AnnuAl RepoRt 2012 SCORECARD
By responding to our customers’ higher expectations, we have achieved solid results.
Fiscal Year
Net sales
Earnings before interest and income taxes (EBIT)
Net earnings
Earnings per diluted share
Cash dividends paid per share
2012
$11,762
1,345
735
3.56
1.08
2011
$10,497
1,249
683
3.14
0.92
% Change
12.1
7.7
7.7
13.4
17.4
net SaleS ($)
SaleS PeR SQU aRe FOO t anD
4-Wall SaleS PeR SQU aRe FOO t ($)*
eaRning S beFORe inteRe St anD
incOme taxeS (ebit) ($)
11,762
11,762
11,762
10,497
11,762
9,310
10,497
10,497
11,762
10,497
10,497
9,310
10,497
11,762
388
8,258
8,272
8,272
9,310
8,258
9,310
8,272
8,258
8,258
8,272
8,258
9,310
8,258
8,272
8,272
9,310
431
397
360
388
388
360
388
368
388
360
397
368
360
368
372
431
337
397
372
397
394
431
372
397
394
394
368
360
337
388
368
397
337
360
337
337
368
372
372
337
372
470
470
470
431
470
431
417
394
431
417
470
417
470
394
417
394
417
417
1,118
779
779
834
779
834
779
1,118
834
779
834
779
1,249
1,118
1,249
1,118
834
834
1,345
1,249
1,345
1,249
1,345
1,249
1,345
1,118
1,249
1,118
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Net Sales Percentage Change
Same-store Sales Percentage Change
2008
2009
2010
(6.3)
(0.2)
12.7
2011
12.7
2012
12.1
2008
(9.0)
2009
(4.2)
2010
8.1
2011
7.2
2012
7.3
Sales Per Square Foot
4-Wall Sales Per Square Foot
inventORy tURn**
caSh Fl OW FROm OPeR atiOnS ($)
5.56
5.41
5.56
5.20
5.41
5.56
5.56
5.56
5.41
5.56
5.41
5.41
5.20
5.41
5.20
5.20
5.20
5.20
5.56
5.56
5.37
5.56
5.56
5.37
5.56
5.37
5.56
5.37
5.37
5.37
1,251
1,251
1,251
1,177
1,251
1,177
1,177
1,251
1,177
1,251
1,177
1,177
848
848
848
848
848
848
RetURn On inve SteD caPital (ROic)
anD RetURn On a SSetS (%)***
1,177
1,177
1,110
1,177
1,177
1,110
1,177
1,110
1,177
1,110
1,110
1,110
11.6
11.6
12.1
11.6
11.6
12.1
13.6
12.1
13.6
11.6
12.1
11.6
13.6
13.3
13.6
13.9
13.3
13.9
13.3
12.1
13.6
13.3
13.6
13.3
13.9
13.9
13.3
8.9
7.0
7.1
7.0
7.0
7.1
7.0
7.0
7.1
7.1
7.0
12.1
8.6
8.6
7.1
7.1
8.7
8.6
8.6
8.7
8.7
8.9
8.6
8.7
8.7
8.6
8.9
8.9
8.7
8.9
8.9
1,345
1,345
13.9
13.9
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Return on Invested Capital
Return on Assets
nordstrom.com/2012companyreview
Dollars in millions except per share and per square foot amounts.
*4-wall sales per square foot is calculated as sales for Nordstrom full-line, Nordstrom Rack, Jeffrey, and treasure&bond stores divided by their weighted-average square footage.
**Inventory Turn is calculated as the cost of sales and related buying and occupancy costs divided by average inventory.
***See Return on Invested Capital (ROIC) Non-GAAP financial measure on page 26 for additional information and reconciliation to the most directly comparable GAAP financial measure.
At Nordstrom, our #1 goal of improving customer service never
changes, but we know the customer’s definition of service does.
• Net earnings reached an all-time high at $735 million, and our 13.9%
Return on Invested Capital (ROIC) was our highest in five years.
Speed, convenience, innovation and personalization have become
cornerstones of the customer experience — and the bar is getting
higher. We need to respond by meeting customers wherever and
As service expectations increase, so do our opportunities to stay
relevant to our customers. That’s easier said than done in today’s
whenever with compelling product and the best experience possible.
rapidly changing landscape. However, we believe we have the team,
Good things happen when we let the customer be our guide. We may
capabilities and customer strategy to make it happen. We’re uniquely
not always get it right, but this approach has served us well over the
positioned as a 112-year-old growth company, and we’re excited about
years and leads to strong results. 2012 was yet another example:
the results we can achieve by serving more customers in more ways.
• We achieved total company sales growth of 12.1% and same-store
sales growth of 7.3%. We’ve increased total sales by more than
$1 billion each of the last three years.
• We reached important milestones in key areas of our business,
including Direct net sales surpassing $1 billion and the Shoe
division exceeding $2 billion for the year.
• We added 15 new Nordstrom Rack stores, with the Rack delivering
a total sales increase of 20% and a same-store sales gain of 7.4%.
PEOPLE + CAPABILITIES — Ever since our founding,
our success has been defined by empowered, knowledgeable and
motivated people dedicated to serving their customers. That will
never change. Our job is to build on this legacy by investing in new
tools and technology to enable customers to shop however they want.
One example of using capabilities to provide better service is
mobile in our stores. We introduced mobile point-of-sale devices in
all full-line stores roughly two years ago. Since then, we’ve continued
• Our Fashion Rewards® program continues to drive loyalty
to learn, adding more devices, improving functionality and rolling
and results. We’ve owned and managed our card business for
them out to all our Rack stores. Our City Creek Center full-line store
over 60 years. This is a point of difference with our customers
in Salt Lake City opened last year with three times the number
and strategically important to the service experience we hope
of mobile devices as cash registers in the store. The functionality
to offer them. In 2012, we added more than 1 million new members
on these devices is now virtually the same as our cash registers,
and saw a 23% increase in sales from the program.
and we expect to be largely mobile in our stores by 2014.
Good things happen when we
Good things happen when we
Good things happen when we
let the customer be our guide.
let the customer be our guide.
let the customer be our guide.
Making people feel good is what
we’re all about. Our #1 goal is
to improve customer service with
new ways to inspire, empower
and engage our customers.
E-commerce is surging.
We hit a new benchmark
this year with over $1 billion
in online sales.
FIRST PAGE OF EDITORIAL – FAcTS AnD FIGuRES
NEW STORES, NEW OPPORTUNITIES — There
were some watershed moments in our company’s history in 2012.
Ten years ago, we had 48 Rack stores. By the end of 2012, we had 119.
Our customers’ response to our newest Racks across the country has
been outstanding. We’ll continue building on this success, and plan
After many years of searching for the right location, it was
to have more than 230 Rack stores by 2016.
gratifying to finally be able to announce our first Manhattan
full-line store. We’re still a ways out from our 2018 opening,
but we’re already excited about the chance to build a flagship
E-COMMERCE — For some time, e-commerce has been the
fastest-growing part of our business. We’ve been investing in this
store on the city’s West Side. It’s our opportunity to have our
high-growth business for many years to better position us with our
best store in the best retail market in the world.
customers as they change the way they want to be served. These
Shortly after announcing Manhattan, we shared news of our first
growing 37% on top of last year’s nearly 30% increase. This is a
Canadian stores. We’re starting off with four stores, beginning in
dynamic area of the business that requires us to move faster and
2014 in Calgary, followed by Ottawa, Vancouver and Toronto. Over
try new things. Though we made good headway, we’re still in
time, we’d like to open more stores, including several Nordstrom
the early innings with e-commerce and will continue to invest
efforts continued to pay off in 2012, with Direct comparable sales
Racks. We look forward to helping more customers in Canada and
aggressively in its growth.
feel fortunate to have this chance to compete.
We’re increasing online selection to have more choices from our
We also continue to find opportunities to open more full-line stores
customers’ favorite brands. Since moving to free shipping and
in top markets. Over the next few years, we’ll open our first full-line
free returns, we’re now finding ways to get product to customers
stores in Milwaukee, Puerto Rico and Jacksonville, while expanding
faster. In 2012, we trimmed standard fulfillment time by two days
our store presence or relocating in other important markets like
on average. We also added to the features and functionality of our
Houston, Los Angeles and Minneapolis.
site to offer easier navigation, better fit and style guides, enhanced
product imagery and fresh content.
NORDSTROM RACK — Nordstrom Rack is an important part
of our offering and a key contributor to our results. Our customers
At the same time, we recognize our customers are always
love the treasure-hunt experience at the Rack and the opportunity
connected and never without their mobile device. Being a relevant
to find significant savings on many of the same great brands we
shopping destination means using technology to create service
carry at our full-line stores. It’s a terrific business and several years
experiences that reflect their way of life. A growing proportion
ago we made a determined effort to serve more customers by
of e-commerce purchases occurs on our customers’ mobile
accelerating our Rack growth.
devices. We’re responding by improving the information and
Evolving to better serve our
customers. We’ve created more
ways to be at the customer’s
fingertips, with new apps that make
it easy to shop anywhere. In store,
mobile devices offer customers
faster, on-the-spot checkout.
Shoe love — personified.
We hit an exciting milestone,
with shoe sales surpassing
$2 billion in 2012.
We’re meeting more customers
in new places. We’re opening our
first full-line stores in Canada,
including Calgary, Ottawa,
Vancouver and Toronto.
functionality that we put at our customers’ fingertips, including
In September, we made a significant addition to our business by
the launch of our iPad shopping app and the enhancement of our
teaming up with the renowned British brands TOPSHOP and TOPMAN.
smartphone apps.
They have unmatched credibility worldwide for delivering unique,
trend-leading fashion at accessible prices. We’ve had great results
We also know our customers live their lives on social media. We
and feel fortunate we were able to become the first large U.S.
continue to be impressed by the growth of our communities.
retailer to carry their product in stores and online. This partnership
We’re flattered by our following on Pinterest, where Nordstrom
is helping us do a better job of offering the hottest trends while
has the largest number of followers of any Fortune 500 company.
attracting more customers to shop with us.
We view social media as a service tool that uniquely complements
our culture of listening and responding to customers. Even as our
different communities grow, what makes social media so exciting
EVOLVING WITH OUR CUSTOMERS — We feel
we’re best able to evolve and grow as a company when we put the
is how it gives us more platforms to engage with customers and
customer first. With all the different choices customers have, it’s
learn from them. Our business was built on word of mouth and the
critical that we find ways to truly empower customers to shop
more we can create an environment where customers want to
with us on their terms. Even as we focus more heavily on speed,
share with us and each other, the more our business will benefit.
agility, technology and growth as the shopping landscape changes,
STRATEGIC PARTNERSHIPS — We’ve worked with
a number of partners to strengthen our product offering and add
to the customer experience. We acquired Jeffrey several years
ago to help grow our designer presence. More recently, we invested
in Peek to complement our Kids’ Wear offering, and also acquired
HauteLook to take advantage of the rapidly growing flash-sale
marketplace and develop more e-commerce capabilities.
we’re humbly aware that we’re only as good as the last interaction
we have with each customer.
Blake W. Nordstrom
President, Nordstrom, Inc.
In 2012, we teamed up with more partners to help us learn
and be relevant to more customers. In April, we invested in
men’s apparel retailer Bonobos, becoming the first retailer to
carry their merchandise outside of their own site and shops.
Last January, Jason Wu debuted his new contemporary label,
MISS WU, with Nordstrom.
Peter E. Nordstrom
President of Merchandising, Nordstrom, Inc.
Erik B. Nordstrom
President of Stores, Nordstrom, Inc.
We’ve reduced our impact on
the environment. By updating
our boxes, we’re saving 400 tons
of paper annually. Changes to
our shopping bags save 23,000
trees each year.
More Rack stores mean more
people are staying stylish on
a budget. In 2012, we opened
15 new Rack stores, and we’re
on track to have more than
230 by 2016.
We’re creating new partnerships.
By teaming up with exciting brands
like TOPSHOP/TOPMAN and
Bonobos, we’re giving customers
more reasons to shop with us.
BRITISH STYLE CROSSES THE POND
POND
THird PAGE OF EdiTOriAl — PrESidENTS’ lETTEr
Improving the customer experience is the most important subject
Additionally, sales have more than doubled and market capitalization
at Nordstrom. This is our team’s top priority because it challenges
has increased by roughly 400%. Nordstrom has opened 100 new
us to earn our customers’ trust every day, and to focus on the
stores, adding more than 9 million square feet of space. From 2000
future. One of the advantages of this simple and constant goal is
to 2012, Nordstrom added some 17,000 people to its team, and now
how it also creates a platform for innovation and fresh thinking
employs over 60,000 people nationwide. Throughout, our company
as we strive to exceed our customers’ expectations.
has not lost sight of operating disciplines and has continued to
maintain an extraordinarily strong balance sheet.
In looking back on 2012, our Board of Directors is struck not only
by the company’s impressive accomplishments for the year just
Nordstrom has also strengthened its reputation as a company
past, but also by what it says about the company’s positioning
that is committed to doing the right thing on behalf of customers.
for coming years. I believe our results have once again shown the
The company has long understood that creating a great place to
benefits of investing in the people and the capabilities to deliver
shop also requires creating a great work environment. Not only
more of what customers want and to create more personalized
experiences, regardless of channel.
has the company consistently ranked among the best customer
service organizations, but it is also one of the world’s most admired
brands, earning high marks for governance, ethics and being an
2012 was a defining year, filled with a number of firsts in our
excellent place to work. All of this is a credit to the leadership
company’s history. Nordstrom set another record for total sales
and integrity at all levels at Nordstrom.
at $11.8 billion. As Blake, Pete and Erik mentioned, we achieved
our highest net earnings yet and best ROIC in five years. At the
While we’re proud of what we’ve achieved thus far, our Board of
same time, we’re taking advantage of new growth opportunities.
Directors and the company’s leadership stand shoulder to shoulder
We plan to open our first Manhattan full-line store and multiple
in our drive to take advantage of more growth opportunities.
Canadian stores as we explore international expansion for the first
With a steadfast commitment to improve service, the strongest
time. We will double the number of Rack stores over the next four
possible values and unmatched competitive spirit, we are confident
years, while continuing to drive outsized e-commerce growth.
Nordstrom can continue to create shareholder value by elevating
What’s impressive about the accomplishments from 2012 is how
they have come on top of the company’s sustained track record of
On behalf of our entire Board of Directors, I thank you for your
success. The Board of Directors stands strongly behind management
support of Nordstrom.
the customer experience.
and its legacy of results. In fact, when today’s leadership assumed
management responsibility more than 12 years ago, Nordstrom’s
stock price stood at $9.00. At the end of our 2012 fiscal year,
the stock was $55.12, representing a gain of over 500%. Assuming
reinvested dividends, this represents a roughly seven-fold
increase in total shareholder returns over this period.
Enrique Hernandez, Jr.
Chairman
New York, New York!
In 2018, we’ll open our first
full-line store in Manhattan,
bringing the Nordstrom
experience to the top
retail city in the world.
We’re creating new relationships
through our enhanced Fashion
Rewards program. Over 1 million
customers joined in 2012, bringing
our total to 3.3 million active
Fashion Rewards members.
F I R S T- RU N FA S H I O N , FA S T.
T H I S I S A W H O L E N E W
KIND OF SAVVY
G E T O N I T
It’s a whole new kind of Savvy.
We’ve transformed our entire Savvy
department, filling it with fast-turn,
first-run fashion at accessible prices
to attract new customers.
FOURTH PAGE OF EDITORIAL — CHAIRMAN’S LETTER
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FIRST PAGE OF FINANCIAL SECTION
[This page intentionally left blank.]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 2, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to___________
Commission file number 001-15059
NORDSTROM, INC.
(Exact name of registrant as specified in its charter)
Washington
(State or other jurisdiction of
incorporation or organization)
1617 Sixth Avenue, Seattle, Washington
(Address of principal executive offices)
91-0515058
(I.R.S. Employer
Identification No.)
98101
(Zip Code)
Registrant's telephone number, including area code 206-628-2111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, without par value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES
NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES
NO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES
NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). YES
NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
NO
As of July 27, 2012 the aggregate market value of the Registrant's voting and non-voting stock held by non-affiliates of the Registrant was
approximately $9.0 billion using the closing sales price on that day of $54.40. On March 12, 2013, 195,891,451 shares of common stock
were outstanding.
Portions of the Proxy Statement for the 2013 Annual Meeting of Shareholders scheduled to be held on May 14, 2013 are incorporated into
Part III.
DOCUMENTS INCORPORATED BY REFERENCE
Nordstrom, Inc. and subsidiaries 1
[This page intentionally left blank.]
TABLE OF CONTENTS
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.
Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accounting Fees and Services.
Exhibits and Financial Statement Schedules.
Signatures
Consent of Independent Registered Public Accounting Firm
Exhibit Index
Page
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6
9
10
12
12
13
15
16
34
35
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62
64
64
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64
64
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68
Nordstrom, Inc. and subsidiaries 3
Item 1. Business.
PART I
DESCRIPTION OF BUSINESS
Founded in 1901 as a retail shoe business in Seattle, Nordstrom later incorporated in the state of Washington in 1946 and went on to
become one of the leading fashion specialty retailers based in the U.S. We operate 242 U.S. stores located in 31 states as of March 18,
2013, as well as a robust e-commerce business through nordstrom.com. The west and east coasts of the United States are the areas in
which we have the largest presence. We have two reportable segments: Retail and Credit.
As of March 18, 2013, the Retail segment includes our 117 'Nordstrom' branded full-line stores and our online store at www.nordstrom.com,
our 121 off-price 'Nordstrom Rack' stores, one clearance store that operates under the name 'Last Chance' and our other retail channels
including our online private sale subsidiary 'HauteLook,' our two 'Jeffrey' boutiques and one philanthropic 'treasure&bond' store. Through
these multiple retail channels, we try to deliver the best customer experience possible. We offer a wide selection of high-quality brand name
and private label merchandise focused on apparel, shoes, cosmetics and accessories. Our integrated Nordstrom full-line stores and online
store allow us to provide our customers with a seamless shopping experience. Purchases within our stores are primarily fulfilled from that
store's inventory, but may also be shipped to our customers from our fulfillment center in Cedar Rapids, Iowa, or from other Nordstrom full-
line stores for inventory unavailable at the original store. Online purchases are primarily shipped to our customers from our Cedar Rapids
fulfillment center, but may also be shipped from our Nordstrom full-line stores. Our customers also have the option to pick up online orders in
our Nordstrom full-line stores if inventory is available at that location. These capabilities allow us to better serve customers across various
channels and improve sales. The Nordstrom Rack stores purchase high-quality name brand merchandise directly from vendors and also
serve as outlets for clearance merchandise from our Nordstrom stores. Our online private sale retailer, HauteLook, offers limited time sale
events on fashion and lifestyle brands.
Our Credit segment includes our wholly owned federal savings bank, Nordstrom fsb, through which we provide a private label credit card,
two Nordstrom VISA credit cards and a debit card. The credit and debit cards feature a shopping-based loyalty program designed to increase
customer visits and spending. Although the primary purpose of our Credit business is to strengthen and build customer relationships, foster
greater customer loyalty and drive more sales, we also generate revenues through finance charges and other fees on these cards and save
on interchange fees that would be incurred by the Retail segment if our customers used third-party cards.
For more information about our business and our reportable segments, see Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations and Note 16: Segment Reporting in Item 8: Financial Statements and Supplementary Data.
FISCAL YEAR
We operate on a 52/53-week fiscal year ending on the Saturday closest to January 31st. References to 2012 relate to the 53-week fiscal year
ended February 2, 2013. References to any other years included within this document are based on a 52-week fiscal year.
TRADEMARKS
We have 139 trademarks, each of which is the subject of one or more trademark registrations and/or trademark applications. Our most
notable trademarks include Nordstrom, Nordstrom Rack, HauteLook, Halogen, Caslon, and BP. Each of our trademarks is renewable
indefinitely, provided that it is still used in commerce at the time of the renewal.
RETURN POLICY
We have a liberal approach to returns at Nordstrom. We do not have a formal return policy at our Nordstrom full-line stores or online at
www.nordstrom.com. If a customer is not satisfied with something they purchased, we evaluate the situation on a case-by-case basis with the
ultimate objective of taking care of the customer. We also try to make returns and exchanges easy for our customers, whether in our stores
or online, where we offer free shipping and free returns. Our Nordstrom Rack stores generally accept returns up to 30 days from the date of
purchase with the original price tag and sales receipt. HauteLook generally accepts returns of apparel, footwear and accessories within 21
days from the date of shipment.
SEASONALITY
Due to our Anniversary Sale in July, the holidays in December and the half-yearly sales that occur in the second and fourth quarters, our
sales are typically higher in the second and fourth quarters of the fiscal year than in the first and third quarters. In 2012, our Anniversary Sale
shifted to the last week of July and the first week of August to align with the historical timing of our sale event. This moved one week of event
sales to the third quarter.
