 250,000 250,000 Note 12: Leases The Company leases land, buildings and equipment under due 2005 300,000 — noncancelable lease agreements with expiration dates Medium-term notes, payable by Nordstrom Credit, Inc., ranging from 2001 to 2080. Certain leases include renewal provisions at the Company’s option. Most of the leases 7.25%-8.67%, due 2001-2002 87,750 145,350 provide for additional rent payments based upon specific Notes payable, of Nordstrom Credit, Inc., 6.7%, due 2005 Other Total long-term debt Less current portion 100,000 100,000 74,546 9,632 1,112,296 804,982 (12,586) (58,191) percentages of sales and require the Company to pay for certain common area maintenance and other costs. Future minimum lease payments as of January 31, 2001 are as follows: 2001-$59,434; 2002-$52,741; 2003-$51,305; 2004-$49,866; 2005-$47,396 and thereafter-$362,567. Total due beyond one year $1,099,710 $746,791 The following is a schedule of rent expense: Aggregate principal payments on long-term debt are as follows: 2001-$12,586; 2002-$131,150; 2003-$1,157; Minimum rent: Year ended January 31, 2001 2000 1999 2004-$1,224; 2005-$400,208 and thereafter-$565,971. Store locations $16,907 $18,794 $19,167 The Company owns a 49% interest in a limited partnership which is constructing a new corporate office building in which the Company will be the primary occupant. In accordance with Emerging Issues Task Force Issue No. 97- 10 “The Effect of Lessee Involvement in Asset Construction”, the Company is considered to be the owner of the property. Construction in progress includes capitalized Offices, warehouses and equipment 21,070 19,926 19,208 Percentage rent: Store locations 9,241 7,441 8,603 Total rent expense $47,218 $46,161 $46,978 Note 13: Stock-Based Compensation costs related to this building of $57,270, which includes Stock Option Plan noncash amounts of $41,883, as of January 31, 2001. The corresponding finance obligation of $53,060 as of January 31, 2001 is included in other long-term debt. This finance obligation will be amortized as rental payments are made by the Company to the limited partnership over the life of permanent financing, expected to be 20-25 years. The amortization will begin once construction is complete, The Company has a stock option plan (the “Plan”) administered by the Compensation Committee of the Board of Directors (the “Committee”) under which stock options, performance share units and restricted stock may be granted to key employees of the Company. Stock options are issued at the fair market value of the stock at the date of grant. Options vest over periods ranging from four to eight years, 30 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 30 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES and expire ten years after the date of grant. In May 2000, the Company’s shareholders approved an In addition to option grants, the Committee granted 355,072, 272,970 and 185,201 performance share units in 2000, 1999 and 1998, which will vest over three years if certain financial goals are attained. Employees may elect to 8,000,000 share increase in the number of shares of the Company’s common stock authorized for issuance under its option plan. At January 31, 2001, 10,150,579 shares are reserved for future stock option grants pursuant to the Plan. receive common stock or cash upon vesting of these The Company applies APB No. 25 and FIN No. 44 in performance shares. The Committee also granted 30,069 measuring compensation costs under its stock-based and 180,000 shares of restricted stock in 1999 and 1998, compensation programs. Accordingly, no compensation cost with weighted average fair values of $32.09 and $27.75, has been recognized for stock options issued under the Plan. respectively, which vest over five years. No monetary For performance share units, compensation expense is consideration is paid by employees who receive performance recorded over the performance period at the fair market share units or restricted stock. At January 31, 2001, value of the stock at the date when it is probable that such $2,741 was recorded in accrued salaries, wages and related shares will be earned. For restricted stock, compensation benefits for these performance shares. In September 2000, expense is based on the market price on the date of grant the Company accelerated the vesting of 144,000 shares of and is recorded over the vesting period. Stock-based restricted stock resulting in compensation expense of compensation expense for 2000, 1999 and 1998 was $3,039, and also cancelled 14,175 shares of restricted $7,594, $3,331 and $10,037, respectively. stock as a result of management changes. Stock option activity for the Plan was as follows: Year ended January 31, 2001 Weighted- Average Exercise Price 2000 Weighted- Average Exercise Price Shares Shares Outstanding, beginning of year 8,135,301 $28 5,893,632 Granted Exercised Cancelled Outstanding, end of year 2,470,169 (181,910) (1,550,218) 8,873,342 Options exercisable at end of year 3,833,379 21 20 28 $27 $26 2,926,368 (341,947) (342,752) 8,135,301 3,145,393 $27 31 23 30 $28 $25 1999 Weighted- Average Exercise Price $21 31 18 27 $27 $23 Shares 3,401,602 3,252,217 (599,593) (160,594) 5,893,632 2,544,092 The following table summarizes information about stock options outstanding for the Plan as of January 31, 2001: Options Outstanding Options Exercisable Weighted- Average Weighted- Average Exercise Price Remaining Contractual Life (Years) 7 7 8 7 $20 27 36 $27 Weighted- Average Exercise Price $20 28 35 $26 Shares 1,446,456 1,590,360 796,563 3,833,379 Range of Exercise Prices Shares $13 - $22 3,659,001 $23 - $32 2,855,785 $33 - $40 2,358,556 8,873,342 31 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 31 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSI DIA RI ES Nordstrom.com Nordstrom.com has two stock option plans, the “1999 Plan” and the “2000 Plan”. As of January 31, 2001 and 2000, under the 1999 and 2000 Plans, 1,767,565 and 2,590,000 options were outstanding at weighted-average exercise prices of $1.76 and $1.70 per share; of which 300,654 and 775,500 are exercisable at the weighted- in 2000 and 1999, respectively: risk-free interest rates of 6.5% and 6.1%; expected volatility factors of .64 and .61; expected dividend yield of 0% for all years; and expected lives of 5 years for all years. The weighted-average fair value of options granted for Nordstrom.com was $1.04 and $.96 for the years ended January 31, 2001 and 2000, respectively. average exercise price of $1.67 per share. Options were If SFAS No. 123 were used to account for the Company’s granted at exercise prices ranging from $1.67 to $1.92 per stock-based compensation programs, the pro forma net share. Pursuant to APB No. 25 and FIN No. 44, no earnings and earnings per share would be as follows: compensation cost has been recognized related to the options under these Plans because the exercise price was Year ended January 31, 2001 2000 1999 equal to, or in excess of the fair value of Nordstrom.com Pro forma net earnings $89,433 $192,936 $201,499 stock on the date of grant as determined by the Board of Pro forma basic Directors of Nordstrom.com. The options vest over a period earnings per share $0.68 $1.40 $1.38 of two and one-half to four years and must be exercised Pro forma diluted within ten years of the grant date. earnings per share $0.68 $1.39 $1.37 Employee Stock Purchase Plan In May 2000, the Company’s shareholders approved the establishment of an Employee Stock Purchase Plan (the “ESPP”) under which 3,500,000 shares of the Company’s common stock are reserved for issuance to employees. The plan qualifies as a noncompensatory employee stock purchase plan under Section 423 of the Internal Revenue Code. Employees are eligible to participate through payroll deductions in amounts related to their base compensation. At the end of each offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period, usually six months. Under the ESPP, 165,842 shares were issued in 2000. As of January 31, 2001, payroll deductions totaling $2,602 were accrued for purchase of shares on March 31, 2001. SFAS No. 123 If the Company had elected to follow the measurement provisions of SFAS No. 123 in accounting for its stock-based compensation programs, compensation expense would be recognized based on the fair value of the options or the shares at the date of grant. To estimate compensation expense which would be recognized under SFAS No. 123, the Company used the modified Black-Scholes option-pricing model with the following weighted-average assumptions for options granted in 2000, 1999 and 1998, respectively: risk- free interest rates of 6.4%, 5.7% and 5.2%; expected volatility factors of .65, .61 and .46; expected dividend yield of 1% for all years; and expected lives of 5 years for all years. As for its ESPP, the Company used the following weighted-average assumptions for shares purchased by its employees in 2000: risk-free interest rate of 6.02%; expected volatility factor of .65; expected dividend yield of 1% and expected life of 0.5 years. The weighted-average fair value of options granted was $12, $17 and $14 for the years ended January 31, 2001, 2000 and 1999, respectively. For Nordstrom.com, the Company used the following weighted-average assumptions for options granted 32 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 32 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NORD ST RO M, INC . AND SUBSIDIA RI ES Note 14: Supplementary Cash Flow Information the design and production of private label merchandise Supplementary cash flow information includes the following: Year ended January 31, 2001 2000 1999 Cash paid during the year for: Interest (net of sold in the majority of the Company’s retail stores. Credit Operations segment revenues consist primarily of finance charges earned through issuance of the Nordstrom proprietary and VISA credit cards. The Catalog/Internet segment generates revenues from direct mail catalogs and the Nordstrom.com and Nordstromshoes.com Web sites. capitalized interest) $58,190 $54,195 $44,418 The Company’s senior management utilizes various Income taxes 88,911 129,566 126,157 measurements to assess segment performance and to Note 15: Segment Reporting The Company has three reportable segments which have allocate resources to segments. The measurements used to compute net earnings for reportable segments are consistent with those used to compute net earnings for the Company. been identified based on differences in products and The accounting policies of the operating segments are the services offered and regulatory conditions: the Retail Stores, same as those described in the summary of significant Credit Operations, and Catalog/Internet segments. The accounting policies in Note 1. Corporate and Other includes Retail Stores segment derives its sales from high-quality certain expenses and a portion of interest expense which are apparel, shoes and accessories for women, men and not allocated to the operating segments. Intersegment children, sold through retail store locations. It includes the revenues primarily consist of fees for credit card services Company’s Product Development Group which coordinates and are based on fees charged by third party cards. 