4
INVENTORY
We plan our merchandise purchases and receipts to coincide with expected sales trends. For instance, our merchandise purchases and
receipts increase prior to our Anniversary Sale, which has historically extended over the last two weeks of July. As discussed above, in 2012
this shifted to the last week of July and the first week of August. We also purchase and receive a larger amount of merchandise in the fall as
we prepare for the holiday shopping season (from late November through December). In 2012, we increased our investment in pack and hold
inventory at Nordstrom Rack, which involves the acquisition of merchandise from some of our top brands in advance of the upcoming selling
seasons in order to take advantage of strategic buying opportunities. This inventory is typically held for six months on average and has
contributed to the growth in our Rack business. We pay for our merchandise purchases under the terms established with our vendors.
In order to offer merchandise that our customers want, we purchase merchandise from a wide variety of high-quality suppliers, including
domestic and foreign businesses. We also have arrangements with agents and contract manufacturers to produce our private label
merchandise. We expect our suppliers to meet our "Nordstrom Partnership Guidelines," which address our corporate social responsibility
standards for matters such as legal and regulatory compliance, labor, health and safety and the environment, and are available on our
website at www.nordstrom.com.
COMPETITIVE CONDITIONS
We operate in a highly competitive business environment. We compete with other national, regional and local retailers that may carry similar
lines of merchandise, including department stores, specialty stores, off-price stores, boutiques and Internet businesses. Our specific
competitors vary from market to market. We believe the keys to competing in our industry are customer service and creating a great
customer experience in store and online, which includes compelling price and value, fashion newness, quality of products, selection,
convenience, technology, product fulfillment, service and stores in top locations.
EMPLOYEES
During 2012, we employed approximately 61,000 employees on a full- or part-time basis. Due to the seasonal nature of our business,
employment increased to approximately 63,500 employees in July 2012 and 64,500 in December 2012. Substantially all of our employees
are non-union. We believe our relationship with our employees is good.
CAUTIONARY STATEMENT
Certain statements in this Annual Report on Form 10-K contain or may suggest "forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the
fiscal year ending February 1, 2014, anticipated annual same-store sales rate, anticipated Return on Invested Capital and trends in our
operations. Such statements are based upon the current beliefs and expectations of the company's management and are subject to
significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon
factors including, but not limited to:
• successful execution of our growth strategy, including expansion into new markets, technological investments and acquisitions, our
ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with newly
planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties,
• our ability to manage the transformation of our business/financial model as we increase our investments in growth opportunities,
including our online business and our ability to manage related organizational changes,
• our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders,
• effective inventory management, disruptions in our supply chain and our ability to control costs,
• the impact of any systems failures, cybersecurity and/or security breaches, including any security breach that results in the theft,
transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and
privacy laws and regulations in the event of such an incident,
• successful execution of our information technology strategy,
• efficient and proper allocation of our capital resources,
• our ability to safeguard our reputation and maintain our vendor relationships,
• the impact of economic and market conditions and the resultant impact on consumer spending patterns,
• our ability to respond to the business environment, fashion trends and consumer preferences, including changing expectations of
service and experience in stores and online,
• the effectiveness of planned advertising, marketing and promotional campaigns in the highly competitive retail industry,
• weather conditions, natural disasters, health hazards, national security or other market disruptions, or the prospects of these events
and the impact on consumer spending patterns,
• our compliance with applicable banking related laws and regulations impacting our ability to extend credit to our customers,
employment laws and regulations, certain international laws and regulations, other laws and regulations applicable to us, including
the outcome of claims and litigation and resolution of tax matters, and ethical standards,
• impact of the current regulatory environment and financial system and health care reforms,
Nordstrom, Inc. and subsidiaries 5
• compliance with debt covenants, availability and cost of credit, changes in interest rates, and trends in personal bankruptcies and bad
debt write-offs, and
• the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances
associated with option exercises or other matters.
These and other factors could affect our financial results and cause actual results to differ materially from any forward-looking information we
may provide. We undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, new information
or future circumstances.
SEC FILINGS
We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission ("SEC").
All material we file with the SEC is publicly available at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. You
may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file
electronically with the SEC.
WEBSITE ACCESS
Our website address is www.nordstrom.com. We make available free of charge on or through our website our annual and quarterly reports
on Form 10-K and 10-Q (including related filings in eXtensible Business Reporting Language ("XBRL") format), current reports on Form 8-K,
proxy statements, statements of changes in beneficial ownership of securities on Form 4 and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file the
report with or furnish it to the SEC. Interested parties may also access a webcast of quarterly earnings conference calls and other financial
events through our website.
CORPORATE GOVERNANCE
We have a long-standing commitment to upholding a high level of ethical standards. In addition, as required by the listing standards of the
New York Stock Exchange ("NYSE") and the rules of the SEC, we have adopted Codes of Business Conduct and Ethics for our employees,
officers and directors ("Codes of Ethics") and Corporate Governance Guidelines. We have posted on our website our Codes of Ethics, our
Corporate Governance Guidelines and our Committee Charters for the Audit, Compensation, Corporate Governance and Nominating and
Finance Committees. Any amendments and waivers to these will also be available on our website.
For printed versions of these items or any other inquiries, please use the following contact information:
Nordstrom Investor Relations
PO Box 2737
Seattle, Washington 98111
(206) 233-6564
invrelations@nordstrom.com
Item 1A. Risk Factors.
Our business faces many risks. We believe the risks described below outline the items of most concern to us.
RISKS DUE TO STRATEGIC AND OPERATIONAL FACTORS
Our strategic growth plans focus on both our stores and on e-commerce and failure to successfully execute our plans could
negatively impact our current business and future profitability.
We plan to accelerate the number of new Nordstrom Rack store openings. New store openings both at the Rack and in our full-line stores
involve certain risks, including the availability of suitable locations, constructing, furnishing and supplying a store in a timely and cost-effective
manner and accurately assessing the demographic or retail environment for a particular location. In addition, sales at new, relocated or
remodeled stores may not meet our projections, which could adversely affect our return on investment. We also intend to open stores in new
and international markets, such as Canada, Puerto Rico and Manhattan, and expansion will require additional management attention and
resources and may distract us from executing our core operations. In addition, competition from strong local competitors, compliance with
foreign and local laws and regulatory requirements and potentially unfavorable tax consequences may cause our business to be
adversely impacted.
6
We are also enhancing our customer shopping experience in our stores, online, and in mobile and social channels by pursuing a heightened
focus on technology and e-commerce to fuel our growth. In addition, other growth opportunities may include acquisitions of, or investments
in, other businesses, as well as new technologies or other investments to improve and integrate these experiences. If we target the wrong
opportunities, fail to make the best investments or make an investment commitment significantly above or below our needs, it may result in
the loss of our competitive position. If these technologies and investments do not perform as expected or are not seamlessly integrated, our
profitability and growth could be adversely affected. In addition, if we do not maintain our current systems, we may see interruptions to our
business and increased costs in order to bring our systems up to date.
As we execute our plans and continue to evolve and transform our strategy, we may not adequately manage the related organizational
changes or appropriately monitor, report or communicate the changes in an effective manner, adversely impacting our current business and
future profitability.
Improvements to our merchandise buying processes and systems could adversely affect our business if not successfully
executed.
We are making investments to improve our merchandise planning, procurement and allocation capabilities through changes in personnel,
processes and technology over a period of several years. If we encounter challenges associated with change management, the ability to hire
and retain key personnel involved in these efforts, implementation of associated information technology or adoption of new processes, our
ability to continue to successfully execute our strategy could be adversely affected. As a result, we may not derive the expected benefits to
our sales and profitability, or we may incur increased costs relative to our current expectations.
If we do not effectively implement our strategic and business planning processes to attract, retain, train and develop future
leaders, our business may suffer.
We rely on the experience of our senior management, who have specific knowledge relating to us and our industry that is difficult to replace.
If unexpected leadership turnover occurs without adequate succession plans, the loss of the services of any of these individuals, or any
negative perceptions of our business as a result, could damage our reputation and our business.
We could expose our customers and our business to risk if we fail to take the appropriate measures to safeguard our information
security and privacy environment from security breaches.
Our operations involve the collection, storage and transmission of customers' personal information, consumer preferences and credit card
information, in addition to employee information and company financial and strategic data. Any measures we implement to prevent a security
or cybersecurity threat may not be totally effective and may have the potential to harm relations with our customers or decrease activity on
our websites by making them more difficult to use. In addition, the regulatory environment surrounding information security, cybersecurity and
privacy is increasingly demanding, with new and constantly changing requirements. Security breaches and cyber incidents and their
remediation, whether at our company, our third-party providers or our peer retailers, could expose us to a risk of loss or misappropriation of
this information, litigation, potential liability, reputation damage and loss of customers' trust and business.
If we fail to appropriately manage our capital, we may negatively impact our operations and shareholder return.
We utilize capital to finance our operations, make capital expenditures and acquisitions, manage our debt levels and return value to our
shareholders through dividends and share repurchases. If our access to capital is restricted or our cost of capital increases, our operations
and financial condition could be adversely impacted. Further, if we do not properly allocate our capital to maximize returns, our operations,
cash flows and returns to shareholders could be adversely affected.
Our customer and employee relationships could be negatively affected if we fail to maintain our corporate culture and reputation.
We have a well-recognized culture and reputation that consumers may associate with a high level of integrity, customer service and quality
merchandise, and it is one of the reasons employees choose Nordstrom as a place of employment. Any significant damage to our reputation
could negatively impact sales, diminish customer trust, reduce employee morale and productivity and lead to difficulties in recruiting and
retaining qualified employees.
RISKS DUE TO ECONOMIC AND EXTERNAL MARKET FACTORS
A downturn in economic conditions could have a significant adverse effect on our business.
During economic downturns, fewer customers may shop for the high-quality items in our stores and on our website as they may be seen as
discretionary and those who do shop may limit the amount of their purchases. This reduced demand may lead to lower sales, higher
markdowns and increased marketing and promotional spending. Deterioration of economic conditions and consumer confidence may also
adversely affect our credit customers' payment patterns and delinquency rates, increasing our bad debt expense.
Nordstrom, Inc. and subsidiaries 7
Our business could suffer if we do not appropriately assess and react to competitive market forces.
We compete with other national, regional, local and online retailers that may carry similar lines of merchandise, including department stores,
specialty stores, off-price stores, boutiques and Internet businesses. Online retail shopping is rapidly evolving and we expect competition in
the e-commerce market to intensify in the future as the Internet facilitates competitive entry and comparison shopping. We may lose market
share to our competitors and our sales and profitability could suffer if we are unable to remain competitive in the key areas of price and value,
fashion newness, quality of products, depth of selection, convenience, fulfillment, service and the shopping experience, including the online
and store environment and location.
Our Credit segment faces competition from other retailers who also offer credit card products with associated loyalty programs, large banks
and other credit card companies, some of which have substantial financial resources. If we do not effectively anticipate or respond to the
competitive banking and credit card environment, we could lose market share to our competitors.
Our sales and customer relationships may be negatively impacted if we do not anticipate and respond to consumer preferences
and fashion trends appropriately.
Our ability to predict or respond to constantly changing fashion trends, consumer preferences and spending patterns significantly impacts our
sales and operating results. If we do not identify and respond to emerging trends in consumer spending and preferences quickly enough, we
may harm our ability to retain our existing customers or attract new customers. If we purchase too much inventory, we may be forced to sell
our merchandise at lower average margins, which could harm our business. Conversely, if we fail to purchase enough merchandise, we may
lose opportunities for additional sales and damage our relationships with our customers.
The results of our Credit operations could be adversely affected by changes in market conditions.
Our credit card revenues and profitability are subject in large part to economic and market conditions that are beyond our control, including,
but not limited to, interest rates, consumer credit availability, consumer debt levels, unemployment trends, laws and regulations and other
factors. These economic and market conditions could impair our ability to assess the creditworthiness of our customers if the criteria and/or
models we use to underwrite and manage our customers become less predictive of future losses. This could cause our losses to rise and
have a negative impact on our results of operations.
Our business and operations could be materially and adversely affected by supply chain disruptions, severe weather patterns,
natural disasters, widespread pandemics and other natural or man-made disruptions.
We derive a significant amount of our total sales from stores located on the west and east coasts of the United States, particularly in
California, which increases our exposure to conditions in these regions. These disruptions could cause, among other things, a decrease in
consumer spending that would negatively impact our sales; staffing shortages in our stores, distribution centers or corporate offices;
interruptions in the flow of merchandise to our stores; disruptions in the operations of our merchandise vendors or property developers;
increased costs; and a negative impact on our reputation and long-term growth plans.
RISKS DUE TO LEGAL AND REGULATORY FACTORS
We are subject to certain laws, litigation, regulatory matters and ethical standards, and our failure to comply with or adequately
address developments as they arise could adversely affect our reputation and operations.
Our policies, procedures and practices and the technology we implement are designed to comply with federal, state, local and foreign laws,
rules and regulations, including those imposed by the SEC and other regulatory agencies, the marketplace, the banking industry and foreign
countries, as well as responsible business, social and environmental practices, all of which may change from time to time. Significant
legislative changes, including those that relate to employment matters and health care reform, could impact our relationship with our
workforce, which could increase our expenses and adversely affect our operations. In addition, if we fail to comply with applicable laws and
regulations or implement responsible business, social and environmental practices, we could be subject to damage to our reputation, class
action lawsuits, legal and settlement costs, civil and criminal liability, increased cost of regulatory compliance, restatements of our financial
statements, disruption of our business and loss of customers. Any required changes to our employment practices could result in the loss of
employees, reduced sales, increased employment costs, low employee morale and harm to our business and results of operations. In
addition, political and economic factors could lead to unfavorable changes in federal and state tax laws, which may increase our tax
liabilities. An increase in our tax liabilities could adversely affect our results of operations. We are also regularly involved in various litigation
matters that arise in the ordinary course of business. Litigation or regulatory developments could adversely affect our business and
financial condition.
8
Our business faces uncertainties as we implement newly enacted financial system reforms that could have an adverse affect on
our operations.
The recession resulted in increased legislative and regulatory changes affecting the financial industry. The Credit Card Accountability
Responsibility and Disclosure Act of 2009 included new rules and restrictions on credit card pricing, finance charges and fees, customer
billing practices and payment application, which required us to make changes to our credit card practices and systems. We expect more
regulations and interpretations of the new rules to emerge and, depending on the nature and extent of the full impact from these rules, the
revenues and profitability of our Credit segment could be adversely affected.
In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in July 2010. It significantly restructures
regulatory oversight and other aspects of the financial industry, creates a new federal agency to supervise and enforce consumer lending
laws and regulations and expands state authority over consumer lending. Numerous regulations will be issued in the near future to
implement the requirements of this Act, which remain uncertain at this time. Depending on the nature and extent of these regulations, and the
enforcement approach of regulators under the new law, there could be an adverse impact to our Credit segment.
Item 1B. Unresolved Staff Comments.
None.
Nordstrom, Inc. and subsidiaries 9
Item 2. Properties.
The following table summarizes the number of retail stores owned or leased by us, and the percentage of total store square footage
represented by each listed category as of February 2, 2013:
Leased stores on leased land
Owned stores on leased land
Owned stores on owned land
Partly owned and partly leased store
Total
The following table summarizes our store opening activity during the last three years:
Fiscal year
Number of stores, beginning of year
Stores opened
Stores closed
Number of stores, end of year
Nordstrom
Nordstrom Rack and Other
Number of stores
% of total store
square footage
143
61
35
1
240
2011
204
22
(1)
225
117
108
34%
43%
22%
1%
100%
2010
184
20
—
204
115
89
2012
225
16
(1)
240
117
123
In 2012, we opened one Nordstrom full-line store (Salt Lake City, Utah), opened 15 Nordstrom Rack stores (Orange, California; Boise, Idaho;
Alpharetta, Georgia; Farmington, Connecticut; Temecula, California; Willow Grove, Pennsylvania; Manchester, Missouri; Vienna, Virginia;
San Diego, California; Huntington Beach, California; Phoenix, Arizona; San Antonio, Texas; Huntington, New York; Warwick, Rhode Island;
and Seattle, Washington) and relocated three Nordstrom Rack stores (Seattle, Washington; Long Island, New York; and White Plains,
New York).
To date in 2013, we have opened two Nordstrom Rack stores (Boston, Massachusetts and Upland, California). During the remainder of 2013,
we have announced the opening of 14 additional Nordstrom Rack stores (Ann Arbor, Michigan; Auburn Hills, Michigan; Birmingham,
Alabama; Columbia, Maryland; Portland, Maine; Washington, D.C.; Atlanta, Georgia; Cleveland, Ohio; Columbus, Ohio; Concord, California;
El Paso, Texas; Eugene, Oregon; Jacksonville, Florida; and Naples, Florida), the relocation of one Nordstrom full-line store (Glendale,
California) and the relocation of two Nordstrom Rack stores (Culver City, California and Honolulu, Hawaii).
We also own six merchandise distribution centers (Portland, Oregon; Dubuque, Iowa; Ontario, California; Newark, California; Upper
Marlboro, Maryland; and Gainesville, Florida) and we own one fulfillment center on leased land (Cedar Rapids, Iowa), all of which are utilized
by our Retail segment. HauteLook, which is also included in our Retail segment, leases two administrative offices (in Los Angeles, California
and New York, New York) and one fulfillment center (in Fontana, California). We lease an office building in Centennial, Colorado and one in
Scottsdale, Arizona, both for use by our Credit segment. Our administrative offices in Seattle, Washington are a combination of leased and
owned space. We also lease a data center in Centennial, Colorado.
10
The following table lists our retail store count and facility square footage by state as of February 2, 2013:
Retail stores by channel
Nordstrom Full-Line Stores
Nordstrom Rack and Other1
Total
State
Alaska
Arizona
California2
Colorado
Connecticut
Delaware
Florida2
Georgia
Hawaii
Idaho
Illinois
Indiana
Kansas
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Nevada
New Jersey
New York
North Carolina
Ohio
Oregon
Pennsylvania
Rhode Island
Tennessee
Texas
Utah
Virginia
Washington2
Washington D.C.
Total (31 states)
Count
1
Square Footage
(000's)
97
Count
—
Square Footage
(000's)
—
Count
1
Square Footage
(000's)
97
2
32
3
1
1
9
3
1
—
4
1
1
4
4
3
1
2
1
5
2
2
3
5
2
1
1
7
2
5
8
—
117
384
5,481
559
189
127
1,431
555
211
—
947
134
219
765
595
552
240
342
207
991
460
300
549
705
381
206
145
1,284
277
894
1,463
—
20,690
6
33
4
1
—
7
4
1
1
7
1
1
3
3
2
2
2
1
2
6
2
2
4
2
1
—
10
2
5
7
1
123
228
1,300
148
36
—
247
130
34
37
280
35
35
115
121
80
75
69
35
70
162
74
75
158
85
38
—
348
66
201
277
41
4,600
8
65
7
2
1
16
7
2
1
11
2
2
7
7
5
3
4
2
7
8
4
5
9
4
2
1
17
4
10
15
1
240
612
6,781
707
225
127
1,678
685
245
37
1,227
169
254
880
716
632
315
411
242
1,061
622
374
624
863
466
244
145
1,632
343
1,095
1,740
41
25,290
1 Other includes one Last Chance clearance store, two Jeffrey boutiques and one philanthropic treasure&bond store.
2 California, Washington and Florida had the highest square footage, with a combined 10,199 square feet, representing 40% of the total company square footage.
Nordstrom, Inc. and subsidiaries 11
Item 3. Legal Proceedings.
We are subject from time to time to various claims and lawsuits arising in the ordinary course of business including lawsuits alleging
violations of state and/or federal wage and hour and other employment laws, privacy and other consumer-based claims. Some of these
lawsuits purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some
may remain unresolved for several years. We believe the recorded reserves in our consolidated financial statements are adequate in light of
the probable and estimable liabilities. As of the date of this report, we do not believe any currently identified claim, proceeding or litigation,
either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters
are subject to inherent uncertainties, our view of them may change in the future.
Item 4. Mine Safety Disclosures.
None.
12
PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities.
MARKET, SHAREHOLDER AND DIVIDEND INFORMATION
Our common stock, without par value, is traded on the New York Stock Exchange under the symbol "JWN." The approximate number of
holders of common stock as of March 12, 2013 was 150,000, based upon the number of registered and beneficial shareholders, as well as
the number of employee shareholders in the Nordstrom 401(k) Plan and Profit Sharing Plan. On this date we had 195,891,451 shares of
common stock outstanding.