33 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 33 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S The following tables set forth the information for the Company’s reportable segments and a reconciliation to the consolidated totals: Year ended January 31, 2001 Net sales and revenues to Retail Stores Credit Operations Catalog/ Internet Corporate and Other Eliminations Total external customers (b) $5,217,889 — $310,648 Depreciation and amortization 176,831 Service charge income Intersegment revenues Interest expense, net Amortization of goodwill and other intangible assets Income tax expense (benefit) Net earnings (loss) Assets (a)(b) Goodwill and — $135,121 30,294 795 1,251 165,150 258,416 26,889 29,267 1,786 — 13,140 20,557 2,554,393 703,077 — — (604) 7,552 — — (29,367) 71,233 — — — $33,240 16,879 — (113,190) (147,688) 279,800 other intangible assets Capital expenditures 143,473 286,941 — 3,095 — 5,187 — 26,231 — $5,528,537 — 135,121 $(57,183) — — — — — — 62,698 203,048 1,251 65,100 101,918 — 3,608,503 — — 143,473 321,454 Year ended January 31, 2000 Net sales and revenues to Retail Stores Credit Operations Catalog/ Internet Corporate and Other Eliminations Total external customers $4,914,293 — $234,973 Service charge income Intersegment revenues Interest expense, net Depreciation and amortization Income tax expense (benefit) Net earnings (loss) Assets (a) Capital expenditures — $125,727 20,285 728 170,765 191,790 300,009 2,051,327 263,352 25,963 26,933 1,424 19,450 30,417 601,320 2,792 — — (167) 6,313 — (35,685) 95,241 5,206 — — — $22,902 15,216 (81,740) (92,184) 314,193 33,702 — $5,149,266 — 125,727 $(46,248) — — — — — 50,396 193,718 129,500 202,557 — 3,062,081 — 305,052 Year ended January 31, 1999 Net sales and revenues to Retail Stores Credit Operations Catalog/ Internet Corporate and Other Eliminations Total external customers $4,834,049 — $215,133 Service charge income Intersegment revenues Interest expense, net Depreciation and amortization Income tax expense (benefit) Net earnings (loss) Assets (a) Capital expenditures — $123,201 23,748 — 166,099 182,800 288,503 2,040,938 273,906 26,736 31,139 806 16,200 25,606 607,255 2,191 — — — 4,613 — (17,681) 57,803 4,121 — — — $16,488 9,137 (68,000) (89,705) 397,693 26,519 — $5,049,182 — 123,201 $(50,484) (536) — — — 47,091 180,655 131,000 — 206,723 — 3,103,689 306,737 — (a) Segment assets in Corporate and Other include unallocated assets in corporate headquarters, consisting primarily of land, buildings and equipment, and deferred tax assets. (b) Includes sales of foreign operations of $12,318 from October 24, 2000, the date of acquisition, and assets of $206,601 as of January 31, 2001. 34 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 34 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Note 16: Contingent Liabilities specialty stores will sell such cosmetics at the The Company has been named in various lawsuits and manufacturer’s suggested retail price ("MSRP"); controlling intends to vigorously defend itself in those cases. The the advertising of cosmetics and Gift-With-Purchase Company is not in a position at this time to quantify the programs; and the manufacturer defendants guaranteeing the amount or range of any possible losses related to those retailer defendants a gross margin equal to 40% of MSRP claims. While no assurance can be given as to the ultimate and buying back any unsold cosmetics to prevent outcome of these lawsuits, based on preliminary discounting from MSRP. investigations, management currently believes that resolving Plaintiffs seek treble damages and restitution in an these matters will not have a material adverse effect on the unspecified amount, attorneys’ fees and prejudgment Company’s financial position, results of operations or cash interest, on behalf of a class of all California residents who flows. purchased cosmetics and fragrances for personal use from Cosmetics. The Company was originally named as a any of the defendants during the period four years prior to defendant along with other department store and specialty the filing of the amended complaint. Defendants, including retailers in nine separate but virtually identical class action the Company, have answered the amended complaint lawsuits filed in various Superior Courts of the State of denying the allegations. Plaintiffs have submitted requests California in May, June and July 1998 that have now been for production of documents to the manufacturer defendants, consolidated in Marin County state court. Plaintiffs’ who are in the process of responding to these and plaintiffs’ consolidated complaint alleged that the Company and other other discovery requests. Plaintiffs