The high and low prices of our common stock and dividends declared for each quarter of 2012 and 2011 are presented in the table below:
Common Stock Price
2012
2011
Dividends per Share
High
$56.75
$57.75
$58.44
$58.40
$58.44
Low
$48.00
$46.27
$51.50
$50.94
$46.27
High
$48.70
$52.15
$53.35
$51.75
$53.35
Low
$40.03
$41.88
$37.28
$44.22
$37.28
2012
$0.27
$0.27
$0.27
$0.27
$1.08
2011
$0.23
$0.23
$0.23
$0.23
$0.92
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
SHARE REPURCHASES
Dollar and share amounts in millions, except per share amounts
Following is a summary of our fourth quarter share repurchases:
November 2012
(October 28, 2012 to
November 24, 2012)
December 2012
(November 25, 2012 to
December 29, 2012)
January 2013
(December 30, 2012 to
February 2, 2013)
Total Number
of Shares
(or Units)
Purchased
Average
Price Paid
Per Share
(or Unit)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that May
Yet Be Purchased Under
the Plans or Programs1
0.6
2.3
1.3
$54.99
$52.58
$54.69
0.6
2.3
1.3
$583
$463
$393
Total
1 In 2012, we completed the $750 repurchase program authorized by our Board of Directors in May 2011. In February 2012, our Board of Directors authorized a program (the
"2012 Program"), which allows for the repurchase of up to $800 of our common stock through February 1, 2014. As of February 2, 2013, there was $393 in remaining share
repurchase capacity under the 2012 Program. During 2012, we repurchased 14.0 shares for an aggregate purchase price of $717 in accordance with the 2012 Program.
Subsequent to year-end, in February 2013, our Board of Directors authorized a new program to repurchase up to $800 of our outstanding common stock, through March 1,
2015, in addition to the remaining amount available for repurchase under the 2012 program. The actual number and timing of future share repurchases, if any, will be subject
to market and economic conditions and applicable Securities and Exchange Commission rules.
$53.55
4.2
4.2
Nordstrom, Inc. and subsidiaries 13
STOCK PRICE PERFORMANCE
The following graph compares for each of the last five fiscal years, ending February 2, 2013, the cumulative total return of Nordstrom
common stock, Standard & Poor's Retail Index and Standard & Poor's 500 Index. The Retail Index is comprised of 33 retail companies,
including Nordstrom, representing an industry group of the Standard & Poor's 500 Index. The cumulative total return of Nordstrom common
stock assumes $100 invested on February 2, 2008 in Nordstrom common stock and assumes reinvestment of dividends.
End of fiscal year
Nordstrom common stock
Standard & Poor's Retail Index
Standard & Poor's 500 Index
2007
100
100
100
2008
33
61
59
2009
92
94
77
2010
110
118
91
2011
133
132
94
2012
153
165
108
14
Item 6. Selected Financial Data.
Dollars in millions except per square foot and per share amounts
The following selected financial data are derived from the audited consolidated financial statements and should be read in conjunction with
Item 1A: Risk Factors, Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and related notes included in Item 8: Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Fiscal year
Earnings Results
Net sales
Credit card revenues
Gross profit1
Selling, general and administrative ("SG&A") expenses:
Retail
Credit
Earnings before interest and income taxes ("EBIT")
Net earnings
Balance Sheet and Cash Flow Data
Cash and cash equivalents
Accounts receivable, net
Merchandise inventories
Current assets
Land, buildings and equipment, net
Total assets
Current liabilities
Long-term debt, including current portion
Shareholders' equity
Cash flow from operations
Performance Metrics
Same-store sales percentage change2
Gross profit % of net sales
Retail SG&A % of net sales
Total SG&A % of net sales
EBIT % of net sales
Return on shareholders' equity
Return on assets
Return on invested capital ("ROIC")3
Sales per square foot4
Ending inventory per square foot
Inventory turnover rate5
Per Share Information
Earnings per diluted share
Dividends declared per share
Book value per share
Store Information (at year-end)
Nordstrom full-line stores
Nordstrom Rack and other stores
Total square footage
2012
2011
$11,762
386
4,330
(3,166)
(205)
1,345
735
$1,285
2,129
1,360
5,081
2,579
8,089
2,226
3,131
1,913
1,110
7.3%
36.8%
26.9%
28.7%
11.4%
38.0%
8.9%
13.9%
$470
$53.77
5.37
$3.56
1.08
9.71
$10,497
380
3,905
(2,807)
(229)
1,249
683
$1,877
2,033
1,148
5,560
2,469
8,491
2,575
3,647
1,956
1,177
7.2%
37.2%
26.7%
28.9%
11.9%
34.3%
8.7%
13.3%
$431
$46.41
5.56
$3.14
0.92
9.42
2010
$9,310
390
3,413
(2,412)
(273)
1,118
613
$1,506
2,026
977
4,824
2,318
7,462
1,879
2,781
2,021
1,177
8.1%
36.7%
25.9%
28.8%
12.0%
34.1%
8.6%
13.6%
$397
$40.96
5.56
$2.75
0.76
9.27
2009
$8,258
369
2,930
(2,109)
(356)
834
441
$795
2,035
898
4,054
2,242
6,579
2,014
2,613
1,572
1,251
(4.2%)
35.5%
25.5%
29.8%
10.1%
31.7%
7.1%
12.1%
$368
$39.44
5.41
$2.01
0.64
7.22
2008
$8,272
301
2,855
(2,103)
(274)
779
401
$72
1,942
900
3,217
2,221
5,661
1,601
2,238
1,210
848
(9.0%)
34.5%
25.4%
28.7%
9.4%
34.5%
7.0%
11.6%
$388
$41.14
5.20
$1.83
0.64
5.62
117
123
25,290,000
117
108
24,745,000
115
89
23,838,000
112
72
22,773,000
109
60
21,876,000
1 Gross profit is calculated as net sales less cost of sales and related buying and occupancy costs (for all segments).
2 Same-store sales include sales from stores that have been open at least one full year at the beginning of the year. Fiscal year 2012 includes an extra week (the 53rd week) as
a result of our 4-5-4 retail reporting calendar. The 53rd week is not included in same-store sales calculations. We also include sales from our Nordstrom online store in same-
store sales because of the integration of our Nordstrom full-line stores and online store.
3 See Return on Invested Capital ("ROIC") (Non-GAAP financial measure) on page 26 for additional information and reconciliation to the most directly comparable GAAP
financial measure.
4 Sales per square foot is calculated as net sales divided by weighted-average square footage. Weighted-average square footage includes a percentage of year-end square
footage for new stores equal to the percentage of the year during which they were open.
5 Inventory turnover rate is calculated as annual cost of sales and related buying and occupancy costs (for all segments) divided by 4-quarter average inventory.
Nordstrom, Inc. and subsidiaries 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Dollar, share and square footage amounts in millions except percentages, per share and per square foot amounts
OVERVIEW
Nordstrom is a leading fashion specialty retailer offering high-quality apparel, shoes, cosmetics and accessories for women, men and
children. We offer a wide selection of brand name and private label merchandise through our various channels: 'Nordstrom' branded full-line
stores and online at www.nordstrom.com, 'Nordstrom Rack' off-price stores, 'Last Chance' clearance store, 'HauteLook' online private sale
subsidiary, 'Jeffrey' boutiques and our 'treasure&bond' philanthropic store. Our stores are located in 31 states throughout the United States.
In addition, we offer our customers a loyalty program along with a variety of payment products and services, including credit and debit cards.
Our 2012 results reflected the ongoing, consistent strength of our business. For the third consecutive year, we achieved double-digit growth
in net sales and earnings per diluted share, added over one billion dollars in net sales and delivered same-store sales growth of over 7%.
These accomplishments reflect the high level of execution across all channels and our ongoing investments in improving the customer
experience as we seek to enhance the merchandise offering, increase relevance with existing and new customers, and aggressively grow
our online capabilities.
E-commerce is our fastest-growing business. We continued to make investments to improve the experience online by expanding our
merchandise selection, enhancing the website and mobile experience with improvements to search, navigation and checkout, and increasing
the speed of fulfillment and delivery. These investments helped drive same-store sales growth of 37% in our Direct channel on top of last
year's 29% growth.
We also continue to grow through new opportunities to increase our market share. We announced plans for our initial entry into Canada,
beginning with four full-line stores and with the potential for a total of eight to 10 full-line stores and 15 to 20 Rack stores. In addition, we are
again increasing the pace of expansion of our Rack stores with plans to grow to over 230 stores by the end of 2016. We also announced
plans to open our first full-line store in Manhattan, which will increase our exposure within a premiere retail market.
Our strong financial position enables us to invest in our stores through expansion, remodels and other initiatives to improve the customer
experience. During 2012, we opened one Nordstrom full-line store, 15 Nordstrom Rack stores and relocated three Nordstrom Rack stores.
Increasingly, we are using technology as an enabler of service. As an example, we now have mobile point-of-sale devices at all of our full-line
and Rack stores to increase the speed at checkout and drive incremental volume. Additionally, mobile devices in our full-line stores have
virtually the same functionality as our cash registers, and we continue to make progress in creating a fully mobile store environment.
Our credit business also plays an important role in reaching new customers and strengthening existing customer relationships through our
Fashion Rewards program, payment products and our ability to serve customers directly through our wholly owned credit services. The
Fashion Rewards program contributes to our overall results, with members shopping more frequently and spending more on average than
non-members. In 2012, net sales from our members increased 23% over the prior year. With the launch of our enhanced program in early
2012, we opened over one million new accounts, and ended the year with 3.3 million active members, a 27% increase over last year. Our
overall credit card portfolio also remains healthy, with delinquency and write-off trends at pre-recession levels.
Our ongoing focus on the customer drives the investments we are making to take advantage of multiple growth opportunities. The
opportunities include Canada, Rack, e-commerce, Manhattan and other new full-line stores and provide a platform to deliver sustainable,
profitable growth. As our business and operating model evolves with our growth, we remain focused on our overall financial goals of
achieving high single-digit total sales growth and mid-teens Return on Invested Capital ("ROIC"), as these measures correlate strongly with
shareholder return.
RESULTS OF OPERATIONS
Our reportable segments are Retail and Credit. Our Retail segment includes our Nordstrom branded full-line stores and website, our
Nordstrom Rack stores, our Last Chance clearance store and our other retail channels including HauteLook, our Jeffrey stores and our
treasure&bond store. For purposes of discussion and analysis of our results of operations, we combine our Retail segment results with
revenues and expenses in the "Corporate/Other" column of our segment reporting footnote (collectively, the "Retail Business"). We analyze
our results of operations through earnings before interest and income taxes for our Retail Business and earnings before income taxes for
Credit, while interest expense and income taxes are discussed on a total company basis.
Similar to many other retailers, Nordstrom follows the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of
2012 (the "53rd week"). The analysis of our results of operations, liquidity and capital resources compares the 53 weeks in 2012 to the 52
weeks in 2011. However, the 53rd week is not included in same-store sales calculations. In 2012, the 53rd week contributed approximately
$0.04 to earnings per diluted share.
16
Retail Business
Summary
The following table summarizes the results of our Retail Business for the past three fiscal years:
Fiscal year
Net sales
Cost of sales and related buying and
occupancy costs
Gross profit
Selling, general and administrative expenses
Earnings before interest and income taxes
2012
2011
2010
Amount
% of net
sales
$11,762
100.0%
Amount
$10,497
% of net
sales
100.0%
Amount
$9,310
% of net
sales
100.0%
(7,318)
4,444
(3,166)
$1,278
(62.2%)
37.8%
(26.9%)
10.9%
(6,517)
3,980
(2,807)
$1,173
(62.1%)
37.9%
(26.7%)
11.2%
(5,831)
3,479
(2,412)
$1,067
(62.6%)
37.4%
(25.9%)
11.5%
Retail Business Net Sales
Fiscal year
Net sales by channel:
Nordstrom full-line stores
Direct
Nordstrom
Nordstrom Rack
Other retail1
Total Retail segment
Corporate/Other
Total net sales
Net sales increase
Same-store sales increase by channel:
Nordstrom full-line stores
Direct
Nordstrom
Nordstrom Rack
Total
Sales per square foot
4-wall sales per square foot2
Percentage of net sales by merchandise category:
Women’s apparel
Shoes
Men’s apparel
Women’s accessories
Cosmetics
Kids’ apparel
Other
Total
2012
$7,964
1,269
9,233
2,445
271
11,949
(187)
$11,762
12.1%
3.9%
37.1%
7.5%
7.4%
7.3%
$470
$417
31%
23%
16%
13%
11%
3%
3%
100%
2011
$7,513
913
8,426
2,045
185
10,656
(159)
$10,497
12.7%
6.0%
29.5%
8.2%
3.7%
7.2%
$431
$394
33%
23%
15%
12%
11%
3%
3%
100%
2010
$6,995
705
7,700
1,691
29
9,420
(110)
$9,310
12.7%
7.9%
25.1%
9.3%
0.7%
8.1%
$397
$372
34%
23%
15%
12%
10%
3%
3%
100%
1 Other retail includes our HauteLook online private sale subsidiary, our Jeffrey stores and our treasure&bond store.
2 4-wall sales per square foot is calculated as sales for Nordstrom full-line, Nordstrom Rack, Jeffrey and treasure&bond stores divided by their weighted-average square footage.
Weighted-average square footage includes a percentage of period-end square footage for new stores equal to the percentage of the period during which they were open.
Nordstrom, Inc. and subsidiaries 17
NET SALES – 2012 VS 2011
Our total net sales increase of 12.1% for 2012 was driven by the same-store sales increase of 7.3% and strong performances across all
channels. Our sales productivity continued to improve, reaching a high of $470 in sales per square foot in 2012 from increases in both our
stores and online. During the year, we opened one Nordstrom full-line store, 15 Nordstrom Rack stores and relocated three Nordstrom Rack
stores. These additions represented 1.5% of our total net sales for 2012, and increased our square footage by 2.2%. The 53rd week
contributed approximately $162 in additional net sales.
Nordstrom net sales for 2012 were $9,233, an increase of 9.6% compared with 2011, with same-store sales up 7.5%. Our sales growth was
due in large part to the ongoing, consistent strength of our business both in store and online. We enhanced our Fashion Rewards loyalty
program and expanded our relationship with our customers. At the same time, we made investments to improve the in-store, online and
mobile experience. Both the number of items sold and the average selling price increased in 2012 compared with 2011. Category highlights
included Handbags, Men's Shoes, Men's Apparel and Cosmetics. We also saw improvements in our Women's Apparel business in the
second half of the year.
Full-line net sales for 2012 were $7,964, an increase of 6.0% compared with 2011, with same-store sales up 3.9%. The top-performing
geographic regions for full-line stores for 2012 were the South and Midwest. The Direct channel continued to show strong sales growth
with net sales of $1,269, an increase of 39% compared with 2011, with same-store sales up 37% on a comparable 52-week basis. These
increases significantly outpaced our overall performance and are reflective of how customers are responding to our ongoing e-commerce
initiatives.
Nordstrom Rack net sales were $2,445, an increase of 20% compared with 2011, while same-store sales increased 7.4% for the year. Men's
Apparel, Shoes and Women's Apparel were the strongest performing categories for the year. Both the number of items sold and the average
selling price increased in 2012 compared with 2011.
NET SALES – 2011 VS 2010
Net sales for 2011 increased 12.7% compared with 2010, while same-store sales increased 7.2%. During 2011, we opened three Nordstrom
full-line stores, 18 Nordstrom Rack stores and one treasure&bond store, relocated two Nordstrom Rack stores and acquired HauteLook.
These additions represented 4.0% of our total net sales for 2011, and increased our square footage by 3.8%.
Nordstrom net sales for 2011 were $8,426, up 9.4% compared with 2010, with same-store sales up 8.2%. Our sales growth was driven by
our merchandising, inventory management and multi-channel initiatives as well as our efforts to build stronger relationships with customers
and to improve the shopping experience across all channels. Both the average selling price and the number of items sold increased in 2011
compared with 2010. Category highlights included Designer, Handbags and Shoes.
Full-line net sales for 2011 were $7,513, an increase of 7.4% compared with 2010, with same-store sales up 6.0%. The top-performing
geographic regions for full-line stores for 2011 were the South and Midwest. The Direct channel continued to show strong sales growth with
net sales of $913, an increase of 30% in 2011 compared with 2010.
Nordstrom Rack net sales were $2,045, up 21% compared with 2010, while same-store sales increased 3.7% for the year. Shoes, Dresses
and Accessories were the strongest performing categories for the year. Both the average selling price and the number of items sold
increased in 2011 compared with 2010.
18
Retail Business Gross Profit
Fiscal year
Gross profit1
Gross profit rate
Ending inventory per square foot
Inventory turnover rate2
2012
$4,444
37.8%
$53.77
5.37
2011
$3,980
37.9%
$46.41
5.56
2010
$3,479
37.4%
$40.96
5.56
1 Retailers do not uniformly record the costs of buying and occupancy and supply chain operations (freight, purchasing, receiving, distribution, etc.) between gross profit and
selling, general and administrative expense. As such, our gross profit and selling, general and administrative expenses and rates may not be comparable to other retailers'
expenses and rates.
2 Inventory turnover rate is calculated as annual cost of sales and related buying and occupancy costs (for all segments) divided by 4-quarter average inventory.
GROSS PROFIT – 2012 VS 2011
Retail gross profit increased $464 in 2012 compared with 2011 due to our strong sales performance, partially offset by an increase in
occupancy costs for our investments in new stores and remodeling of existing stores. Our gross profit rate decreased 13 basis points
compared with 2011 primarily due to accelerated Rack growth, which carries a lower gross profit rate relative to our other channels, and
overall occupancy costs that outpace sales in the early years following a store opening. With Rack's high sales productivity and return on
invested capital, as well as the availability of what we believe are numerous quality locations, we plan to continue to grow our Rack channel.
Our inventory turnover rate decreased to 5.37 times in 2012, from 5.56 times in 2011. This was primarily due to our increased investment in
pack and hold inventory at Nordstrom Rack, which involves the acquisition of merchandise from some of our top brands in advance of the
upcoming selling seasons in order to take advantage of strategic buying opportunities. We hold this inventory in our warehouses for six
months on average until the next selling season and it represents approximately 10% of our total inventory at the end of 2012 compared with
3% in 2011. On a per square foot basis, we ended the year with a 15.8% increase in our ending inventory on a 9.0% increase in sales
compared with 2011. The increase in ending inventory per square foot relative to the increase in sales per square foot is primarily due to
Rack's growth.
GROSS PROFIT – 2011 VS 2010
Retail gross profit increased $501 in 2011 compared with 2010 primarily due to higher sales and merchandise margin, partially offset by
increases in occupancy costs for stores opened during both 2011 and 2010. Our gross profit rate improved 54 basis points compared with
2010 primarily due to leveraging buying and occupancy costs on higher net sales. Our increase in ending inventory per square foot of 13.3%
on an 8.5% increase in sales per square foot is a result of our growth initiatives including expansion of our Rack business.
Retail Business Selling, General and Administrative Expenses
Fiscal year
Selling, general and administrative expenses
Selling, general and administrative rate
2012
$3,166
26.9%
2011
$2,807
26.7%
2010
$2,412
25.9%
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – 2012 VS 2011
Our Retail selling, general and administrative expenses ("Retail SG&A") increased $359 in 2012 compared with 2011. This increase reflects
the investments we made to improve the customer experience across all channels and specifically in our e-commerce business as we
expanded our capabilities and increased the speed of fulfillment and delivery. The increase also reflected higher sales volume and the
opening of 16 stores in 2012. Our Retail SG&A rate increased 18 basis points for 2012 compared with 2011 due to the increased
investments, partially offset by leverage on increased sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – 2011 VS 2010
Our Retail SG&A expenses increased $395 in 2011 compared with 2010. This increase reflects initiatives to improve the shopping
experience across all channels and specifically to grow our e-commerce business. The increase was also due in part to higher sales volume
and the opening of 22 stores in 2011. As a result, our Retail SG&A rate increased 84 basis points for 2011 compared with 2010. We
continued to leverage SG&A expense in our stores, with an improvement of approximately 35 basis points in 2011, compared with 2010.
Nordstrom, Inc. and subsidiaries 19
Credit Segment
The Nordstrom credit and debit card products are designed to strengthen customer relationships and grow retail sales by providing loyalty
benefits, valuable services and payment products. We believe that owning all aspects of our credit business allows us to build deeper
relationships with our customers by fully integrating our rewards program with our retail stores and providing better service, which in turn
fosters greater customer loyalty. Our cardholders tend to visit our stores more frequently and spend more with us than non-cardholders, and
we believe the Nordstrom Fashion Rewards® program helps drive sales in our Retail segment. Our Nordstrom private label credit and debit
cards can be used only in our Nordstrom full-line and Rack stores and on our website ("inside volume"), while our Nordstrom VISA cards also
may be used for purchases outside of Nordstrom ("outside volume"). Cardholders participate in the Nordstrom Fashion Rewards program
through which customers accumulate points based on their level of spending. Upon reaching a certain threshold, customers receive
Nordstrom Notes®, which can be redeemed for goods or services in our full-line stores, at Nordstrom Rack and online. Fashion Rewards
customers receive a credit for complimentary alterations and a personal triple points day, in addition to early access to sales events. With
increased spending, they can receive additional amounts of these benefits as well as access to exclusive fashion and shopping events.
The table below provides a detailed view of the operational results of our Credit segment, consistent with the segment disclosure provided in
the Notes to Consolidated Financial Statements. In order to better reflect the economic contribution of our credit and debit card program,
intercompany merchant fees are also included in the table below, which represents the estimated costs that would be incurred if our
customers used third-party cards.
Interest expense is assigned to the Credit segment in proportion to the amount of estimated debt and equity needed to fund our credit card
receivables. Based on our research, debt as a percentage of credit card receivables for other credit card companies ranges from 70% to
90%. As such, we believe a mix of 80% debt and 20% equity, as represented by the average credit card receivable investment metric below,
is appropriate.