have not yet moved for retailers agreed to charge identical prices for cosmetics and class certification. fragrances, not to discount such prices, and to ur ge Nine West. In early 1999, the Company was named as a manufacturers to refuse to sell to retailers who sell defendant in a number of substantially identical lawsuits cosmetics and fragrances at discount prices, resulting in that were consolidated in Federal District Court in New York. artificially-inflated retail prices paid by the class in violation In addition to Nine West, a leading manufacturer and retailer of California state law. Defendants, including the Company, of men’s, women’s and children’s non-athletic footwear and answered the consolidated complaint denying the accessories, which was later acquired by Jones Apparel, allegations. The Company and the other retail defendants other defendants included various department store and have produced documents and responded to plaintiffs’ other specialty retailers. Plaintiffs filed a consolidated complaint discovery requests, including providing witnesses for alleging that the retailer defendants agreed with Nine West depositions. and with each other on the minimum prices to be charged Last year, plaintiffs filed an amended complaint naming a for Nine West shoes. Plaintiffs sought treble damages in an number of manufacturers of cosmetics and fragrances and unspecified amount, attorneys’ fees and prejudgment two other retailers as additional defendants. Plaintiffs’ interest on behalf of a nationwide class of persons who amended complaint alleges that the retail price of the purchased Nine West footwear from the defendants during "prestige" cosmetics sold in department and specialty stores the period January 1988 to February 1999. was collusively controlled by the retailer and manufacturer The Federal Trade Commission and the Attorneys General of defendants in violation of the Cartwright Act and the the states of New York, Ohio, Texas and Florida then opened California Unfair Competition Act by various means, an investigation into the plaintiffs’ allegations, and the including restricting the sale of prestige cosmetics to Company and the other defendants submitted documents department stores only; agreeing that all department and and information to those agencies. Last year, Nine 35 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 35 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S West/Jones Apparel, and the Federal Trade Commission and 1997. Plaintiff, a resident of Pennsylvania and a user of the states, separately reached tentative agreements on Nordstrom's credit through Nordstrom fsb, claims to settlements and consent decrees under which all fifty states represent all customers of Nordstrom who have been and certain possessions of the United States exercised their extended credit by Nordstrom fsb under revolving credit right under federal law and filed suit against Nine West, but accounts for consumer purchases at Nordstrom stores. not the Company, in Federal District Court in New York on Plaintiff claims that Nordstrom fsb has been paid principal, behalf of a class of persons who purchased Nine West interest and late fees in violation of said statutes on account footwear during the period January 1, 1988 through July 31, of which plaintiff seeks recovery or forfeiture thereof. 1999, alleging violations of federal and state antitrust and Nordstrom fsb has moved to dismiss the complaint and a related laws. Pursuant to the settlement agreements, Nine hearing on that motion was held on February 21, 2001. West paid $34 million in damages to the states and The court has not yet ruled on that motion. Counsel to submitted to certain injunctive relief. Nordstrom fsb has advised the Company that in their In December 2000, the Federal District Court in New York opinion, plaintiff’s claim is meritless. gave final approval to the settlement agreement between Bar Code. The Company is named as one of 135 retailer Nine West and the states, and the Federal Trade Commission defendants in a lawsuit filed in the United States District approved its settlement and consent decree with Nine West. Court for the District of Arizona. Plaintiff claims that the As a result, the court entered a final judgment dismissing Company and the other defendants have infringed certain the suit filed by the fifty states and certain possessions of patents held by it related to methods of scanning production the United States against Nine West. The period for appeal markings (bar codes) placed on work pieces or merchandise. from the court’s decision approving the settlement with the The complaint seeks from each defendant an award of states has expired and that settlement and judgment have damages for past infringement, to be trebled because of become final. Neither settlement admitted any violation of alleged willful and deliberate infringement. In February the law or liability by Nine West, the Company or any other 2001, the Company was dismissed without prejudice defendant in the putative private class actions. Nor did the pursuant to an agreement and stipulation intended to resolve settlements require any payment by the Company. a potential judicial conflict of interest. The agreement The plaintiffs who filed the putative private class actions confirms that