Fiscal year
2012
2011
2010
% of average
credit card
receivables
Amount
18.6%
(1.2%)
17.3%
(5.5%)
(9.8%)
(15.3%)
2.0%
4.3%
6.3%
Credit card revenues
Interest expense
Net credit card income
Cost of sales and related buying and occupancy
costs – loyalty program
Selling, general and administrative expenses
Total expense
Credit segment earnings before income taxes, as
presented in segment disclosure
Intercompany merchant fees
Credit segment contribution, before income taxes
Credit and debit card volume:
Outside
Inside
Total volume
Average credit card receivables
Average credit card receivable investment1
Credit segment contribution2
$386
(26)
360
(114)
(205)
(319)
41
89
$130
$4,305
4,484
$8,789
$2,076
$415
19.4%
1 Assumes 80% of accounts receivable is funded with debt.
2 Net of tax, calculated as a percentage of our average credit card receivable investment.
% of average
credit card
receivables
18.6%
% of average
credit card
receivables
18.7%
Amount
$390
Amount
$380
(1.0%)
17.7%
(3.2%)
(13.1%)
(16.3%)
1.4%
2.8%
4.2%
(13)
367
(75)
(229)
(304)
63
71
$134
$4,101
3,596
$7,697
$2,047
$409
20.0%
(0.7%)
17.9%
(3.7%)
(11.2%)
(14.9%)
3.1%
3.5%
6.6%
(21)
369
(66)
(273)
(339)
30
58
$88
$3,838
2,953
$6,791
$2,088
$418
12.8%
20
Credit Card Revenues
Fiscal year
Finance charge revenue
Interchange — third party
Late fees and other revenue
Total credit card revenues
2012
$254
84
48
$386
2011
$251
82
47
$380
2010
$266
76
48
$390
Credit card revenues include finance charges, interchange fees, late fees and other revenue. Finance charges represent interest earned on
unpaid balances while interchange fees are earned from the use of Nordstrom VISA credit cards at merchants outside of Nordstrom. Late
fees are assessed when a credit card account becomes delinquent. We consider an account delinquent if the minimum payment is not
received by the payment due date.
CREDIT CARD REVENUES – 2012 VS 2011
Credit card revenues increased $6 in 2012 compared with 2011 primarily due to an extra week (the 53rd week) of revenue in 2012 as a result
of our 4-5-4 retail reporting calendar. The increase is also due to growth in total volume that was offset by continued improvements in
customer payment rates. Our average credit card receivable balance in 2012 was $2,076, an increase of $29, or 1.4%, from 2011.
CREDIT CARD REVENUES – 2011 VS 2010
Credit card revenues decreased $10 in 2011 compared with 2010 primarily due to a decrease in finance charge revenue resulting from
continued improvements in customer payment rates that drove lower finance charge yields and slightly lower receivables. Our average credit
card receivable balance in 2011 was $2,047, a decrease of $41, or 1.9%, from 2010. These decreases were partially offset by an increase in
interchange revenue due to increased use of our Nordstrom VISA credit cards at third parties.
Credit Segment Interest Expense
Interest expense increased to $26 in 2012 from $13 in 2011 and $21 in 2010 primarily due to higher average interest rates applicable to the
Credit segment.
Credit Segment Cost of Sales and Related Buying and Occupancy Costs
COST OF SALES AND RELATED BUYING AND OCCUPANCY COSTS – 2012 VS 2011
Cost of sales and related buying and occupancy costs, which include the estimated cost of Nordstrom Notes that we expect to issue and
ultimately be redeemed and complimentary alterations under our Fashion Rewards program, increased to $114 in 2012 compared with $75 in
2011. The increase was due to enhancements to our Fashion Rewards program and increases in Nordstrom credit and debit card volumes of
14.2%. We provide the Fashion Rewards benefits to our members, as participation in the program enhances customer loyalty and drives
incremental sales in our stores and online.
COST OF SALES AND RELATED BUYING AND OCCUPANCY COSTS – 2011 VS 2010
Cost of sales and related buying and occupancy costs increased to $75 in 2011 compared with $66 in 2010. The increase was due to
additional expenses related to the Fashion Rewards program as a result of a 13.3% increase in volume on Nordstrom credit and debit cards
and increased utilization of program benefits.
Credit Segment Selling, General and Administrative Expenses
Fiscal year
Operational and marketing expenses
Bad debt provision
Total Credit selling, general and administrative expenses
2012
$149
56
$205
2011
$128
101
$229
2010
$124
149
$273
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – 2012 VS 2011
Total Credit SG&A decreased $24 in 2012 compared with 2011, due to lower bad debt expense, partially offset by increases in operational
and marketing expenses. The decrease in bad debt expense reflects continued improvement in our portfolio delinquencies and write-off
results, which are further discussed below. The increase in operational and marketing expenses was primarily driven by enhancements in our
Fashion Rewards benefits.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES – 2011 VS 2010
Total Credit SG&A decreased $44 in 2011 compared with 2010, due primarily to lower bad debt expense. The decrease in bad debt expense
reflected continued improvement in our portfolio trends, the overall performance of our credit portfolio and economic trends.
Nordstrom, Inc. and subsidiaries 21
Allowance for Credit Losses and Credit Trends
The following table illustrates activity in the allowance for credit losses:
Fiscal year
Allowance at beginning of year
Bad debt provision
Write-offs
Recoveries
Allowance at end of year
Net write-offs as a percentage of average credit card receivables
30+ days delinquent as a percentage of ending credit card receivables
Allowance as a percentage of ending credit card receivables
2012
$115
56
(111)
25
$85
4.1%
1.9%
4.0%
2011
$145
101
(153)
22
$115
6.3%
2.6%
5.5%
2010
$190
149
(211)
17
$145
9.2%
3.0%
6.9%
CREDIT TRENDS
During 2012, our delinquency and net write-off results continued the improvements that began in 2010. Net write-offs in 2012 were $86, a
significant improvement over 2011 of $131 and 2010 of $194. As delinquencies improved in both 2012 and 2011, and combined with the net
write-off results, we reduced our allowance for credit losses by $30 in both 2012 and 2011.
CREDIT QUALITY
The quality of our credit card receivables at any time reflects, among other factors, general economic conditions, the creditworthiness of our
cardholders and the success of our account management and collection activities. In general, credit quality tends to decline, and the risk of
credit losses tends to increase, during periods of deteriorating economic conditions. Through our underwriting and risk management
standards and practices, we seek to maintain a high-quality cardholder portfolio, thereby mitigating our exposure to credit losses. As of
February 2, 2013, 78.3% of our credit card receivables were from cardholders with FICO scores of 660 or above (generally considered
"prime" according to industry standards) compared with 78.1% as of January 28, 2012.
Intercompany Merchant Fees
Intercompany merchant fees represent the estimated costs that would be incurred if our customers used third-party cards in our Nordstrom
stores and online. In 2012, these fees increased to $89 or 4.3% of average credit card receivables from $71 or 3.5% in 2011. This was
primarily driven by the increased use of our credit and debit cards in store and online, as reflected by an increase in inside volume as a
percent of total volume from 46.7% in 2011 to 51.0% in 2012.
Total Company Results
Interest Expense, Net
Fiscal year
Interest on long-term debt and short-term borrowings
Less:
Interest income
Capitalized interest
Interest expense, net
2012
$167
(2)
(5)
$160
2011
$139
(2)
(7)
$130
2010
$133
(1)
(5)
$127
INTEREST EXPENSE, NET – 2012 VS 2011
Interest expense, net increased $30 in 2012 compared with 2011 due to higher average interest rates and higher average debt balances.
INTEREST EXPENSE, NET – 2011 VS 2010
Interest expense, net increased $3 in 2011 compared with 2010 due to higher debt balances, partially offset by lower average interest rates.
22
Income Tax Expense
Fiscal year
Income tax expense
Effective tax rate
2012
$450
38.0%
The following table illustrates the components of our effective tax rate for 2012, 2011 and 2010:
Fiscal year
Statutory rate
State and local income taxes, net of federal income taxes
Non-taxable acquisition-related items
Other, net
Effective tax rate
2012
35.0%
3.6
—
(0.6)
38.0%
2011
$436
39.0%
2011
35.0%
3.6
0.6
(0.2)
39.0%
2010
$378
38.2%
2010
35.0%
3.4
—
(0.2)
38.2%
INCOME TAX EXPENSE
The decrease in the effective tax rate for 2012 compared with 2011 and the increase in 2011 compared with 2010 was primarily due to the
impact of non-taxable HauteLook acquisition-related expenses in 2011, including a goodwill impairment.
Fourth Quarter Results
Quarter ended
Net sales
Credit card revenues
Gross profit
Gross profit (% of net sales)
Selling, general and administrative ("SG&A") expenses:
Retail
Retail SG&A (% of net sales)
Credit
Net earnings
Earnings per diluted share
February 2, 2013
$3,596
106
1,357
37.8%
(912)
25.4%
(53)
284
$1.40
January 28, 2012
$3,169
97
1,196
37.7%
(818)
25.8%
(58)
236
$1.11
Nordstrom's fourth quarter performance was consistent with the strong trends the company experienced throughout 2012. Net earnings for
the fourth quarter of 2012 were $284, or $1.40 per diluted share, compared with $236, or $1.11 per diluted share, in 2011. The 53rd week
contributed approximately $0.04 to earnings per diluted share in 2012.
Nordstrom, Inc. and subsidiaries 23
NET SALES
The total net sales increase for the fourth quarter of 13.5% was driven by the same-store sales increase of 6.3% and the impact of the 53rd
week, which contributed approximately $162 in additional net sales.
Nordstrom net sales for the fourth quarter of 2012 increased $273, or 10.5% compared with the same period in 2011, with an increase in
same-store sales of 6.1%. Both the number of items sold and the average selling price of our merchandise increased for the fourth quarter of
2012, compared with the same period last year. Category highlights for the quarter were Men's Apparel, Cosmetics, Kids' Apparel and
Women's Apparel.
Full-line net sales for the quarter increased $147, or 6.6% compared with the same period in 2011, with an increase in same-store sales of
2.2%. The top-performing geographic regions for full-line stores for the quarter were the South and Midwest. Direct increased same-store
sales 31% in the fourth quarter on top of last year's 35% increase for the same period. Direct sales growth continues to outpace the overall
Company, reflecting ongoing initiatives to improve the customer experience online.
Nordstrom Rack net sales for the quarter increased $131, or 23%, primarily from opening 15 new Rack stores in 2012 and 18 in 2011, while
same-store sales increased 7.1% compared with the fourth quarter of 2011. Both the average selling price of Nordstrom Rack merchandise
and the number of items sold increased for the quarter, compared with the same period in the prior year. Men's Apparel and Shoes were the
leading categories for Nordstrom Rack.
GROSS PROFIT
Our total company gross profit rate was flat compared with the same period in the prior year. Markdown improvements were offset by higher
expenses associated with our enhanced Fashion Rewards program, which generated incremental sales and attracted new members. Our
ending inventory per square foot increased 15.8% on an 11.1% increase in sales per square foot compared with the fourth quarter of 2011.
The increase in ending inventory per square foot relative to the increase in sales per square foot is primarily due to our increased investment
in pack and hold inventory associated with Rack's growth.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for our Retail Business increased $94 compared with last year's fourth quarter. The increase
was primarily attributable to higher sales volume and the opening of 16 new stores since the fourth quarter of 2011. The increase also
reflected our initiatives to improve the customer experience across all channels, including higher planned fulfillment expenses. Our Retail
SG&A rate decreased 45 basis points, due to leverage on increased sales, partially offset by increases in fulfillment costs associated with
improving the speed of delivery for shipped sales.
In the fourth quarter, selling, general and administrative expenses for our Credit segment were $53, down from $58 in 2011. The
decrease was primarily driven by lower bad debt expense resulting from continued improvements in delinquencies and write-off results
within our portfolio.
For further information on our quarterly results in 2012 and 2011, refer to Note 17: Selected Quarterly Data in the Notes to Consolidated
Financial Statements in Item 8: Financial Statements and Supplementary Data.
24
2013 Outlook
Our expectations for 2013, which are shown in comparison to the 53-week fiscal 2012 where applicable, are as follows:
Total sales
Same-store sales1
Credit card revenues
Gross profit rate2
Selling, general and administrative expenses:
Retail (% of net sales)
Credit
Interest expense, net
Effective tax rate
Earnings per diluted share3
Diluted shares outstanding3
4.5 to 6.5 percent increase
3.5 to 5.5 percent increase
$0 to $5 increase
10 to 30 basis point decrease
10 to 30 basis point decrease
$20 to $30 increase
$5 decrease
39.0 percent
$3.65 to $3.80
Approximately 203
1 Beginning in 2013, HauteLook will be included in same-store sales. 2013 same-store sales are compared with the first 52 weeks of 2012.
2 Includes both our Retail gross profit and the cost of our loyalty program, which is recorded in our Credit segment, as a percentage of net sales.
3 This outlook does not include the impact of any future share repurchases.
To date in 2013, we have opened two Nordstrom Rack stores. We plan to open more than 20 Nordstrom Rack stores (of which 16 have been
formally announced) and relocate one Nordstrom full-line store and two Nordstrom Rack stores during 2013. The announced store openings
will increase our retail square footage by approximately 2.2%.
Included in our guidance are upfront infrastructure expenses for Canada, as well as organizational and incremental pre-opening expenses
related to Rack's store expansion. In 2013, we expect these costs to be approximately $20 to $25.
We expect our gross profit rate to decrease approximately 10 to 30 basis points. The decrease is expected as a result of an increasing mix of
Nordstrom Rack stores and continued growth in our Fashion Rewards program.
The decrease in our Retail SG&A rate relates to our expectation of leverage on higher sales.
For our Credit segment, we expect credit card revenues to remain relatively consistent with 2012 and Credit SG&A expenses to increase $20
to $30 when compared with 2012 results given the $30 reduction in the allowance for credit losses recognized in 2012, with none expected
for 2013.
Nordstrom, Inc. and subsidiaries 25
Return on Invested Capital ("ROIC") (Non-GAAP financial measure)
We define ROIC as follows:
ROIC =
Net Operating Profit After Taxes
Average Invested Capital
For the 12 fiscal months ended February 2, 2013, our ROIC increased to 13.9% compared with 13.3% for the 12 fiscal months ended
January 28, 2012. Our ROIC increased compared with the prior year primarily due to an increase in our earnings before interest and income
tax expense.
We believe that ROIC is a useful financial measure for investors in evaluating our operating performance. When analyzed in conjunction with
our net earnings and total assets and compared with return on assets (net earnings divided by average total assets), it provides investors
with a useful tool to evaluate our ongoing operations and our management of assets from period to period. ROIC is one of our key financial
metrics, and we also incorporate it into our executive incentive measures. We believe that overall performance as measured by ROIC
correlates directly to shareholders' return over the long term. ROIC is not a measure of financial performance under GAAP, should not be
considered a substitute for return on assets, net earnings or total assets as determined in accordance with GAAP and may not be
comparable with similarly titled measures reported by other companies. The closest measure calculated using GAAP amounts is return on
assets, which increased to 8.9% from 8.7% for the 12 fiscal months ended February 2, 2013, compared with the 12 fiscal months ended
January 28, 2012. The following is a comparison of return on assets to ROIC:
Net earnings
Add: income tax expense
Add: interest expense
Earnings before interest and income tax
expense
Add: rent expense
Less: estimated depreciation on
capitalized operating leases1
Net operating profit
Estimated income tax expense2
Net operating profit after tax
Average total assets3
Less: average non-interest-bearing
current liabilities4
Less: average deferred property
incentives3
Add: average estimated asset base of
capitalized operating leases5
Average invested capital
Return on assets
February 2, 2013
$735
450
162
1,347
105
(56)
1,396
(530)
$866
$8,274
(2,262)
(494)
724
$6,242
8.9%
12 Fiscal months ended
January 28, 2012
$683
January 29, 2011
$613
January 30, 2010
$441
January 31, 2009
$401
436
132
1,251
78
(42)
1,287
(501)
$786
$7,890
(2,041)
(504)
555
$5,900
378
128
1,119
62
(32)
1,149
(439)
$710
$7,091
(1,796)
(487)
425
$5,233
255
138
834
43
(23)
854
(313)
$541
$6,197
(1,562)
(462)
311
$4,484
247
131
779
37
(19)
797
(303)
$494
$5,768
(1,447)
(400)
322
$4,243
8.7%
8.6%
7.1%
7.0%
ROIC
1 Capitalized operating leases is our best estimate of the asset base we would record for our leases that are classified as operating if they had met the criteria for a capital lease,
13.9%
11.6%
13.3%
13.6%
12.1%
or we purchased the property. Asset base is calculated as described in footnote 5 below.
2 Based upon our effective tax rate multiplied by the net operating profit for the 12 fiscal months ended February 2, 2013, January 28, 2012, January 29, 2011, January 30, 2010
and January 31, 2009.
3 Based upon the trailing 12-month average.
4 Based upon the trailing 12-month average for accounts payable, accrued salaries, wages and related benefits, and other current liabilities.
5 Based upon the trailing 12-month average of the monthly asset base, which is calculated as the trailing 12-months rent expense multiplied by eight. The multiple of eight times
rent expense is a commonly used method of estimating the asset base we would record for our capitalized operating leases described in footnote 1.
26
LIQUIDITY AND CAPITAL RESOURCES
We maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to maintain appropriate levels of short-term
borrowings. We believe that our operating cash flows, available credit facilities and potential future borrowings are sufficient to finance our
cash requirements for the next 12 months and beyond.
Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial position, manage
refinancing risk and allow flexibility for strategic initiatives. We regularly assess our debt and leverage levels, capital expenditure
requirements, debt service payments, dividend payouts, potential share repurchases and other future investments. We believe that as of
February 2, 2013, our existing cash and cash equivalents on-hand of $1,285, operating cash flows of $1,110, available credit facilities of
$900 and potential future borrowings will be sufficient to fund these scheduled future payments and potential long-term initiatives.
Operating Activities
Net cash provided by operating activities was $1,110 in 2012 and $1,177 in 2011. The majority of our operating cash inflows are derived from
sales. We also receive cash payments for property incentives from developers. Our operating cash outflows generally consist of payments to
our merchandise vendors (net of vendor allowances), payments to our employees for wages, salaries and other employee benefits and
payments to our landlords for rent. Operating cash outflows also include payments for income taxes and interest payments on our short-term
and long-term borrowings.
Cash provided by operating activities decreased in 2012 compared with 2011, with higher earnings offset by increased inventory purchases
in conjunction with growth in sales and fewer property incentives received from developers.
In 2013, we expect our operating cash flows to increase as a result of higher sales and earnings with less growth in inventory.
Investing Activities
Net cash used in investing activities was $369 in 2012 and $728 in 2011. Our investing cash flows primarily consist of capital expenditures,
changes in restricted cash accumulated for debt maturities and changes in credit card receivables associated with cardholder purchases
outside of Nordstrom using our Nordstrom VISA credit cards.
CAPITAL EXPENDITURES
Our capital expenditures over the last three years totaled $1,423, with $513 in 2012, $511 in 2011 and $399 in 2010. Capital expenditures
included investments in new stores, relocations and remodels and information technology improvements.
Capital expenditures remained flat in 2012 compared with 2011 as increased spending on technology, e-commerce and remodels was offset
by a decrease in new stores. The following table summarizes our store count and square footage activity:
Fiscal year
Total, beginning of year
Store openings:
Nordstrom full-line stores
Nordstrom Rack and other stores
Closed stores
Total, end of year
Store count
Square footage
2012
225
1
15
(1)
240
2011
204
3
19
(1)
225
2010
184
3
17
—
204
2012
24.7
0.1
0.6
(0.1)
25.3
2011
23.8
0.4
0.7
(0.2)
24.7
2010
22.8
0.4
0.6
—
23.8
We relocated three Nordstrom Rack stores in 2012, compared with two Nordstrom Rack stores in 2011. Our 2012 store openings and
relocations increased our square footage by 2.2%.
To date in 2013, we have opened two Nordstrom Rack stores. We plan to open more than 20 Nordstrom Rack stores (of which 16 have been
formally announced) and relocate one Nordstrom full-line store and two Nordstrom Rack stores during 2013. The announced store openings
will increase our retail square footage by approximately 2.2%.
Nordstrom, Inc. and subsidiaries 27
We received property incentives from our developers of $58 in 2012, $78 in 2011 and $95 in 2010. These incentives are included in our cash
provided by operations in our consolidated statements of cash flows. However, operationally we view these as an offset to our capital
expenditures. Our capital expenditure percentages, net of property incentives, by category are summarized as follows:
Fiscal year
Category and expenditure percentage:
New store openings, relocations and remodels
Information technology
Other
Total
2012
54%
27%
19%
100%
2011
62%
20%
18%
100%
2010
67%
15%
18%
100%
Other capital expenditures consist of ongoing improvements to our stores in the ordinary course of business and expenditures related to
various growth initiatives.
We expect to significantly increase our capital expenditures, net of property incentives, over the next five years to approximately $3,700,
compared with $1,900 over the previous five years. We plan to spend approximately $750 to $790 in 2013 compared with $455 in 2012, with
the increase due to new Rack and full-line stores, improvements to e-commerce delivery and fulfillment initiatives and our planned Manhattan
store development. Over these next five years, we expect that approximately 55% of our net capital expenditures will be for new store
openings, relocations, remodels and other with an additional 20% for entry into Canada and Manhattan, and 25% for e-commerce and
information technology. We believe that we have the capacity for additional capital investments should opportunities arise.
CHANGE IN RESTRICTED CASH
In connection with the April 2012 maturity of our Series 2007-2 Class A & B Notes ("the Notes") totaling $500, we began making required
monthly cash deposits of $100 into a restricted account in December 2011 until we accumulated $500 by April 2012 to retire the Notes. As of
January 28, 2012, we had accumulated $200, which was recorded as cash paid into our restricted cash account and included in our
consolidated balance sheet in prepaid expenses and other in 2011. During the first quarter of 2012, the net amount withdrawn from restricted
cash of $200 was recorded as cash received from investing activities.
CHANGE IN CREDIT CARD RECEIVABLES ORIGINATED AT THIRD PARTIES
The Nordstrom VISA credit cards allow our customers to make purchases at merchants outside of our stores and accumulate points for our
Nordstrom Fashion Rewards program. In 2012, the change in credit card receivables from customers' third-party purchases using their
Nordstrom VISA credit cards increased to $42, compared with $7 in 2011, as a result of increased volume partially offset by improved
payment rates.
Financing Activities
Net cash used in financing activities was $1,333 in 2012 compared with $78 in 2011. Our financing activities include our short-term and long-
term borrowing activity, repurchases of common stock and payment of dividends.
SHORT-TERM AND LONG-TERM BORROWING ACTIVITY
We retired our $500 securitized Series 2007-2 Class A & B Notes upon maturity in April 2012 using accumulated restricted cash described in
Investing Activities above. We had no short-term borrowings and no amounts outstanding on our revolving line of credit during the year.
During 2011, we issued $500 of senior unsecured notes at 4.00%, due October 2021. After deducting the original issue discount of $1, net
proceeds from the offering were $499. Additionally, we issued $325 Series 2011-1 Class A Notes at 2.28%, due October 2016.
Also during 2011, we received proceeds of $72 from the sale of our interest rate swap agreements (collectively, the "swap") with a $650
notional amount maturing in 2018. Under the swap, we received a fixed rate of 6.25% and paid a variable rate based on one-month LIBOR
plus a margin of 2.9%. As of February 2, 2013, the accumulated adjustment to our long-term debt was $60, which will be amortized as a
reduction of interest expense over the remaining life of the related debt. See Note 1: Nature of Operations and Summary of Significant
Accounting Policies in Item 8: Financial Statements and Supplementary Data for additional information related to our swap.
SHARE REPURCHASES
In 2012, we completed the $750 repurchase program authorized by our Board of Directors in May 2011. In February 2012, our Board of
Directors authorized another program (the "2012 Program"), which allows for the repurchase of up to $800 of our common stock through
February 1, 2014. As of February 2, 2013, there was $393 in remaining share repurchase capacity under the 2012 Program. During 2012, we
repurchased 14.0 shares of our common stock for an aggregate purchase price of $717. Subsequent to year-end, in February 2013, our
Board of Directors authorized a new program to repurchase up to $800 of our outstanding common stock, through March 1, 2015, in addition
to the remaining amount available for repurchase under the 2012 program. The actual number and timing of future share repurchases, if any,
will be subject to market and economic conditions and applicable Securities and Exchange Commission rules.
28
DIVIDENDS
In 2012, we paid dividends of $220, or $1.08 per share, compared with $197, or $0.92 per share, in 2011. During the first quarter of 2012, we
increased our quarterly dividend from $0.23 per share to $0.27 per share. In determining the amount of dividends to pay, we analyze our
dividend payout ratio and dividend yield, while taking into consideration our current and projected operating performance and liquidity. We
target a 25% to 30% dividend payout ratio, which is calculated as our dividend payments divided by net earnings.
In February 2013, we declared a quarterly dividend of $0.30 per share, increased from $0.27 per share in 2012.
Free Cash Flow (Non-GAAP financial measure)
We define Free Cash Flow as:
Free Cash Flow = Net Cash Provided by Operating Activities – Capital Expenditures – Cash Dividends Paid +/– Change in Credit
Card Receivables Originated at Third Parties +/– Change in Cash Book Overdrafts
Free Cash Flow is one of our key liquidity measures, and in conjunction with GAAP measures, provides us with a meaningful analysis of our
cash flows. We believe that our ability to generate cash is best analyzed using this measure. Free Cash Flow is not a measure of liquidity
under GAAP and should not be considered a substitute for operating cash flows as determined in accordance with GAAP. In addition, Free
Cash Flow does have limitations:
• Free Cash Flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to
fund our cash needs; and
• Other companies in our industry may calculate Free Cash Flow differently than we do, limiting its usefulness as a comparative
measure.
To compensate for these limitations, we analyze Free Cash Flow in conjunction with other GAAP financial and performance measures
impacting liquidity, including operating cash flows. The closest GAAP measure calculated using GAAP amounts is net cash provided by
operating activities, which was $1,110 and $1,177 for the years ended February 2, 2013 and January 28, 2012. The following is a
reconciliation of our net cash provided by operating activities and Free Cash Flow:
Fiscal year
Net cash provided by operating activities
Less: capital expenditures
Less: cash dividends paid
Less: change in credit card receivables originated at third parties
Add (Less): change in cash book overdrafts
Free Cash Flow
Net cash used in investing activities
Net cash used in financing activities
2012
$1,110
(513)
(220)
(42)
5
$340
($369)
($1,333)
2011
$1,177
(511)
(197)
(7)
(30)
$432
($728)
($78)
Credit Capacity and Commitments
As of February 2, 2013, we had total short-term borrowing capacity available for general corporate purposes of $800. Of the total capacity,
we had $600 under our commercial paper program, which is backed by our unsecured revolving credit facility ("revolver") that expires in June
2016, and $200 under our 2007-A Variable Funding Note ("2007-A VFN") that expires in January 2014.
Under the terms of our $600 revolver, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is
available for working capital, capital expenditures and general corporate purposes, including liquidity support for our commercial paper
program. We have the option to increase the revolving commitment by up to $100, to a total of $700, provided that we obtain written consent
from the lenders. During 2012, we had no borrowings under our revolver.
Our $600 commercial paper program allows us to use the proceeds to fund operating cash requirements. Under the terms of the commercial
paper agreement, we pay a rate of interest based on, among other factors, the maturity of the issuance and market conditions. The issuance
of commercial paper has the effect, while it is outstanding, of reducing borrowing capacity under our revolver by an amount equal to the
principal amount of commercial paper. During 2012, we had no issuances under our commercial paper program.
Nordstrom, Inc. and subsidiaries 29
The 2007-A VFN has a capacity of $200 and is backed by all of the Nordstrom private label card receivables and a 90% interest in the co-
branded Nordstrom VISA credit card receivables. Borrowings under the 2007-A VFN incur interest based upon one-month LIBOR plus 35
basis points. We pay a commitment fee for the facility based on the size of the commitment. During 2012, we had no borrowings against
this facility.
Our wholly owned federal savings bank, Nordstrom fsb, also maintains a variable funding facility with a short-term credit capacity of $100.
This facility is backed by the remaining 10% interest in the Nordstrom VISA credit card receivables and is available, if needed, to provide
liquidity support to Nordstrom fsb. Borrowings under the facility incur interest at an agreed upon rate with investors in the facility. During
2012, Nordstrom fsb had no borrowings against this facility.
We have a registration statement on file with the Securities and Exchange Commission using a “shelf” registration process. Under this shelf
registration process, we may offer and sell, from time to time, any combination of the securities described in a prospectus to the registration
statement, including registered debt, provided we maintain Well-known Seasoned Issuer (WKSI) status.
We maintain trade and standby letters of credit to facilitate international payments. As of February 2, 2013, we have $8 available under a
trade letter of credit, with $2 outstanding. We also hold a $15 standby letter of credit, with $1 outstanding under this facility at the end of
the year.
Impact of Credit Ratings
Under the terms of our $600 revolver, any borrowings we may enter into will accrue interest for Euro-Dollar Rate Loans at a floating rate tied
to LIBOR and for Base Rate Loans at the highest of: (i) the Euro-Dollar rate plus 100 basis points, (ii) the federal funds rate plus 50 basis
points and (iii) the prime rate.
The rate depends upon the type of borrowing incurred, plus in each case an applicable margin. This applicable margin varies depending
upon the credit ratings assigned to our long-term unsecured debt. At the time of this report, our long-term unsecured debt ratings, outlook
and resulting applicable margin were as follows:
Moody's
Standard & Poor's
Euro-Dollar Rate Loan
Base Rate Loan
Credit Ratings
Baa1
A-
Base Interest
Rate
LIBOR
various
Outlook
Stable
Stable
Applicable
Margin
1.125%
0.125%
Should the ratings assigned to our long-term unsecured debt improve, the applicable margin associated with any such borrowings may
decrease, resulting in a slightly lower cost of capital under this facility. Should the ratings assigned to our long-term unsecured debt worsen,
the applicable margin associated with our borrowings may increase, resulting in a slightly higher cost of capital under this facility.
Debt Covenants
The revolver requires that we maintain a leverage ratio, defined as Adjusted Debt to Earnings before Interest, Income Taxes, Depreciation,
Amortization and Rent ("EBITDAR"), of less than four times (see the following additional discussion of Adjusted Debt to EBITDAR).
As of February 2, 2013 and January 28, 2012, we were in compliance with this covenant. We will continue to monitor this covenant to ensure
that we make any necessary adjustments to our plans, and we believe that we will remain in compliance with this covenant during 2013.
30
Adjusted Debt to EBITDAR (Non-GAAP financial measure)
Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe that our debt levels are best analyzed using this measure. Our
current goal is to manage debt levels to maintain an investment-grade credit rating as well as operate with an efficient capital structure for our
size, growth plans and industry. Investment-grade credit ratings are important to maintaining access to a variety of short-term and long-term
sources of funding, and we rely on these funding sources to continue to grow our business. We believe a higher ratio, among other factors,
could result in rating agency downgrades. In contrast, we believe a lower ratio would result in a higher cost of capital and could negatively
impact shareholder returns. As of February 2, 2013, our Adjusted Debt to EBITDAR was 2.1 compared with 2.4 as of January 28, 2012. The
decrease was primarily the result of a reduction in debt and an increase in earnings before interest and income taxes for the 12 months
ended February 2, 2013, compared with the 12 months ended January 28, 2012.
Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should not be considered a substitute for debt to net
earnings, net earnings or debt as determined in accordance with GAAP. In addition, Adjusted Debt to EBITDAR does have limitations:
• Adjusted Debt is not exact, but rather our best estimate of the total company debt we would hold if we had purchased the property
and issued debt associated with our operating leases;
• EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments,
including leases, or the cash requirements necessary to pay interest and principal on our debt; and
• Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a
comparative measure.
To compensate for these limitations, we analyze Adjusted Debt to EBITDAR in conjunction with other GAAP financial and performance
measures impacting liquidity, including operating cash flows, capital spending and net earnings. The closest measure calculated using GAAP
amounts is debt to net earnings, which was 4.3 and 5.3 for 2012 and 2011. The following is a comparison of debt to net earnings and
Adjusted Debt to EBITDAR:
Debt
Add: rent expense x 82
Less: fair value hedge adjustment included in long-term debt
Adjusted Debt
Net earnings
Add: income tax expense
Add: interest expense, net
Earnings before interest and income taxes
Add: depreciation and amortization expenses
Add: rent expense
Add: non-cash acquisition-related charges
EBITDAR
Debt to Net Earnings
20121
$3,131
843
(60)
$3,914
735
450
160
1,345
429
105
10
$1,889
4.3
20111
$3,647
627
(72)
$4,202
683
436
130
1,249
371
78
21
$1,719
5.3
Adjusted Debt to EBITDAR
1 The components of Adjusted Debt are as of February 2, 2013 and January 28, 2012, while the components of EBITDAR are for the 12 months ended February 2, 2013 and
2.1
2.4
January 28, 2012.
2 The multiple of eight times rent expense used to calculate Adjusted Debt is a commonly used method of estimating the debt we would record for our leases that are classified
as operating if they had met the criteria for a capital lease, or we had purchased the property.
Nordstrom, Inc. and subsidiaries 31
Contractual Obligations
The following table summarizes our contractual obligations and the expected effect on our liquidity and cash flows as of February 2, 2013.
We expect to fund these commitments primarily with operating cash flows generated in the normal course of business and credit available to
us under existing and potential future facilities.
Long-term debt
Capital lease obligations
Operating leases
Purchase obligations
Other long-term liabilities
Total
Total
$4,628
10
1,619
1,901
286
$8,444
Less than
1 year
$173
2
153
1,429
—
$1,757
1 – 3 years
$702
3 – 5 years
$606
4
317
191
51
3
299
120
33
More than
5 years
$3,147
1
850
161
202
$1,265
$1,061
$4,361
Included in the required debt repayments disclosed above are estimated total interest payments of $1,555 as of February 2, 2013, payable
over the remaining life of the debt.
The capital and operating lease obligations in the table above do not include payments for operating expenses that are required by most of
our lease agreements. Such expenses, which include common area charges, real estate taxes and other executory costs, totaled $74 in
2012, $69 in 2011 and $65 in 2010. In addition, some of our leases require additional rental payments based on a percentage of our sales,
referred to as "percentage rent." Percentage rent, which is also excluded from the obligations in the table above, was $14 in 2012, $12 in
2011 and $9 in 2010.
Purchase obligations primarily consist of purchase orders for unreceived goods or services and capital expenditure commitments.
Other long-term liabilities consist of workers' compensation and general liability insurance reserves and postretirement benefits. The payment
amounts presented above were estimated based on historical payment trends. Other long-term liabilities not requiring cash payments, such
as deferred property incentives and deferred revenue, were excluded from the table above. Also excluded from the table above are
unrecognized tax benefits of $12, as we are unable to reasonably estimate the timing of future cash payments, if any, for these liabilities.
Off-Balance Sheet Arrangements
We enter into commitments to extend credit to customers for use at third parties through our Nordstrom VISA credit cards. The unused credit
card capacity available to our customers represents an off-balance sheet commitment. As of February 2, 2013, this unfunded commitment
was $15,807.
We had no other material off-balance sheet arrangements, other than operating leases entered into in the normal course of business,
during 2012.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements requires that we make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and
other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. The following
discussion highlights the estimates we believe are critical and should be read in conjunction with the Notes to Consolidated Financial
Statements in Item 8: Financial Statements and Supplementary Data. Our management has discussed the development and selection of
these critical accounting estimates with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our disclosures
that follow.
Allowance for Credit Losses
The allowance for credit losses reflects our best estimate of the losses inherent in our credit card receivables as of the balance sheet date,
including uncollectible finance charges and fees. We estimate such credit losses based on several factors, including historical aging and
delinquency trends, write-off experience, portfolio concentration and risk metrics and general economic conditions.
We believe the allowance for credit losses is adequate to cover anticipated losses in our credit card receivables under current conditions;
however, significant deterioration in any of the factors mentioned above could materially change these expectations. During 2012, our
delinquency and net write-off results continued to improve. As a result, we reduced our allowance for credit losses by $30 during 2012, from
$115 to $85, and by $30 during 2011, from $145 to $115. A 10% change in our allowance for credit losses would have affected net earnings
by $5 for the fiscal year ended February 2, 2013.
32
Revenue Recognition
We recognize revenue from sales at our retail stores at the point of sale, net of an allowance for estimated sales returns. Revenue from sales
to customers shipped directly from our stores, website and catalog, which includes shipping revenue when applicable, is recognized upon
estimated receipt by the customer. We estimate customer merchandise returns based on historical return patterns and reduce sales and cost
of sales accordingly.
Although we believe we have sufficient current and historical knowledge to record reasonable estimates of sales returns, there is a possibility
that actual returns could differ from recorded amounts. In the past three years, we have made no material changes to our estimates included
in the calculations of our sales return reserve. A 10% change in the sales return reserve would have had a $7 impact on our net earnings for
the year ended February 2, 2013.
Inventory
Our merchandise inventories are generally stated at the lower of cost or market value using the retail inventory method. Under the retail
method, the valuation of inventories and the resulting gross margins are determined by applying a calculated cost-to-retail ratio to the retail
value of ending inventory. The value of our inventory on the balance sheet is then reduced by a charge to cost of sales for retail inventory
markdowns taken on the selling floor. To determine if the retail value of our inventory should be marked down, we consider current and
anticipated demand, customer preferences, age of the merchandise and fashion trends. Inherent in the retail inventory method are certain
management judgments that may affect the ending inventory valuation as well as gross margin.
We reserve for obsolescence based on historical trends and specific identification. Our obsolescence reserve contains uncertainties as the
calculations require management to make assumptions and to apply judgment regarding a number of factors, including market conditions,
the selling environment, historical results and current inventory trends.
We do not believe that the assumptions used in these estimates will change significantly based on prior experience. In the past three years,
we have made no material changes to our estimates included in the calculations of the obsolescence reserve. A 10% change in the
obsolescence reserve would have had no material impact on our net earnings for the year ended February 2, 2013.
Goodwill
We review our goodwill annually for impairment, or when circumstances indicate its carrying value may not be recoverable. We perform this
evaluation at the reporting unit level, comprised of the principal business units within our Retail segment. To assess the fair value of our
HauteLook goodwill, we utilize both an income approach and a market approach. To determine the fair value of goodwill related to
nordstrom.com and Jeffrey, we utilize a market approach. We compare the fair value of the reporting unit to its carrying value to determine if
there is potential goodwill impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to
the extent that the fair value of the goodwill within the reporting unit is less than the carrying value of the goodwill.
As part of our impairment testing, we utilize certain assumptions and apply judgment regarding a number of factors. Significant estimates in
the market approach include identifying similar companies and acquisitions with comparable business factors such as size, growth,
profitability, risk and return of investment and assessing comparable earnings or revenue multiples in estimating the fair value of the reporting
unit. Assumptions in the income approach include future cash flows for the business, future growth rates and discount rates. Estimates of
cash flows may differ from actual cash flows due to, among other things, economic conditions, changes to the business model or changes in
operating performance. Based on the results of our 2012 review, we did not recognize an impairment loss for goodwill. Based on the results
of our 2011 review, we recognized an impairment charge of $25 related to our HauteLook goodwill. A 10% change in the fair value of any of
our reporting units would not have had an impact on our net earnings for the fiscal year ended February 2, 2013.
Income Taxes
We regularly evaluate the likelihood of realizing the benefit for income tax positions we have taken in various federal, state and foreign filings
by considering all relevant facts, circumstances and information available to us. If we believe it is more likely than not that our position will be
sustained, we recognize a benefit at the largest amount that we believe is cumulatively greater than 50% likely to be realized. Our
unrecognized tax benefit was $15 as of February 2, 2013 and $21 as of January 28, 2012.
Unrecognized tax benefits require significant management judgment regarding applicable statutes and their related interpretation, the status
of various income tax audits and our particular facts and circumstances. Also, as audits are completed or statutes of limitations lapse, it may
be necessary to record adjustments to our taxes payable, deferred taxes, tax reserves or income tax expense. Such adjustments did not
materially impact our effective income tax rate in 2012 or 2011.
Nordstrom, Inc. and subsidiaries 33
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1: Nature of Operations and Summary of Significant Accounting Policies in Item 8: Financial Statements and Supplementary Data
to our consolidated financial statements for a discussion of recent accounting pronouncements. We do not expect any of these
pronouncements to have a material effect on our results of operations, liquidity or capital resources.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Dollars in millions
INTEREST RATE RISK
We are exposed to interest rate risk primarily from changes in short-term interest rates. As of February 2, 2013, we had cash and cash
equivalents of $1,285, which generate interest income at variable rates, and gross credit card receivables of $2,142, which generate finance
charge income at a combination of fixed and variable rates. Interest rate fluctuations can affect our interest income, credit card revenues and
interest expense. See Note 3: Accounts Receivable in Item 8: Financial Statements and Supplementary Data for additional information.
We use sensitivity analyses to measure and assess our interest rate risk exposure. For purposes of presenting the potential earnings effect
of a reasonably possible hypothetical change in interest rates from our reporting date, we utilized two sensitivity scenarios: (i) linear growth of
approximately 170 basis points over the year and (ii) linear decline of approximately 20 basis points over the year, due to the fact that current
interest rates are at or near historically low levels. Other key parameters and assumptions in our sensitivity analyses include the average
cash and cash equivalents balance, average credit card receivables balance and no new floating rate debt issuance. The first hypothetical
scenario would result in an approximate $16 increase in future earnings, while the second hypothetical scenario would not have a material
effect on future earnings.
For our long-term fixed-rate debt of $3,131, our exposure to interest rate risk is limited to the change in fair value of the debt. As of
February 2, 2013, the fair value of our fixed-rate debt was $3,665. See Note 8: Debt and Credit Facilities and Note 9: Fair Value
Measurements in Item 8: Financial Statements and Supplementary Data for additional information.