if the potential conflict is for any reason against Nine West, the Company and other retailers agreed resolved, plaintiff can amend its complaint to add the that the suit instituted by the states against Nine West took Company as a defendant. precedence over those actions, which were never certified as Saipan. The Company has reached a settlement, which is of class actions, and that the final judgment dismissing the an immaterial amount, in its previously described lawsuits states’ proceeding also conclusively and preclusively resolved relating to its sourcing of clothing products from all claims alleged in plaintiffs’ consolidated complaint independent garment manufacturers in Saipan against the Company and the other defendants, which have (Commonwealth of Northern Marina Islands). The settlement likewise been dismissed. is subject to court approval. No hearing has been set to Credit Fees. The Company’s subsidiary, Nordstrom fsb, has date. been named a defendant in a purported class action in the Other. The Company is also subject to other ordinary routine Federal District Court for the Eastern District of litigation incidental to its business and with respect to which Pennsylvania. The case purports to be brought under the no material liability is expected. National Bank Act and the Arizona Consumer Loan Act of 36 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 36 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Note 17: Selected Quarterly Data (unaudited) Year ended January 31, 2001 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net sales Gross profit Write-down of investment Earnings before income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share $1,153,377 $1,457,035 $1,262,390 $1,655,735 $5,528,537 407,722 502,722 438,522 530,055 1,879,021 — (10,540) (20,655) (1,662) (32,857) 53,689 32,789 .25 .25 .08 74,501 45,401 .35 .35 .09 (5,520) (3,320) (.03) (.03) .09 44,348 27,048 167,018 101,918 .20 .20 .09 .78 .78 .35 Year ended January 31, 2000 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Net sales Gross profit Earnings before income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share $1,043,981 $1,449,089 $1,116,219 $1,539,977 $5,149,266 355,785 51,688 31,538 .22 .22 .08 505,741 116,189 70,839 .51 .51 .08 398,375 529,605 1,789,506 55,033 33,633 109,147 66,547 332,057 202,557 .25 .25 .08 .50 .50 .08 1.47 1.46 .32 37 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 37 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S Ten-Year Statistical Summary Dollars in thousands except square footage and per share amounts Year ended January 31, Financial Position Customer accounts receivable, net Merchandise inventories Current assets Current liabilities Working capital Working capital ratio Land, buildings and equipment, net Long-term debt, including current portion Debt/capital ratio Shareholders’ equity Shares outstanding Book value per share Total assets Operations Net sales Gross profit 2001 2000 1999 $ 699,687 $ 596,020 $ 567,661 945,687 797,845 750,269 1,812,982 1,564,648 1,668,689 950,568 862,414 1.91 866,509 698,139 1.81 794,490 874,199 2.10 1,599,938 1,429,492 1,378,006 1,112,296 804,982 .4929 .4249 868,234 .4214 1,229,568 1,185,614 1,300,545 133,797,757 132,279,988 142,114,167 9.19 8.96 9.15 3,608,503 3,062,081 3,103,689 5,528,537 5,149,266 1,879,021 1,789,506 5,049,182 1,704,237 Selling, general and administrative expense (1,747,048) (1,523,836) (1,429,837) Operating income Interest expense, net Write-down of investment Service charge income and other, net Earnings before income taxes Income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share Comparable store sales percentage increase (decrease) Net earnings as a percent of net sales Return on average shareholders’ equity Sales per square foot for Company-operated stores Stores Total square footage 131,973 (62,698) (32,857) 130,600 167,018 265,670 (50,396) — 116,783 332,057 274,400 (47,091) — 110,414 337,723 (65,100) (129,500) (131,000) 101,918 202,557 206,723 .78 .78 .35 .3% 1.84% 8.44% 342 140 1.47 1.46 .32 (1.1%) 3.93% 16.29% 350 104 1.41 1.41 .30 (2.7%) 4.09% 14.98% 362 97 16,056,0 00 14,487,0 00 13,593,0 00 38 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 38 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES 1998 1997 1996 1995 1994 1993 1992 $ 641,862 $ 693,123 $ 874,103 $ 655,715 $ 565,151 $ 584,379 $ 585,490 826,045 719,919 626,303 627,930 585,602 536,739 506,632 1,613,492 1,549,819 1,612,776 1,397,713 1,314,914 1,219,844 1,177,638 979,031 634,461 1.65 795,321 754,498 1.95 833,443 779,333 1.94 1,252,513 1,152,454 1,103,298 420,865 .3194 380,632 .2720 439,943 .3232 693,015 704,698 2.02 984,195 373,910 .2575 631,064 683,850 2.08 845,596 438,574 .2934 516,397 703,447 2.36 824,142 481,945 .3337 1,458,950 1,457,084 1,408,053 1,330,437 1,153,594 1,038,649 558,768 618,870 2.11 856,404 491,076 .4029 927,465 152,518,104 159,269,954 162,226,288 164,488,196 164,118,256 163,949,594 163,688,454 9.57 9.15 8.68 8.09 7.03 6.34 5.67 2,890,664 2,726,495 2,732,619 2,396,783 2,177,481 2,053,170 2,041,875 4,864,604 1,568,791 4,457,931 4,113,717 1,378,472 1,310,931 3,895,642 1,297,018 3,591,228 1,121,539 3,415,613 3,174,822 1,079,608 1,007,554 (1,338,235) (1,232,860) (1,136,069) (1,029,856) (940,708) (901,446) (831,005) 230,556 (34,250) — 110,907 