FOREIGN CURRENCY EXCHANGE RISK
The majority of our revenues, expenses and capital expenditures are transacted in U.S. dollars. However, we periodically enter into
merchandise purchase orders denominated primarily in Euros. From time to time, we may use forward contracts to hedge against
fluctuations in foreign currency prices. As of February 2, 2013, our outstanding forward contracts did not have a material impact on our
consolidated financial statements.
During 2012, we announced plans to open four full-line stores in Canada beginning in 2014, and as a result we have incurred certain
expenses denominated in Canadian dollars. As of February 2, 2013, activities associated with the future store openings have not had a
material impact on our consolidated financial statements.
34
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Nordstrom, Inc.
Seattle, Washington
We have audited the accompanying consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the "Company") as of February 2,
2013 and January 28, 2012, and the related consolidated statements of earnings, comprehensive earnings, shareholders' equity, and cash
flows for each of the three years in the period ended February 2, 2013. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Nordstrom, Inc. and
subsidiaries as of February 2, 2013 and January 28, 2012, and the results of their operations and their cash flows for each of the three years
in the period ended February 2, 2013, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's
internal control over financial reporting as of February 2, 2013, based on the criteria established in Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 18, 2013 expressed an
unqualified opinion on the Company's internal control over financial reporting.
/s/ Deloitte & Touche LLP
Seattle, Washington
March 18, 2013
Nordstrom, Inc. and subsidiaries 35
Nordstrom, Inc.
Consolidated Statements of Earnings
In millions except per share amounts
Fiscal year
Net sales
Credit card revenues
Total revenues
Cost of sales and related buying and occupancy costs
Selling, general and administrative expenses:
Retail
Credit
Earnings before interest and income taxes
Interest expense, net
Earnings before income taxes
Income tax expense
Net earnings
Earnings per share:
Basic
Diluted
Weighted-average shares outstanding:
Basic
Diluted
2012
$11,762
386
12,148
(7,432)
(3,166)
(205)
1,345
(160)
1,185
(450)
$735
$3.62
$3.56
203.0
206.7
2011
$10,497
380
10,877
(6,592)
(2,807)
(229)
1,249
(130)
1,119
(436)
$683
$3.20
$3.14
213.5
217.7
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Nordstrom, Inc.
Consolidated Statements of Comprehensive Earnings
In millions
Fiscal year
Net earnings
Postretirement plan adjustments, net of tax of $1, $10 and $7
Comprehensive net earnings
2012
$735
(2)
$733
2011
$683
(16)
$667
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
2010
$9,310
390
9,700
(5,897)
(2,412)
(273)
1,118
(127)
991
(378)
$613
$2.80
$2.75
218.8
222.6
2010
$613
(10)
$603
36
Nordstrom, Inc.
Consolidated Balance Sheets
In millions
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Merchandise inventories
Current deferred tax assets, net
Prepaid expenses and other
Total current assets
Land, buildings and equipment, net
Goodwill
Other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
Accrued salaries, wages and related benefits
Other current liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt, net
Deferred property incentives, net
Other liabilities
Commitments and contingencies
Shareholders' equity:
Common stock, no par value: 1,000 shares authorized; 197.0 and 207.6 shares issued and
outstanding
Retained earnings
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
February 2, 2013
January 28, 2012
$1,285
2,129
1,360
227
80
5,081
2,579
175
254
$8,089
$1,011
404
804
7
2,226
3,124
485
341
1,645
315
(47)
1,913
$8,089
$1,877
2,033
1,148
220
282
5,560
2,469
175
287
$8,491
$917
388
764
506
2,575
3,141
500
319
1,484
517
(45)
1,956
$8,491
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Nordstrom, Inc. and subsidiaries 37
Common Stock
Shares
217.7
Amount
$1,066
Retained
Earnings
$525
Accumulated
Other
Comprehensive
Loss
($19)
Nordstrom, Inc.
Consolidated Statements of Shareholders' Equity
In millions except per share amounts
Balance at January 30, 2010
Net earnings
Postretirement plan adjustments, net of tax
Dividends ($0.76 per share)
Issuance of common stock under stock compensation plans
Stock-based compensation
Repurchase of common stock
Balance at January 29, 2011
Net earnings
Postretirement plan adjustments, net of tax
Dividends ($0.92 per share)
Issuance of common stock for HauteLook acquisition
Issuance of common stock under stock compensation plans
Stock-based compensation
Repurchase of common stock
Balance at January 28, 2012
Net earnings
Postretirement plan adjustments, net of tax
Dividends ($1.08 per share)
Issuance of common stock under stock compensation plans
Stock-based compensation
Repurchase of common stock
Balance at February 2, 2013
—
—
—
2.5
0.1
(2.3)
218.0
—
—
—
3.5
3.4
1.2
(18.5)
207.6
—
—
—
3.3
0.1
(14.0)
197.0
—
—
—
65
37
—
$1,168
—
—
—
148
95
73
—
$1,484
—
—
—
114
47
—
$1,645
613
—
(167)
—
—
(89)
$882
683
—
(197)
—
—
—
(851)
$517
735
—
(220)
—
—
(717)
$315
Total
$1,572
613
(10)
(167)
65
37
(89)
$2,021
683
(16)
(197)
148
95
73
(851)
$1,956
735
(2)
(220)
114
47
(717)
—
(10)
—
—
—
—
($29)
—
(16)
—
—
—
—
—
($45)
—
(2)
—
—
—
—
($47)
$1,913
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
38
Nordstrom, Inc.
Consolidated Statements of Cash Flows
In millions
Fiscal year
Operating Activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization expenses
Amortization of deferred property incentives and other, net
Deferred income taxes, net
Stock-based compensation expense
Tax benefit from stock-based compensation
Excess tax benefit from stock-based compensation
Provision for bad debt expense
Change in operating assets and liabilities:
Accounts receivable
Merchandise inventories
Prepaid expenses and other assets
Accounts payable
Accrued salaries, wages and related benefits
Other current liabilities
Deferred property incentives
Other liabilities
Net cash provided by operating activities
Investing Activities
Capital expenditures
Change in restricted cash
Change in credit card receivables originated at third parties
Other, net
Net cash used in investing activities
Financing Activities
Proceeds from long-term borrowings, net of discounts
Principal payments on long-term borrowings
Proceeds from sale of interest rate swap
Increase (decrease) in cash book overdrafts
Cash dividends paid
Payments for repurchase of common stock
Proceeds from issuances under stock compensation plans
Excess tax benefit from stock-based compensation
Other, net
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Cash Flow Information
Cash paid during the year for:
Interest (net of capitalized interest)
Income taxes paid, net of refunds
Non-cash investing activity:
Issuance of common stock for HauteLook acquisition
2012
$735
429
(63)
22
53
23
(24)
56
(113)
(170)
5
48
13
36
58
2
1,110
(513)
200
(42)
(14)
(369)
—
(506)
—
5
(220)
(725)
91
24
(2)
(1,333)
(592)
1,877
$1,285
$169
$429
—
2011
$683
371
(46)
14
50
20
(22)
101
(98)
(137)
—
54
6
95
78
8
1,177
(511)
(200)
(7)
(10)
(728)
824
(6)
72
(30)
(197)
(840)
76
22
1
(78)
371
1,506
$1,877
$124
$398
$148
2010
$613
327
(54)
2
42
15
(16)
149
(74)
(80)
1
72
37
42
95
6
1,177
(399)
—
(66)
3
(462)
498
(356)
—
37
(167)
(84)
48
16
4
(4)
711
795
$1,506
$121
$381
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Nordstrom, Inc. and subsidiaries 39
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Founded in 1901 as a shoe store in Seattle, Washington, today Nordstrom, Inc. is a leading fashion specialty retailer that offers customers a
well-edited selection of high-quality fashion brands focused on apparel, shoes, cosmetics and accessories for men, women and children. This
breadth of merchandise allows us to serve a wide range of customers who appreciate quality fashion and a superior shopping experience.
We offer a wide selection of brand name and private label merchandise through multiple retail channels, including 117 'Nordstrom' branded
full-line stores and our online store at www.nordstrom.com (collectively, "Nordstrom"), 119 off-price 'Nordstrom Rack' stores, our 'HauteLook'
online private sale subsidiary, two 'Jeffrey' boutiques, one philanthropic 'treasure&bond' store and one 'Last Chance' clearance store. Our
stores are located in 31 states throughout the U.S.
Through our Credit segment, we provide our customers with a variety of payment products and services, including a Nordstrom private label
card, two Nordstrom VISA credit cards and a debit card for Nordstrom purchases. These products also allow our customers to participate in
our loyalty program, which is designed to increase customer visits and spending. Although the primary purpose of our Credit segment is to
foster greater customer loyalty and drive more sales, we also generate revenues through finance charges and other fees on these cards and,
on a consolidated basis, we avoid costs that would be incurred if our customers used third-party cards.
Fiscal Year
We operate on a 52/53-week fiscal year ending on the Saturday closest to January 31st. References to 2012 relate to the 53-week fiscal year
ended February 2, 2013. References to any other years included within this document are based on a 52-week fiscal year.
Principles of Consolidation
The consolidated financial statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and
balances are eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and
disclosure of contingent assets and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are
inherent in the preparation of financial statements and actual results may differ from these estimates and assumptions. Our most significant
accounting judgments and estimates include the allowance for credit losses, revenue recognition, inventory, goodwill and income taxes.
Net Sales
We recognize revenue from sales at our retail stores at the point of sale, net of estimated returns and excluding sales taxes. Revenue from
sales to customers shipped directly from our stores, website and catalog, which includes shipping revenue when applicable, is recognized
upon estimated receipt by the customer. We estimate customer merchandise returns based on historical return patterns and reduce sales
and cost of sales accordingly. Activity in the allowance for sales returns, net, for the past three fiscal years is as follows:
Fiscal year
Allowance at beginning of year
Additions
Returns, net1
2012
$103
1,724
(1,711)
2011
$85
1,411
(1,393)
2010
$76
1,180
(1,171)
Allowance at end of year
1 Returns, net consist of actual returns offset by the value of the merchandise returned and the sales commission reversed. The increase in 2012 over 2011 is driven primarily by
$116
$103
$85
the growth of our online business.
Credit Card Revenues
Credit card revenues include finance charges, late fees and other revenue generated by our combined Nordstrom private label card and
Nordstrom VISA credit card programs, and interchange fees generated by the use of Nordstrom VISA cards at third-party merchants. Finance
charge and late fees are assessed according to the terms of the related cardholder agreements and recognized as revenue when earned.
Cost of Sales
Cost of sales includes the purchase cost of inventory sold (net of vendor allowances), in-bound freight and certain costs of loyalty program
benefits related to our credit and debit cards.
40
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Loyalty Program
Customers who use our Nordstrom private label credit or debit card or our Nordstrom VISA credit cards can participate in the Nordstrom
Fashion Rewards® program through which customers accumulate points based on their level of spending. Upon reaching a certain threshold,
customers receive Nordstrom Notes®, which can be redeemed for goods or services in our Nordstrom full-line and Rack stores and on our
website. Fashion Rewards customers receive a credit for complimentary alterations and a personal triple points day, in addition to early
access to sales events. With increased spending, they can receive additional amounts of these benefits as well as access to exclusive
fashion and shopping events.
We estimate the net cost of Nordstrom Notes that will be issued and redeemed, and record this cost as rewards points are accumulated.
These costs, as well as complimentary alterations, are recorded in cost of sales given that we provide customers with products and services
for these rewards. Other costs of the loyalty program, including shipping and fashion events, are recorded in selling, general and
administrative expenses.
Buying and Occupancy Costs
Buying costs consist primarily of compensation and other costs incurred by our merchandising and product development groups. Occupancy
costs include rent, depreciation, property taxes and facility operating costs of our retail, corporate center and distribution operations.
Rent
We recognize minimum rent expense, net of landlord reimbursements, on a straight-line basis over the minimum lease term from the time
that we control the leased property. For leases that contain predetermined, fixed escalations of the minimum rent, we recognize the rent
expense on a straight-line basis and record the difference between the rent expense and the rent payable as a deferred credit. Contingent
rental payments, typically based on a percentage of sales, are recognized in rent expense when payment of the contingent rent is probable.
We receive incentives from landlords to construct stores in certain developments. These property incentives are recorded as a deferred credit
and recognized as a reduction of rent expense on a straight-line basis over the lease term. At the end of 2012 and 2011, the deferred credit
balance was $544 and $556.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of compensation and benefit costs (other than those included in buying
and occupancy costs), advertising, shipping and handling costs, bad debt expense related to our credit card operations and other
miscellaneous expenses.
Advertising
Advertising production costs for Internet, magazines, store events and other media are expensed the first time the advertisement is run. Total
advertising expenses, net of vendor allowances, of $161, $128 and $114 in 2012, 2011 and 2010 were included in selling, general and
administrative expenses.
Vendor Allowances
We receive allowances from merchandise vendors for cosmetic selling expenses, purchase price adjustments, cooperative advertising
programs and various other expenses. Allowances for cosmetic selling expenses are recorded in selling, general and administrative
expenses as a reduction of the related costs when incurred. Purchase price adjustments are recorded as a reduction of cost of sales at the
point they have been earned and the related merchandise has been sold. Allowances for cooperative advertising and promotion programs
and other expenses are recorded in selling, general and administrative expenses as a reduction of the related costs when incurred. Any
allowances in excess of actual costs incurred that are included in selling, general and administrative expenses are recorded as a reduction of
cost of sales. Vendor allowances earned are as follows:
Fiscal year
Cosmetic selling expenses
Purchase price adjustments
Cooperative advertising and promotion
Other
Total vendor allowances
2012
$137
125
92
3
$357
2011
$128
108
78
2
$316
2010
$118
96
67
2
$283
Nordstrom, Inc. and subsidiaries 41
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Shipping and Handling Costs
Our shipping and handling costs include payments to third-party shippers and costs to hold, move and prepare merchandise for shipment.
These costs do not include in-bound freight to our distribution centers, which we include in the cost of our inventory. Shipping and handling
costs of $240, $178 and $133 in 2012, 2011 and 2010 were included in selling, general and administrative expenses.
Stock-Based Compensation
We recognize stock-based compensation expense related to stock options at their estimated grant date fair value, recorded on a straight-line
basis over the requisite service period. The total compensation expense is reduced by estimated forfeitures expected to occur over the
vesting period of the award. We estimate the grant date fair value of stock options using the Binomial Lattice option valuation model. Stock-
based compensation expense also includes amounts related to HauteLook stock compensation, performance share units and our Employee
Stock Purchase Plan, based on their fair values as of the end of each reporting period.
New Store Opening Costs
Non-capital expenditures associated with opening new stores, including marketing expenses, relocation expenses and temporary occupancy
costs, are charged to expense as incurred. These costs are included in both buying and occupancy costs and selling, general and
administrative expenses according to their nature as disclosed above.
Gift Cards
We recognize revenue from the sale of gift cards when the gift card is redeemed by the customer, or we recognize breakage income when
the likelihood of redemption, based on historical experience, is deemed to be remote. Based on an analysis of our program since its inception
in 1999, we determined that balances remaining on cards issued beyond five years are unlikely to be redeemed and therefore may be
recognized as income. Breakage income was $10, $9 and $9 in 2012, 2011 and 2010. To date, our breakage rate is approximately 3.0% of
the amount initially issued as gift cards. Gift card breakage income is included in selling, general and administrative expenses in our
consolidated statement of earnings. We had outstanding gift card liabilities of $231 and $209 at the end of 2012 and 2011, which are included
in other current liabilities.
Income Taxes
We use the asset and liability method of accounting for income taxes. Using this method, deferred tax assets and liabilities are recorded
based on differences between the financial reporting and tax basis of assets and liabilities. The deferred tax assets and liabilities are
calculated using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We routinely
evaluate the likelihood of realizing the benefit of our deferred tax assets and may record a valuation allowance if, based on all available
evidence, it is determined that some portion of the tax benefit will not be realized.
We regularly evaluate the likelihood of realizing the benefit for income tax positions that we have taken in various federal, state and foreign
filings by considering all relevant facts, circumstances and information available. If we believe it is more likely than not that our position will be
sustained, we recognize a benefit at the largest amount that we believe is cumulatively greater than 50% likely to be realized.
Interest and penalties related to income tax matters are classified as a component of income tax expense.
Comprehensive Net Earnings
Comprehensive net earnings include net earnings and other comprehensive earnings and losses. Other comprehensive losses in 2012, 2011
and 2010 consisted of adjustments, net of tax, related to our postretirement benefit obligations. Accumulated other comprehensive losses at
the end of 2012 and 2011 consisted of unrecognized losses on postretirement benefit obligations.
Cash Equivalents
Cash equivalents are short-term investments with a maturity of three months or less from the date of purchase and are carried at amortized
cost, which approximates fair value. Our cash management system provides for the reimbursement of all major bank disbursement accounts
on a daily basis. Accounts payable at the end of 2012 and 2011 included $86 and $81 of checks not yet presented for payment drawn in
excess of our bank deposit balances.
42
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Accounts Receivable
Accounts receivable includes credit card receivables from our Nordstrom private label and VISA credit cards, as well as credit and debit card
receivables due from third-party financial institutions. We record credit card receivables on our consolidated balance sheets at the
outstanding balance, net of an allowance for credit losses. The allowance for credit losses reflects our best estimate of the losses inherent in
our receivables as of the balance sheet date, including uncollectible finance charges and fees. We estimate such credit losses based on
several factors, including historical aging and delinquency trends, write-off experience, concentration and risk metrics and general economic
conditions. Credit card receivables constitute unsecured consumer loans, for which the risk of cardholder default and associated credit losses
tend to increase as general economic conditions deteriorate.
We consider a credit card account delinquent if the minimum payment is not received by the payment due date. Our aging method is based
on the number of completed billing cycles during which the customer has failed to make a minimum payment. Delinquent accounts, including
accrued finance charges and fees, are written off when they are determined to be uncollectible, usually after they become 150 days past due.
Accounts are written off sooner in the event of customer bankruptcy or other circumstances that make further collection unlikely.
We recognize finance charges and fees on delinquent accounts until they become 120 days past due, after which we place accounts on non-
accrual status. Payments received for accounts on non-accrual status are applied to accrued finance charges, fees and principal balances
consistent with other accounts, with subsequent finance charge income recognized only when actually received. Non-accrual accounts may
return to accrual status when we receive three consecutive minimum payments or the equivalent lump sum.
Our Nordstrom private label credit card can be used only in our Nordstrom full-line and Rack stores and on our website, while our Nordstrom
VISA cards allow our customers the option of using the cards for purchases of Nordstrom merchandise and services, as well as for purchases
outside of Nordstrom. Cash flows from the use of both the private label and Nordstrom VISA credit cards for sales originating at our stores
and our website are treated as an operating activity within the consolidated statements of cash flows, as they relate to sales at Nordstrom.
Cash flows arising from the use of Nordstrom VISA cards outside of our stores are treated as an investing activity within the consolidated
statements of cash flows, as they represent loans made to our customers for purchases at third parties.
Merchandise Inventories
Merchandise inventories are valued at the lower of cost or market, using the retail method (weighted-average cost). Under the retail method,
the valuation of inventories and the resulting gross margins are determined by applying a calculated cost-to-retail ratio to the retail value of
ending inventory. The value of our inventory on the balance sheet is then reduced by a charge to cost of sales for retail inventory markdowns
taken on the selling floor. To determine if the retail value of our inventory should be marked down, we consider current and anticipated
demand, customer preferences, age of the merchandise and fashion trends. We reserve for obsolescence based on historical trends and
specific identification.
Land, Buildings and Equipment
Land is recorded at historical cost, while buildings and equipment are recorded at cost less accumulated depreciation. Capitalized software
includes the costs of developing or obtaining internal-use software, including external direct costs of materials and services and internal
payroll costs related to the software project.
We capitalize interest on construction in progress and software projects during the period in which expenditures have been made, activities
are in progress to prepare the asset for its intended use and actual interest costs are being incurred.
Depreciation is computed using the straight-line method over the asset's estimated useful life, which is determined by asset category
as follows:
Asset
Buildings and improvements
Store fixtures and equipment
Leasehold improvements
Capitalized software
Life (in years)
5 – 40
3 – 15
Shorter of initial lease term or asset life
3 – 7
Leasehold improvements made at the inception of the lease are amortized over the shorter of the initial lease term or the asset life.
Leasehold improvements made during the lease term are amortized over the shorter of the asset life or the remaining lease term. Lease
terms include the fixed, non-cancelable term of a lease, plus any renewal periods determined to be reasonably assured.
Nordstrom, Inc. and subsidiaries 43
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Goodwill, Intangible Assets and Long-Lived Assets
Goodwill represents the excess of acquisition cost over the fair value of the related net assets acquired, and is not subject to amortization. As
of February 2, 2013, we had HauteLook goodwill of $121 and nordstrom.com and Jeffrey goodwill of $53. We review our goodwill annually for
impairment or when circumstances indicate its carrying value may not be recoverable. We review our HauteLook goodwill as of the first day
of the fourth quarter and review our nordstrom.com and Jeffrey goodwill on the first day of the first quarter. We perform this evaluation at the
reporting unit level, comprised of the principal business units within our Retail segment, through the application of a two-step fair value test.
The first step compares the carrying value of the reporting unit to its estimated fair value, which is based on the expected present value of
future cash flows, comparable public companies and acquisitions, or a combination of both. If fair value is lower than the carrying value, then
a second step is performed to quantify the amount of the impairment. For nordstrom.com and Jeffrey, the fair values substantially exceeded
carrying values and therefore we had no goodwill impairment in 2012, 2011 or 2010. In 2011, the year we acquired HauteLook, we recorded
a goodwill impairment loss of $25. In 2012, our testing indicated that the fair value of HauteLook substantially exceeded the carrying value,
and therefore we did not record goodwill impairment for 2012.
When facts and circumstances indicate that the carrying values of long-lived assets, including buildings, equipment and amortizable
intangible assets, may be impaired, we perform an evaluation of recoverability by comparing the carrying values of the net assets to their
related projected undiscounted future cash flows, in addition to other quantitative and qualitative analyses. Upon indication that the carrying
values of long-lived assets will not be recoverable, we recognize an impairment loss. We estimate the fair value of the assets using the
expected present value of future cash flows of the assets. Land, buildings and equipment are grouped at the lowest level at which there are
identifiable cash flows when assessing impairment. Cash flows for our retail store assets are identified at the individual store level, while our
intangible assets associated with HauteLook are identified at the HauteLook reporting unit level. We did not record an impairment loss for
long-lived tangible or amortizable intangible assets in 2012, 2011 or 2010.
Self-Insurance
We retain a portion of the risk for certain losses related to employee health and welfare, workers' compensation and general liability claims.
Liabilities associated with these losses include undiscounted estimates of both losses reported and losses incurred but not yet reported. We
estimate our ultimate cost based on an actuarially based analysis of claims experience, regulatory changes and other relevant factors.
Derivatives
During 2011, we held interest rate swap agreements (collectively, the "swap"), which were intended to hedge our exposure to changes in the
fair value of our fixed-rate senior notes due in 2018 from interest rate risk. The swap was designated as a fully effective fair value hedge. As
such, the interest rate swap fair value was included in other assets or other liabilities on our consolidated balance sheet, with an offsetting
adjustment to the carrying value of our long-term debt (included in other unsecured debt). In the fourth quarter of 2011, we sold our swap and
received proceeds of $72. The accumulated adjustments to the associated debt of $60 as of February 2, 2013 are being amortized as a
reduction of interest expense over the remaining life of the debt. The cash flows from the sale of our swap are treated as a financing activity
within our consolidated statement of cash flows. See Note 8: Debt and Credit Facilities for additional information related to our swap.
Recent Accounting Pronouncements
In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU') No. 2011-11,
Disclosures about Offsetting Assets and Liabilities, which was subsequently modified in January 2013 by ASU No. 2013-01, Clarifying the
Scope of Disclosures about Offsetting Assets and Liabilities. This ASU has requirements that are disclosure-only in nature. It requires
disclosures about offsetting and related arrangements for certain financial instruments and derivative instruments, including gross and net
information and evaluation of the effect of netting arrangements on the statement of financial position. We do not expect the provisions of this
ASU, which are effective for us beginning with the first quarter of 2013, to have a material impact on our consolidated financial statements.
44
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 2: HAUTELOOK
In 2011, we acquired 100% of the outstanding equity of HauteLook, Inc., an online private sale retailer offering limited time sale events on
fashion and lifestyle brands, for upfront consideration of $180 in Nordstrom stock and an "earn-out" provision of up to $90 that was ultimately
settled in 2011 for $30 of additional Nordstrom stock. The upfront consideration included $27 related to amounts attributable to HauteLook
employees that are subject to ongoing vesting requirements and are recorded as compensation expense as the related service is performed
over the respective employee vesting periods of up to four years after the acquisition date.
On the acquisition date, we recorded intangible assets of $62 and goodwill of $146, offset by other net liabilities of $13. We amortize the
intangible assets over their estimated lives of two to seven years on a straight-line basis, which reasonably approximates the pattern of
expected economic benefit. We recorded intangible amortization expense of $19 for 2012 and $16 for 2011.
The goodwill value of $146 recorded at the time of the acquisition was the excess of the purchase price over the net assets recognized. We
include this goodwill, which is not deductible for tax purposes, in our Retail segment. In 2011, we recognized a goodwill impairment charge of
$25, reducing the HauteLook goodwill to $121 due to a reorganization of HauteLook, changes in expected business results and market
dynamics. Additionally, as part of the reorganization, we recorded income of $12 related to the settlement of the earn-out liability. We
recognized no goodwill impairment charge for fiscal 2012. See Note 9: Fair Value Measurements for additional information relating to the
valuation of the goodwill impairment charge.
NOTE 3: ACCOUNTS RECEIVABLE
The components of accounts receivable are as follows:
Credit card receivables:
Nordstrom VISA credit card receivables
Nordstrom private label card receivables
Total credit card receivables
Allowance for credit losses
Credit card receivables, net
Other accounts receivable1
Accounts receivable, net
1 Other accounts receivable consist primarily of credit and debit card receivables due from third-party financial institutions.
February 2, 2013
January 28, 2012
$1,348
794
2,142
(85)
2,057
72
$2,129
$1,347
727
2,074
(115)
1,959
74
$2,033
Our credit card receivables are restricted under our securitization program. Our Series 2011-1 Class A Notes and the 2007-A Variable
Funding Note are secured by 100% of the Nordstrom private label credit card receivables and 90% of the Nordstrom VISA credit card
receivables, while the remaining 10% of the Nordstrom VISA credit card receivables secure the variable funding credit facility held by our
wholly owned federal savings bank, Nordstrom fsb. As of February 2, 2013 and January 28, 2012, our restricted credit card receivables
included more receivables than necessary to collateralize our outstanding secured debt and variable funding facilities, and as such can be
utilized to increase the current usage of our securitization program. Our credit card securitization agreements set a maximum percentage of
receivables that can be associated with various receivable categories, such as employee or foreign receivables, and as of February 2, 2013
and January 28, 2012, these maximums were not exceeded.
Activity in the allowance for credit losses is as follows:
Fiscal year
Allowance at beginning of year
Bad debt provision
Write-offs
Recoveries
Allowance at end of year
2012
$115
56
(111)
25
$85
2011
$145
101
(153)
22
$115
2010
$190
149
(211)
17
$145
For purposes of determining impairment and recording the associated allowance for credit losses, we evaluate our credit card receivables on
a collective basis as they are composed of large groups of smaller-balance homogeneous loans and, therefore, are not individually evaluated
for impairment.
Nordstrom, Inc. and subsidiaries 45
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Under certain circumstances, we may make modifications to payment terms for a customer experiencing financial difficulties in an effort to
help the customer avoid bankruptcy and to maximize our recovery of the outstanding balance. These modifications, which meet the definition
of troubled debt restructurings ("TDRs"), include reduced or waived fees and finance charges, and/or reduced minimum payments.
Receivables classified as TDRs were $53, or 2.5% of our total credit card receivables as of February 2, 2013 and $58, or 2.8% of our total
credit card receivables as of January 28, 2012. As with other aged receivables in our portfolio, the allowance for credit losses related to
receivables classified as TDRs is primarily based on our historical aging and delinquency trends and write-off experience, with qualitative
consideration of factors affecting the credit quality of our portfolio, including amounts of and trends in TDRs.
Credit Quality
The primary indicators of the credit quality of our credit card receivables are aging and delinquency, particularly the levels of account
balances delinquent 30 days or more as these are the accounts most likely to be written off. The following table illustrates the aging and
delinquency status of our credit card receivables:
February 2, 2013
January 28, 2012
Current
1 – 29 days delinquent
30+ days delinquent:
30 – 59 days delinquent
60 – 89 days delinquent
90 days or more delinquent
Total 30+ days delinquent
Total credit card receivables
Receivables not accruing finance charges
Receivables 90 days or more delinquent
and still accruing finance charges
% of total
94.2%
3.9%
0.7%
0.5%
0.7%
1.9%
100.0%
Balance
$2,018
84
15
10
15
40
$2,142
$11
$8
Balance
$1,928
% of total
93.0%
92
20
13
21
54
4.4%
1.0%
0.6%
1.0%
2.6%
$2,074
100.0%
$15
$11
We also evaluate credit quality using FICO credit scores. The following table illustrates the distribution of our credit card receivables across
FICO score ranges:
FICO Score Range1
801+
660 – 800
001 – 659
Other2
Total credit card receivables
February 2, 2013
January 28, 2012
Balance
% of total
$310
1,366
379
87
$2,142
14.5%
63.8%
17.7%
4.0%
100.0%
Balance
$307
1,313
390
64
$2,074
% of total
14.8%
63.3%
18.8%
3.1%
100.0%
1 Credit scores for our cardholders are updated at least every 60 days for active accounts and every 90 days for inactive accounts. Amounts listed in the table reflect the most
recently obtained credit scores as of the dates indicated.
2 Other consists of amounts not yet posted to customers' accounts and receivables from customers for whom FICO scores are temporarily unavailable.
46
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 4: LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment consist of the following:
Land and land improvements
Buildings and building improvements
Leasehold improvements
Store fixtures and equipment
Capitalized software
Construction in progress
Land, buildings and equipment
Less: accumulated depreciation and amortization
Land, buildings and equipment, net
February 2, 2013
$76
975
2,209
2,679
518
186
6,643
(4,064)
$2,579
January 28, 2012
$76
960
2,062
2,528
461
173
6,260
(3,791)
$2,469
The total cost of buildings and equipment held under capital lease obligations was $28 at the end of both 2012 and 2011, with related
accumulated amortization of $24 in 2012 and $23 in 2011. Depreciation expense was $410 in 2012 and $355 in 2011.
NOTE 5: SELF-INSURANCE
Our self-insurance reserves are summarized as follows:
Workers' compensation
Employee health and welfare
General liability
Total
February 2, 2013
$63
23
16
$102
January 28, 2012
$53
19
14
$86
Our workers' compensation policies have a retention per claim of $1 or less and no policy limits.
We are self-insured for the majority of our employee health and welfare coverage, and we do not use stop-loss coverage. Participants
contribute to the cost of their coverage through both premiums and out-of-pocket expenses and are subject to certain plan limits and
deductibles.
Our general liability policies, encompassing employment practices liability and commercial general liability, have a retention per claim of $3 or
less and a policy limit up to $30 and $150, respectively.
NOTE 6: 401(k) AND PROFIT SHARING
We provide a 401(k) and profit sharing plan for our employees. Our Board of Directors establishes our profit sharing contribution each year.
The 401(k) component is funded by voluntary employee contributions and our discretionary company contribution in an amount determined
by our Board of Directors. Our expense related to the profit sharing component and the matching contributions of the 401(k) component
totaled $83, $88 and $86 in 2012, 2011 and 2010.
NOTE 7: POSTRETIREMENT BENEFITS
We have an unfunded defined benefit Supplemental Executive Retirement Plan ("SERP"), which provides retirement benefits to certain
officers and select employees. The SERP has different benefit levels depending on the participant's role in the company. At the end of 2012,
we had 59 participants in the plan, including 32 officers and select employees eligible for SERP benefits, 26 retirees and 1 beneficiary. This
plan is non-qualified and does not have a minimum funding requirement.
Nordstrom, Inc. and subsidiaries 47
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Benefit Obligations and Funded Status
Change in benefit obligation:
Benefit obligation at beginning of year
Participant service cost
Interest cost
Benefits paid
Actuarial loss
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Employer contribution
Benefits paid
Fair value of plan assets at end of year
Underfunded status at end of year
February 2, 2013
January 28, 2012
$152
4
7
(5)
9
167
—
5
(5)
—
$122
3
7
(5)
25
152
—
5
(5)
—
($167)
($152)
The accumulated benefit obligation, which is the present value of benefits, assuming no future compensation changes, was $158 and $144 at
the end of 2012 and 2011.
Amounts recognized as liabilities in the consolidated balance sheets consist of the following:
February 2, 2013
Current liabilities
Noncurrent liabilities
Net amount recognized
Components of SERP Expense
The components of SERP expense recognized in the consolidated statements of earnings are as follows:
Fiscal year
Participant service cost
Interest cost
Amortization of net loss
Total SERP expense
2012
$4
7
7
$18
$6
161
$167
2011
$3
7
4
$14
January 28, 2012
$6
146
$152
2010
$2
6
2
$10
Amounts not yet reflected in SERP expense and included in accumulated other comprehensive loss (pre-tax) consist of the following:
Accumulated loss
Prior service cost
Total accumulated other comprehensive loss
February 2, 2013
($60)
(1)
($61)
January 28, 2012
($58)
(1)
($59)
In 2013, we expect $8 of costs currently in accumulated other comprehensive loss to be recognized as components of SERP expense.
48
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Assumptions
Weighted-average assumptions used to determine our benefit obligation and SERP expense are as follows:
Fiscal year
Assumptions used to determine benefit obligation:
Discount rate
Rate of compensation increase
Assumptions used to determine SERP expense:
Discount rate
Rate of compensation increase
2012
4.30%
3.00%
4.50%
3.00%
2011
4.50%
3.00%
5.60%
3.00%
Future Benefit Payments and Contributions
As of February 2, 2013, the expected future benefit payments based upon the assumptions described above and including benefits
attributable to estimated future employee service are as follows:
Fiscal year
2013
2014
2015
2016
2017
2018 – 2022
In 2013, we expect to make contributions and pay benefits of $6.
2010
5.60%
3.00%
5.95%
3.00%
$6
7
8
9
9
53
Nordstrom, Inc. and subsidiaries 49
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 8: DEBT AND CREDIT FACILITIES
Debt
A summary of our long-term debt is as follows:
Secured
Series 2007-2 Class A Notes, one-month LIBOR plus 0.06% per year, due April 2012
Series 2007-2 Class B Notes, one-month LIBOR plus 0.18% per year, due April 2012
Series 2011-1 Class A Notes, 2.28%, due October 2016
Mortgage payable, 7.68%, due April 2020
Other
Unsecured
Senior notes, 6.75%, due June 2014, net of unamortized discount
Senior notes, 6.25%, due January 2018, net of unamortized discount
Senior notes, 4.75%, due May 2020, net of unamortized discount
Senior notes, 4.00%, due October 2021, net of unamortized discount
Senior debentures, 6.95%, due March 2028
Senior notes, 7.00%, due January 2038, net of unamortized discount
Other
Total long-term debt
Less: current portion
Total due beyond one year
February 2, 2013
January 28, 2012
—
—
$325
47
10
382
400
648
498
499
300
344
60
2,749
3,131
(7)
$3,124
$454
46
325
51
12
888
399
648
498
499
300
343
72
2,759
3,647
(506)
$3,141
All of our Nordstrom private label card receivables and a 90% interest in our Nordstrom VISA credit card receivables serve as collateral
for various borrowings and credit facilities, including our Series 2011-1 Class A Notes and our Variable Funding Note facility ("2007-A VFN").
Upon maturity in April 2012, we retired our Series 2007-2 Class A & B Notes ("the Notes") totaling $500, which had also been secured
by our restricted receivables. The Notes were retired using cash that had been accumulated monthly into a restricted account beginning
in December 2011. Prior to the retirement, the accumulated cash was included in our consolidated balance sheet in prepaid expenses
and other.
Our mortgage payable is secured by an office building that had a net book value of $70 at the end of 2012. Other secured debt as of
February 2, 2013 consisted primarily of capital lease obligations.
During 2011, we received proceeds of $72 from the sale of our interest rate swap agreements (collectively, the "swap") with a $650 notional
amount maturing in 2018. Under the swap, we received a fixed rate of 6.25% and paid a variable rate based on one-month LIBOR plus a
margin of 2.9%. As of February 2, 2013, the accumulated adjustment to our long-term debt was $60, which will be amortized as a reduction of
interest expense over the remaining life of the related debt, and is included as part of other unsecured debt in the table above. See Note 1:
Nature of Operations and Summary of Significant Accounting Policies for additional information related to our swap.
50
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Required principal payments on long-term debt, excluding capital lease obligations, are as follows:
Fiscal year
2013
2014
2015
2016
2017
Thereafter
Interest Expense
The components of interest expense, net are as follows:
Fiscal year
Interest on long-term debt and short-term borrowings
Less:
Interest income
Capitalized interest
Interest expense, net
2012
$167
(2)
(5)
$160
2011
$139
(2)
(7)
$130
$5
406
6
331
7
2,318
2010
$133
(1)
(5)
$127
Credit Facilities
As of February 2, 2013, we had total short-term borrowing capacity available for general corporate purposes of $800. Of the total capacity, we
had $600 under our commercial paper program, which is backed by our unsecured revolving credit facility ("revolver") that expires in June
2016, and $200 under our 2007-A Variable Funding Note ("2007-A VFN") that expires in January 2014.
Under the terms of our $600 revolver, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is
available for working capital, capital expenditures and general corporate purposes, including liquidity support for our commercial paper
program. We have the option to increase the revolving commitment by up to $100, to a total of $700, provided that we obtain written consent
from the lenders.
The revolver requires that we maintain a leverage ratio, defined as Adjusted Debt to Earnings before Interest, Income Taxes, Depreciation,
Amortization and Rent ("EBITDAR"), of less than four times. As of February 2, 2013, we were in compliance with this covenant.
Our $600 commercial paper program allows us to use the proceeds to fund operating cash requirements. Under the terms of the commercial
paper agreement, we pay a rate of interest based on, among other factors, the maturity of the issuance and market conditions. The issuance
of commercial paper has the effect, while it is outstanding, of reducing borrowing capacity under our revolver by an amount equal to the
principal amount of commercial paper.
During 2012 and 2011, we had no borrowings under our revolver and no issuances under our commercial paper program.
The 2007-A VFN has a capacity of $200 and is backed by all of the Nordstrom private label card receivables and a 90% interest in the co-
branded Nordstrom VISA credit card receivables. Borrowings under the 2007-A VFN incur interest based upon one-month LIBOR plus 35
basis points. We pay a commitment fee for the facility based on the size of the commitment. During 2012 and 2011, we had no borrowings
against this facility.
Our wholly owned federal savings bank, Nordstrom fsb, also maintains a variable funding facility with a short-term credit capacity of $100.
This facility is backed by the remaining 10% interest in the Nordstrom VISA credit card receivables and is available, if needed, to provide
liquidity support to Nordstrom fsb. Borrowings under the facility incur interest at an agreed upon rate with investors in the facility. During 2012
and 2011, Nordstrom fsb had no outstanding borrowings against this facility.
Nordstrom, Inc. and subsidiaries 51
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 9: FAIR VALUE MEASUREMENTS
We disclose our financial assets that are measured at fair value in our consolidated balance sheets by level within the fair value hierarchy as
defined by applicable accounting standards:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that cannot be corroborated by market data that reflect the reporting entity's own
assumptions
We did not have any financial assets or liabilities that were measured at fair value on a recurring basis as of February 2, 2013 or
January 28, 2012.
Financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable and accounts
payable and approximate fair value due to their short-term nature. We also estimate on a nonrecurring basis the fair value of our long-term
debt, including current maturities and the remaining fair value adjustment from our previous effective fair value hedge, which was $3,665 as
of February 2, 2013, compared with a carrying value of $3,131, and as of January 28, 2012 the fair value was $4,152, compared with a
carrying value of $3,647. We estimated the fair value of long-term debt using quoted market prices of the same or similar issues, and as such
this is considered a Level 2 fair value measurement.
We also measure certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill and long-lived tangible and intangible
assets, in connection with periodic evaluations for potential impairment. See Note 1: Nature of Operations and Summary of Significant
Accounting Policies for additional information related to goodwill, intangible assets and long-lived assets. We recorded no impairment
charges for these assets in 2012. During the fourth quarter of 2011, as part of our annual impairment analysis for goodwill related to
HauteLook, we wrote down the carrying value of $146 as of the acquisition date to its implied fair value of $121, resulting in an impairment
charge of $25. The impairment charge was included in Retail selling, general and administrative expenses in the consolidated statement of
earnings. We estimated the fair value of our HauteLook goodwill using an income approach and a market approach based on comparable
public companies and acquisitions. These valuation approaches are based on Level 3 inputs in the fair value hierarchy.
NOTE 10: LEASES
We lease the land or the land and buildings at many of our stores. Additionally, we lease office facilities, warehouses and equipment. Most of
these leases are classified as operating leases and they expire at various dates through 2080. The majority of our fixed, non-cancelable
lease terms are 15 to 30 years for Nordstrom full-line stores and 10 to 15 years for Nordstrom Rack stores. Many of our leases include
options that allow us to extend the lease term beyond the initial commitment period, subject to terms agreed to at lease inception. Most of our
leases also provide for payment of operating expenses, such as common area charges, real estate taxes and other executory costs, and
some leases require additional payments based on sales, referred to as "percentage rent."