307,213 (121,000) 186,213 1.20 1.20 .265 4.0% 3.83% 12.77% 384 92 145,612 (39,400) — 135,331 241,543 (95,227) 146,316 .90 .90 .25 0.6% 3.28% 10.21% 377 83 174,862 (39,295) — 134,179 269,746 (106,190) 163,556 1.00 1.00 .25 (0.7%) 3.98% 11.94% 382 78 267,162 (30,664) — 98,311 334,809 (132,304) 202,505 1.23 1.23 .1925 4.4% 5.20% 16.30% 395 76 180,831 (37,646) — 88,509 231,694 (90,804) 140,890 .86 .86 .17 2.7% 3.92% 12.85% 383 74 178,162 (44,810) — 86,140 219,492 (84,489) 135,003 .82 .82 .16 1.4% 3.95% 13.73% 381 72 176,549 (49,106) — 87,443 214,886 (80,527) 134,359 .82 .82 .155 1.4% 4.23% 15.41% 388 68 12,614,0 0 0 11,754,0 0 0 10,713,0 0 0 9,998,0 0 0 9,282,0 0 0 9,224,0 0 0 8,590,0 0 0 39 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 39 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S Management and Independent Auditors’ Report Management Report Independent Auditors’ Report The accompanying consolidated financial statements, We have audited the accompanying consolidated balance including the notes thereto, and the other financial sheets of Nordstrom, Inc. and subsidiaries (the "Company") information presented in this Annual Report have been as of January 31, 2001 and 2000, and the related prepared by management. The financial statements have consolidated statements of earnings, shareholders’ equity and been prepared in accordance with accounting principles cash flows for each of the three years in the period ended generally accepted in the United States of America and January 31, 2001. These financial statements are the include amounts that are based upon our best estimates and responsibility of the Company’s management. Our judgments. Management is responsible for the consolidated responsibility is to express an opinion on these financial financial statements, as well as the other financial statements based on our audits. information in this Annual Report. We conducted our audits in accordance with auditing The Company maintains an effective system of internal standards generally accepted in the United States of accounting control. We believe that this system provides America. Those standards require that we plan and perform reasonable assurance that transactions are executed in the audit to obtain reasonable assurance about whether the accordance with management authorization, and that they are financial statements are free of material misstatement. An appropriately recorded, in order to permit preparation of audit includes examining, on a test basis, evidence financial statements in conformity with accounting principles supporting the amounts and disclosures in the financial generally accepted in the United States of America and to statements. An audit also includes assessing the accounting adequately safeguard, verify and maintain accountability for principles used and significant estimates made by assets. The concept of reasonable assurance is based on the management, as well as evaluating the overall financial recognition that the cost of a system of internal control statement presentation. We believe that our audits provide a should not exceed the benefits derived. reasonable basis for our opinion. The consolidated financial statements and related notes have In our opinion, the accompanying consolidated financial been audited by Deloitte & Touche LLP, independent certified statements present fairly, in all material respects, the public accountants. The accompanying independent financial position of Nordstrom, Inc. and subsidiaries as of auditors’ report expresses an independent professional January 31, 2001 and 2000, and the results of their opinion on the fairness of presentation of management’s operations and their cash flows for each of the three years in financial statements. The Audit Committee of the Board of Directors is composed of the outside directors, and is responsible for recommending the independent certified public accounting firm to be retained for the coming year, subject to shareholder approval. the period ended January 31, 2001, in conformity with accounting principles generally accepted in the United States of America. The Audit Committee meets periodically with the Seattle, Washington independent auditors, as well as with management and the March 21, 2001 internal auditors, to review accounting, auditing, internal accounting controls and financial reporting matters. The independent auditors and the internal auditors also meet privately with the Audit Committee. Michael G. Koppel Vice President and Corporate Controller (Principal Accounting Officer) 40 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 40 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR DST ROM, INC. AND S UBSI DI ARIES Officers of the Corporation Jammie Baugh, 48 Executive Vice President, Human Resources Laurie M. Black, 42 Vice President, Kevin T. Knight, 45 Suzanne R. Patneaude, 54 Executive Vice President and President, Vice President, Nordstrom Credit and Customer Corporate Merchandise Manager, Relationship Marketing Michael G. Koppel, 44 Designer/Savvy, Full-line Store Group Corporate Merchandise Manager, Vice President, Corporate Controller and R. Michael Richardson, 44 Women’s Activewear/Lingerie/Hosiery, Acting Chief Financial Officer Vice President, Full-line Store Group Mark S. Brashear, 39 Executive Vice President, Southwest General Manager, Full-line Store Group Robert E. Campbell, 45 Vice President, Strategy and Planning, Treasurer N. Claire Chapman, 40 Corporate Secretary and Director of Legal Affairs Gail A. Cottle, 49 Executive Vice President and President, Llynn (Len) A. Kuntz, 40 Executive Vice President, Northwest General Manager, Full-line Store Group David P. Lindsey, 51 Vice President, Store Planning David L. Mackie, 52 Vice President, Real Estate Robert J. Middlemas, 44 Executive Vice President, Central States General Manager, Full-line Store Group Jack H. Minuk, 46 Vice President, Nordstrom Product Group Corporate Merchandise Manager, Dale Cameron (Crichton), 52 Executive Vice President, Women’s Shoes, Full-line Store Group Corporate Merchandise Manager, Blake W. Nordstrom, 40 President Bruce A. Nordstrom, 67 Chairman of the Board of Directors Erik B. Nordstrom, 37 Executive Vice President, Full-line Stores, Full-line Store Group Cosmetics, Full-line Store Group Joseph V. Demarte, 49 Vice President, Human Resources Linda Toschi Finn, 53 Executive Vice President, Marketing Bonnie M. Junell, 44 Vice President, Corporate Merchandise Manager, Point of View/Narrative, Full-line Store Group Chief Information Officer Karen Bowman Roesler, 45 Vice President, Marketing Nordstrom Credit Group (Karen) K. C. Shaffer, 47 Executive Vice President, General Merchandise Manager, Nordstrom Rack Group Joel T. Stinson, 51 Executive Vice President, Chief Administrative Officer Delena M. Sunday, 40 Executive Vice President, Diversity Affairs Susan A. Wilson Tabor, 55 Executive Vice President and President, Nordstrom Rack Group Michael A. Tam, 44 Executive Vice President, Director of Brands, Nordstrom Product Group Geevy S. K. Thomas, 36 Executive Vice President, General Merchandise Manager, Peter E. Nordstrom, 39 Full-line Store Group Executive Vice President and President, Full-line Store Group James R. O’Neal, 42 Executive Vice President, East Coast General Manager, Full-line Store Group 41 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 41 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk NOR D STROM, I NC. AND SUBSID IAR IE S Directors and Committees Directors D. Wayne Gittinger, 68 Partner, Lane Powell Spears Lubersky LLP Seattle, Washington Enrique Hernandez, Jr., 45 President and CEO, Inter-Con Security Systems, Inc. Pasadena, California Ann McLaughlin Korologos, 59 Chairman, the Aspen Institute Aspen, Colorado John A. McMillan, 69 Retired Co-Chairman of the Board of Directors Seattle, Washington Bruce A. Nordstrom, 67 Chairman of the Board of Directors Seattle, Washington John N. Nordstrom, 64 Retired Co-Chairman of the Board of Directors Seattle, Washington Alfred E. Osborne, Jr., 56 Director of the Harold Price Center for Entrepreneurial Studies and Associate Professor of Business Economics, The Anderson School at UCLA Los Angeles, California William D. Ruckelshaus, 68 A Principal in Madrona Investment Group, L.L.C. Seattle, Washington Bruce G. Willison, 52 Dean, The Anderson School at UCLA Los Angeles, California 42 Committees Executive John A. McMillan Bruce A. Nordstrom John N. Nordstrom Audit Enrique Hernandez, Jr. Ann McLaughlin Korologos, Chair Alfred E. Osborne, Jr. William D. Ruckelshaus Bruce G. Willison Compensation and Stock Option Enrique Hernandez, Jr. Ann McLaughlin Korologos Alfred E. Osborne, Jr. William D. Ruckelshaus, Chair Finance D. Wayne Gittinger Enrique Hernandez, Jr. John A. McMillan John N. Nordstrom Alfred E. Osborne, Jr., Chair Bruce G. Willison Corporate Governance and Nominating D. Wayne Gittinger, Chair Enrique Hernandez, Jr. Ann McLaughlin Korologos Alfred E. Osborne, Jr. William D. Ruckelshaus 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 42 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk Location Store Name area/sq. ft. Location Store Name Present total store Fashion Square 235,000 NOR DST ROM, INC. AND S UBSI DI ARIES Retail store facilities 151,000 195,000 154,000 122,000 116,000 235,000 156,000 147,000 150,000 172,000 134,000 187,000 173,000 161,000 164,000 149,000 190,000 220,000 151,000 130,000 174,000 149,000 169,000 186,000 165,000 193,000 East Coast Group (continued) Maryland Annapolis Bethesda Columbia Towson New Jersey Edison Freehold Paramus Short Hills New York Garden City White Plains Pennsylvania Annapolis Mall Montgomery Mall The Mall in Columbia Towson Town Center Menlo Park Freehold Raceway Mall Garden State Plaza The Mall at Short Hills Roosevelt Field The Westchester Rhode Island Providence Virginia Arlington McLean Norfolk Central States Group Illinois Chicago Oak Brook Schaumburg Skokie Indiana The Fashion Centre at Pentagon City Tysons Corner Center MacArthur Center Michigan Avenue Oakbrook Center Woodfield Shopping Center Old Orchard Center Indianapolis Circle Centre Kansas Overland Park Oak Park Mall King of Prussia The Plaza at King of Prussia 238,000 Providence Place 206,000 Present total store area/sq. ft. 162,000 225,000 173,000 205,000 266,000 174,000 282,000 188,000 241,000 219,000 241,000 253,000 166,000 271,000 249,000 215,000 209,000 216,000 219,000 Southwest Group Arizona Scottsdale California Arcadia Brea Santa Anita Brea Mall Canoga Park Topanga Plaza Cerritos Los Cerritos Center Corte Madera The Village at Corte Madera Costa Mesa Escondido Glendale Los Angeles Mission Viejo Montclair Palo Alto Pleasanton South Coast Plaza North County Fair Glendale Galleria Westside Pavilion The Shops at Mission Viejo Montclair Plaza Stanford Shopping Center Stoneridge Mall Redondo Beach The Galleria at South Bay Riverside Roseville The Galleria at Tyler Galleria at Roseville Sacramento Arden Fair San Diego San Diego San Diego San Francisco San Francisco San Mateo Santa Ana Fashion Valley Center Horton Plaza University Towne Centre Stonestown Galleria Hillsdale Shopping Center MainPlace/Santa Ana Santa Barbara Paseo Nuevo Santa Clara Walnut Creek Valley Fair Broadway Plaza East Coast Group Connecticut Farmington Florida Boca Raton Georgia Atlanta Buford San Francisco Shopping Centre 350,000 Westfarms 189,000 Michigan Troy Town Center at Boca Raton 193,000 Minnesota Somerset Collection 258,000 Perimeter Mall Mall of Georgia 243,000 172,000 Ohio Beachwood Beachwood Place 231,000 Bloomington Mall of America 240,000 Texas Dallas Frisco Dallas Galleria Stonebriar Centre 249,000 149,000 43 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 43 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk Retail store facilities, cont. Location Store Name area/sq. ft. Location Store Name Northwest Group Nordstrom Rack Group Present total store Alaska Anchorage Colorado Broomfield Littleton Oregon Portland Portland Portland Salem Tigard Utah Murray Anchorage FlatIron Crossing Park Meadows Clackamas Town Center Downtown Portland Lloyd Center Salem Center Washington Square Fashion Place Salt Lake City Crossroads Plaza Washington Bellevue Lynnwood Seattle Seattle Spokane Tacoma Tukwila Vancouver Yakima Other Honolulu, HI Honolulu, HI Façonnable Façonnable Bellevue Square Alderwood Mall Downtown Seattle (1) Northgate Spokane Tacoma Mall Southcenter Mall Vancouver Mall Downtown Yakima Women’s Ala Moana Shoes Men’s Ala Moana Shoes U.S. (3 boutiques) International (20 boutiques) 97,000 172,000 245,000 121,000 174,000 150,000 71,000 189,000 110,000 140,000 285,000 127,000 383,000 122,000 137,000 134,000 170,000 71,000 44,000 14,000 8,000 35,000 69,000 Present total store area/sq. ft. 37,000 48,000 38,000 45,000 30,000 31,000 50,000 36,000 54,000 57,000 48,000 44,000 64,000 34,000 44,000 34,000 40,000 Chandler, AZ Phoenix, AZ Chandler Festival Rack Last Chance Scottsdale, AZ Scottsdale Promenade Rack Brea, CA Chino, CA Colma, CA Brea Union Plaza Rack Chino Rack Colma Rack Costa Mesa, CA Metro Pointe Rack Glendale, CA Glendale Fashion Center Rack Sacramento, CA Howe ‘Bout Arden Center Rack San Diego, CA San Jose, CA Mission Valley Rack Westgate Mall Rack San Leandro, CA San Leandro Rack Woodland Hills, CA Topanga Rack Littleton, CO Buford, GA Honolulu, HI Northbrook, IL Oak Brook, IL Meadows Marketplace Rack Mall of Georgia Rack Victoria Ward Center Rack Northbrook Rack The Shops at Oakbrook Place Rack 42,000 Schaumburg, IL Woodfield Rack Gaithersburg, MD Gaithersburg Rack Silver Spring, MD City Place Rack Towson, MD Troy, MI Towson Rack Troy Marketplace Rack Bloomington, MN Mall of America Rack 45,000 49,000 37,000 31,000 40,000 41,000 Hampstead, NY The Mall at the Source Rack 48,000 Beaverton, OR Tanasbourne Town Center Rack Portland, OR Portland, OR Clackamas Promenade Rack Downtown Portland Rack Philadelphia, PA Franklin Mills Mall Rack Plano, TX Hurst, TX Preston Shepard Place Rack North East Mall Rack Salt Lake City, UT Sugarhouse Rack Woodbridge, VA Potomac Mills Rack Auburn, WA Bellevue, WA Auburn SuperMall Rack Factoria Rack Lynnwood, WA Golde Creek Plaza Rack Seattle, WA Spokane, WA Downtown Seattle Rack NorthTown Mall Rack 53,000 28,000 19,000 43,000 39,000 40,000 31,000 46,000 48,000 46,000 38,000 42,000 28,000 (1) Excludes approximately 311,000 square feet of corporate and administrative offices. 44 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. 44 8.375 x 10.875 • PDF • 150 lpi PMS 5503 PMS 5773 Cyan Mag Yelo Blk Shareholder Information Independent Auditors Deloitte & Touche LLP Counsel Lane Powell Spears Lubersky LLP Transfer Agent and Registrar Mellon Investor Services LLC P.O. Box 3315 South Hackensack, New Jersey 07606 Telephone (800) 318-7045 TDD for Hearing Impaired (800) 231-5469 Foreign Shareholders (201) 329-8660 TDD Foreign Shareholders (201) 329-8354 General Offices 1617 Sixth Avenue Seattle, Washington 98101-1742 Telephone (206) 628-2111 Annual Meeting May 15, 2001 at 11:00 a.m. Pacific Daylight Time Nordstrom Downtown Seattle Store John W. Nordstrom Room, fifth floor 1617 Sixth Avenue Seattle, Washington 98101-1742 Form 10-K The Company’s Annual Report on Form 10-K for the year ended January 31, 2001 will be provided to shareholders upon written request to: Nordstrom, Inc. Investor Relations P.O. Box 2737 Seattle, Washington 98111 or by calling (206) 373-4310. Shareholder Information Please visit www.nordstrom.com to obtain shareholder information. In addition, the Company is always willing to discuss matters of concern to shareholders, including its vendor standards compliance mechanisms and progress in achieving compliance. 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. IBC 16.937 x 10.875 • DCS2 • 150 lpi VARN BUMP 5773 5503 Cyan Mag Yelo Blk 20100444 Nordstrom 2001 Annual Report • 44pgs. + 4 covers pg. BC 16.937 x 10.875 • DCS2 • 150 lpi 

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