Future minimum lease payments as of February 2, 2013 are as follows:
Fiscal year
2013
2014
2015
2016
2017
Thereafter
Total minimum lease payments
Less: amount representing interest
Present value of net minimum lease payments
52
Capital leases
$2
Operating leases
$153
159
158
155
144
850
$1,619
2
2
2
1
1
10
(2)
$8
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Rent expense for 2012, 2011 and 2010 was as follows:
Fiscal year
Minimum rent:
Store locations
Offices, warehouses and equipment
Percentage rent
Property incentives
Total rent expense
2012
$124
32
14
(65)
$105
2011
$108
23
12
(65)
$78
2010
$94
19
9
(60)
$62
The rent expense above does not include common area charges, real estate taxes and other executory costs which were $74 in 2012, $69 in
2011 and $65 in 2010.
NOTE 11: COMMITMENTS AND CONTINGENT LIABILITIES
Our estimated total purchase obligations, capital expenditure contractual commitments and inventory purchase orders were $1,901 as of
February 2, 2013. In connection with the purchase of foreign merchandise, we have outstanding trade letters of credit totaling $2 as of
February 2, 2013.
We are subject from time to time to various claims and lawsuits arising in the ordinary course of business, including lawsuits alleging
violations of state and/or federal wage and hour and other employment laws, privacy and other consumer-based claims. Some of these
lawsuits purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some
may remain unresolved for several years. We believe the recorded reserves in our consolidated financial statements are adequate in light of
the probable and estimable liabilities. As of the date of this report, we do not believe any currently identified claim, proceeding or litigation,
either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters
are subject to inherent uncertainties, our view of them may change in the future.
NOTE 12: SHAREHOLDERS' EQUITY
Share Repurchase Program
In February 2012, our Board of Directors authorized a program to repurchase up to $800 of our outstanding common stock, through February
1, 2014, in addition to the remaining amount available for repurchase under the previously authorized programs. The following is a summary
of the activity related to our share repurchase programs in 2010, 2011 and 2012:
Shares
Average price
per share
Amount
Capacity at January 30, 2010
August 2010 authorization (ended January 28, 2012)
Shares repurchased
Capacity at January 29, 2011
May 2011 authorization (ended February 2, 2013)
Shares repurchased
Capacity at January 28, 2012
February 2012 authorization (ends February 1, 2014)
Shares repurchased
Capacity at February 2, 2013
2.3
18.5
14.0
$39
$46
$51
—
$500
(89)
$411
750
(851)
$310
800
(717)
$393
Subsequent to year-end, in February 2013 our Board of Directors authorized a new program to repurchase up to $800 of our outstanding
common stock, through March 1, 2015, in addition to the remaining amount available for repurchase under our February 2012 authorization.
The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities
and Exchange Commission rules.
Dividends
We paid dividends of $1.08 per share in 2012, $0.92 per share in 2011 and $0.76 per share in 2010. In February 2013, we declared a
quarterly dividend of $0.30 per share, increased from $0.27 per share in 2012.
Nordstrom, Inc. and subsidiaries 53
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 13: STOCK-BASED COMPENSATION
We currently have three stock-based compensation plans: the 2010 Equity Incentive Plan ("2010 Plan"), our Employee Stock Purchase Plan
("ESPP") and the 2002 Nonemployee Director Stock Incentive Plan. Additionally, as part of our acquisition of HauteLook in 2011, we granted
awards from shares available that were not allocated to a specific plan.
In 2010, our shareholders approved the adoption of the 2010 Plan, which replaced the 2004 Equity Incentive Plan ("2004 Plan"). The 2010
Plan authorizes the grant of stock options, performance share units, restricted stock units, stock appreciation rights and both restricted and
unrestricted shares of common stock to employees. The aggregate number of shares to be issued under the 2010 Plan may not exceed 11.6
plus any shares currently outstanding under the 2004 Plan which are forfeited or which expire during the term of the 2010 Plan. No future
grants will be made under the 2004 Plan. As of February 2, 2013, we have 54.4 shares authorized, 33.5 shares issued and outstanding and
6.8 shares remaining available for future grants under the 2010 Plan.
Under the ESPP, employees may make payroll deductions of up to 10% of their base and bonus compensation. At the end of each six-month
offering period, participants may apply their accumulated payroll deductions toward the purchase of shares of our common stock at 90% of
the fair market value on the last day of the offer period. As of February 2, 2013, we had 12.6 shares authorized and 3.8 shares available for
issuance under the ESPP. We issued 0.3 shares under the ESPP during 2012. At the end of both 2012 and 2011, we had current liabilities of
$5, for future purchases of shares under the ESPP.
The 2002 Nonemployee Director Stock Incentive Plan authorizes the grant of stock awards to our nonemployee directors. These awards may
be deferred or issued in the form of restricted or unrestricted stock, non-qualified stock options or stock appreciation rights. As of February 2,
2013, we had 0.9 shares authorized and 0.6 shares available for issuance under this plan. In 2012, we deferred shares with a total expense
of less than $1.
The following table summarizes our stock-based compensation expense:
Fiscal year
Stock options
HauteLook stock compensation
Performance share units
Employee stock purchase plan
Other
Total stock-based compensation expense, before income tax benefit
Income tax benefit
Total stock-based compensation expense, net of income tax benefit
2012
$36
9
3
2
3
53
(17)
$36
2011
$32
9
4
2
3
50
(17)
$33
The stock-based compensation expense before income tax benefit was recorded in our consolidated statements of earnings as follows:
Fiscal year
Cost of sales and related buying and occupancy costs
Selling, general and administrative expenses
Total stock-based compensation expense, before income tax benefit
2012
$14
39
$53
2011
$12
38
$50
2010
$35
—
3
2
2
42
(16)
$26
2010
$13
29
$42
The benefits of tax deductions in excess of the compensation cost recognized for stock-based awards are classified as financing cash inflows
and are reflected as "Excess tax benefit from stock-based compensation" in the consolidated statements of cash flows.
54
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Stock Options
We used the following assumptions to estimate the fair value for stock options at grant date:
Fiscal year
Risk-free interest rate: Represents the yield on U.S. Treasury zero-coupon securities that
mature over the 10-year life of the stock options.
2012
2011
2010
0.3% – 2.0%
0.4% – 3.5%
0.5% – 4.0%
Weighted-average volatility: Based on a combination of the historical volatility of our common
stock and the implied volatility of exchange traded options for our common stock.
Weighted-average expected dividend yield: Our forecasted dividend yield for the next
10 years.
Expected life in years: Represents the estimated period of time until option exercise. The
expected term of options granted was derived from the output of the Binomial Lattice option
valuation model and was based on our historical exercise behavior, taking into consideration
the contractual term of the option and our employees' expected exercise and post-vesting
employment termination behavior.
36.5%
2.1%
39.0%
2.0%
40.0%
1.3%
6.1
5.9
5.7
The weighted-average fair value per option at the grant date was $15, $15 and $13 in 2012, 2011 and 2010. In 2012, 2011 and 2010, stock
option awards to employees were approved by the Compensation Committee of our Board of Directors and their exercise price was set at
$53, $45 and $37, the closing price of our common stock on February 22, 2012, February 25, 2011 and February 26, 2010 (the dates of
grant). The awards are determined based upon a percentage of the recipients' base salary and the fair value of the stock options. In 2012, we
awarded stock options to 1,477 employees, compared with 1,331 and 1,259 employees in 2011 and 2010.
As of February 2, 2013, we have 13.5 options outstanding under the 2010 Plan. Options vest over four years, and expire 10 years after the
date of grant. A summary of the stock option activity for 2012 is presented below:
Fiscal year
2012
Outstanding, beginning of year
Granted
Exercised
Cancelled
Outstanding, end of year
Options exercisable at end of year
Options vested or expected to vest at end of year
Shares
14.1
2.9
(3.0)
(0.5)
13.5
6.7
12.6
Weighted-
average
exercise price
Weighted-average
remaining
contractual
life (years)
Aggregate
intrinsic
value
$32
53
25
44
$38
$33
$37
6
5
6
$237
$148
$226
The total intrinsic value of options exercised during 2012, 2011 and 2010 was $90, $80 and $51. The total fair value of stock options vested
during 2012, 2011 and 2010 was $32, $29 and $27. As of February 2, 2013, the total unrecognized stock-based compensation expense
related to nonvested stock options was $57, which is expected to be recognized over a weighted-average period of 26 months.
Nordstrom, Inc. and subsidiaries 55
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
HauteLook
As discussed in Note 2: HauteLook, consideration for our acquisition of HauteLook payable in Nordstrom stock includes ongoing vesting
requirements for HauteLook's employees. These amounts are recorded as compensation expense as the related service is performed over
the respective employee vesting periods of up to four years after the acquisition date.
A summary of the nonvested restricted stock award activity related to HauteLook for 2012 is as follows:
Fiscal year
Outstanding, beginning of year
Vested
Outstanding, end of year
2012
Weighted-
average grant-
date fair value
$42
42
$42
Shares
0.8
(0.5)
0.3
The total fair value of restricted stock vested during 2012 was $22. As of February 2, 2013, the total unrecognized stock-based compensation
expense related to HauteLook nonvested restricted stock awards was $9, which is expected to be recognized over a weighted-average
period of eight months.
Performance Share Units
We grant performance share units to executive officers as one of the ways to align compensation with shareholder interests. Performance
share units vest after a three-year period only when our total shareholder return (reflecting daily stock price appreciation and compounded
reinvestment of dividends) is positive and outperforms companies in a defined group of competitors determined by the Compensation
Committee of our Board of Directors. The percentage of units that are earned depends on our relative position at the end of the vesting
period and can range from 0% to 175% of the number of units granted.
Performance share units are payable in either cash or stock as elected by the employee; therefore, they are classified as a liability award.
The liability is remeasured, with a corresponding adjustment to earnings, at each fiscal quarter-end during the vesting period. The
performance share unit liability is remeasured using the estimated percentage of units earned multiplied by the closing market price of our
common stock on the current period-end date and is pro-rated based on the amount of time passed in the vesting period. The price used to
issue stock or cash for the performance share units upon vesting is the closing market price of our common stock on the vest date.
Following is a summary of performance share unit activity:
Fiscal year
Outstanding units, beginning of year
Granted
Vested but unearned
Vested and earned
Cancelled
Outstanding units, end of year
Total fair value of performance share units earned
Total fair value of performance share units settled or to be settled in cash
2012
127,368
55,244
(15,987)
(47,961)
(13,756)
104,908
$3
$2
As of February 2, 2013, our other liabilities included $4 for performance share units. As of February 2, 2013, the remaining unrecognized
stock-based compensation expense for unvested performance share units was $1, which is expected to be recognized over a weighted-
average period of 12 months.
56
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 14: INCOME TAXES
Income tax expense consists of the following:
Fiscal year
Current income taxes:
Federal
State and local
Total current income tax expense
Deferred income taxes:
Federal
State and local
Total deferred income tax expense
Total income tax expense
2012
$362
66
428
21
1
22
$450
2011
$359
63
422
20
(6)
14
$436
A reconciliation of the statutory federal income tax rate to the effective tax rate on earnings before income taxes is as follows:
Fiscal year
Statutory rate
State and local income taxes, net of federal income taxes
Non-taxable acquisition-related items
Other, net
Effective tax rate
2012
35.0%
3.6
—
(0.6)
38.0%
2011
35.0%
3.6
0.6
(0.2)
39.0%
2010
$324
52
376
4
(2)
2
$378
2010
35.0%
3.4
—
(0.2)
38.2%
In 2011, we acquired HauteLook in a tax-free merger transaction. The non-taxability of certain acquisition-related items, including goodwill
impairment, resulted in an increase in our effective tax rate in 2011.
The major components of deferred tax assets and liabilities are as follows:
Compensation and benefits accruals
Allowance for sales returns
Accrued expenses
Merchandise inventories
Gift cards and gift certificates
Loyalty reward certificates
Allowance for credit losses
Federal benefit of state taxes
Gain on sale of interest rate swap
Other
Total deferred tax assets
Land, buildings and equipment basis and depreciation differences
Total deferred tax liabilities
Net deferred tax assets
February 2, 2013
$177
January 28, 2012
$167
51
43
24
18
22
33
7
24
13
412
(90)
(90)
$322
45
41
22
17
17
45
6
29
17
406
(63)
(63)
$343
Nordstrom, Inc. and subsidiaries 57
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2012, 2011 and 2010 is as follows:
Fiscal year
Unrecognized tax benefit at beginning of year
Gross increase to tax positions in prior periods
Gross decrease to tax positions in prior periods
Gross increase to tax positions in current period
Settlements
Unrecognized tax benefit at end of year
2012
$21
1
(7)
1
(1)
$15
2011
$43
14
(14)
2
(24)
$21
2010
$43
3
(3)
3
(3)
$43
Settlement activity in 2011 includes amounts paid for a state tax matter and to close our 2008 IRS audit.
At the end of 2012, 2011 and 2010, $7, $11 and $21 of the ending gross unrecognized tax benefit related to items which, if recognized, would
affect the effective tax rate.
Our income tax expense included a decrease to expense of $1 in 2012 and $4 in 2011 and an increase to expense of $5 in 2010 for tax-
related interest and penalties. At the end of 2012, 2011 and 2010, our liability for interest and penalties was $7, $5 and $11.
We file income tax returns in the U.S. and a limited number of foreign jurisdictions. With few exceptions, we are no longer subject to
federal, state and local, or non-U.S. income tax examinations for years before 2008. Unrecognized tax benefits related to federal, state
and local tax positions may decrease by $2 by February 1, 2014, due to the completion of examinations and the expiration of various
statutes of limitations.
NOTE 15: EARNINGS PER SHARE
Earnings per basic share is computed using the weighted-average number of common shares outstanding during the year. Earnings per
diluted share uses the weighted-average number of common shares outstanding during the year plus dilutive common stock equivalents,
primarily stock options.
The computation of earnings per share is as follows:
Fiscal year
Net earnings
Basic shares
Dilutive effect of stock options and other
Diluted shares
Earnings per basic share
Earnings per diluted share
2012
$735
203.0
3.7
206.7
$3.62
$3.56
2011
$683
213.5
4.2
217.7
$3.20
$3.14
2010
$613
218.8
3.8
222.6
$2.80
$2.75
Options and other equity instruments totaling 4.2 shares in 2012, 3.9 shares in 2011 and 6.1 shares in 2010 were excluded from earnings per
diluted share because their impact was anti-dilutive.
58
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
NOTE 16: SEGMENT REPORTING
As of the end of 2012, we have two reportable segments: Retail and Credit. Our Retail segment includes our "Nordstrom" operating
segment, which is composed of our Nordstrom full-line stores and our online store at www.nordstrom.com. Through our multi-channel
initiatives, we have integrated the operations, merchandising and technology of our Nordstrom full-line and online stores, consistent with our
customers' expectations of a seamless shopping experience, regardless of channel. Our internal reporting to our president, who is our chief
operating decision maker, is consistent with these multi-channel initiatives. We aggregate our Nordstrom Rack operating segment into the
Retail reporting segment, based on similar economic and other qualitative characteristics. Additionally, we include HauteLook, Jeffrey and
treasure&bond in the Retail reporting segment.
Through our Credit segment, we provide our customers with a variety of payment products and services, including a Nordstrom private label
card, two Nordstrom VISA credit cards and a debit card for Nordstrom purchases. Our credit and debit card products also include a loyalty
program that provides benefits to our cardholders based on their level of spending.
Amounts in the Corporate/Other column include unallocated corporate expenses and assets, inter-segment eliminations and other
adjustments to segment results necessary for the presentation of consolidated financial results in accordance with generally accepted
accounting principles.
In general, we use the same measurements to compute earnings before income taxes for reportable segments as we do for the consolidated
company. However, redemptions of our Nordstrom Notes are included in net sales for our Retail segment. The sales amount in our
Corporate/Other column includes an entry to eliminate these transactions from our consolidated net sales. There is no impact to consolidated
earnings before income taxes for this adjustment. The related Nordstrom Notes expenses and other costs associated with the Fashion
Rewards program are included in our Credit segment. In addition, our sales return reserve and other corporate adjustments are recorded in
the Corporate/Other column. Other than as described above, the accounting policies of the operating segments are the same as those
described in Note 1: Nature of Operations and Summary of Significant Accounting Policies.
Nordstrom, Inc. and subsidiaries 59
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
The following table sets forth information for our reportable segments:
Retail
Credit
Corporate/Other
Total
Fiscal year 2012
Net sales
Credit card revenues
Earnings (loss) before interest and income taxes
Interest expense, net
Earnings (loss) before income taxes
Capital expenditures
Depreciation and amortization
Goodwill
Assets1
Fiscal year 2011
Net sales
Credit card revenues
Earnings (loss) before interest and income taxes
Interest expense, net
Earnings (loss) before income taxes
Capital expenditures
Depreciation and amortization
Goodwill
Assets1
Fiscal year 2010
Net sales
Credit card revenues
Earnings (loss) before interest and income taxes
Interest expense, net
Earnings (loss) before income taxes
Capital expenditures
Depreciation and amortization
Goodwill
Assets1
$11,949
—
1,757
—
1,757
371
357
175
3,922
$10,656
—
1,570
—
1,570
424
313
175
3,642
$9,420
—
1,406
—
1,406
361
295
53
3,234
—
$386
67
(26)
41
2
2
—
2,201
—
$380
76
(13)
63
2
2
—
2,135
—
$390
51
(21)
30
1
2
—
2,060
($187)
—
(479)
(134)
(613)
140
70
—
1,966
($159)
—
(397)
(117)
(514)
85
56
—
2,714
($110)
—
(339)
(106)
(445)
37
30
—
2,168
1 Assets in Corporate/Other include unallocated assets in corporate headquarters, consisting primarily of cash, land, buildings and equipment and deferred tax assets.
The following table summarizes net sales within our reportable segments:
Fiscal year
Nordstrom full-line stores
Direct
Nordstrom
Nordstrom Rack
Other retail1
Total Retail segment
Corporate/Other
2012
$7,964
1,269
9,233
2,445
271
11,949
(187)
Total net sales
1 Other retail includes our HauteLook online private sale subsidiary, our Jeffrey stores and our treasure&bond store.
$11,762
60
2011
$7,513
913
8,426
2,045
185
10,656
(159)
$10,497
$11,762
386
1,345
(160)
1,185
513
429
175
8,089
$10,497
380
1,249
(130)
1,119
511
371
175
8,491
$9,310
390
1,118
(127)
991
399
327
53
7,462
2010
$6,995
705
7,700
1,691
29
9,420
(110)
$9,310
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
The following table summarizes net sales by merchandise category:
Fiscal year
Women’s apparel
Shoes
Men’s apparel
Women’s accessories
Cosmetics
Kids’ apparel
Other
Total net sales
2012
2011
2010
Net sales
% of total
$3,684
2,716
1,866
1,574
1,255
381
286
31%
23%
16%
13%
11%
3%
3%
Net sales
$3,438
% of total
33%
Net sales
$3,184
2,413
1,612
1,311
1,106
341
276
23%
15%
12%
11%
3%
3%
2,094
1,415
1,101
972
303
241
% of total
34%
23%
15%
12%
10%
3%
3%
$11,762
100%
$10,497
100%
$9,310
100%
NOTE 17: SELECTED QUARTERLY DATA (UNAUDITED)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Fiscal year 2012
Net sales
Same-store sales percentage change1
Credit card revenues
Gross profit2
Selling, general and administrative expenses:
Retail
Credit
Earnings before income taxes
Net earnings
Earnings per basic share
Earnings per diluted share
Fiscal year 2011
Net sales
Same-store sales percentage change1
Credit card revenues
Gross profit2
Selling, general and administrative expenses:
Retail
Credit
Earnings before income taxes
Net earnings
Earnings per basic share
$2,535
8.5%
94
951
721
44
240
149
$0.72
$0.70
$2,229
6.5%
94
844
611
55
241
145
$2,918
4.5%
91
1,039
778
62
250
156
$0.76
$0.75
$2,716
7.3%
94
993
708
59
290
175
$2,713
10.7%
95
983
755
46
239
146
$0.73
$0.71
$2,383
7.9%
95
872
670
57
209
127
$0.66
$0.81
$0.60
$3,596
6.3%
106
1,357
912
53
456
284
$1.43
$1.40
$3,169
7.1%
97
1,196
818
58
379
236
$1.13
$11,762
7.3%
386
4,330
3,166
205
1,185
735
$3.62
$3.56
$10,497
7.2%
380
3,905
2,807
229
1,119
683
$3.20
Earnings per diluted share
$3.14
1 Same-store sales include sales from stores that have been open at least one full year at the beginning of the year. Fiscal year 2012 includes an extra week (the 53rd week) in
the fourth quarter as a result of our 4-5-4 retail reporting calendar. The 53rd week is not included in same-store sales calculations. We also include sales from our Nordstrom
online store in same-store sales because of the integration of our Nordstrom full-line stores and online store.
2 Gross profit is calculated as net sales less cost of sales and related buying and occupancy costs (for all segments).
$0.65
$1.11
$0.80
$0.59
Nordstrom, Inc. and subsidiaries 61
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Annual Report on Form 10-K, the Company performed an evaluation under the supervision and
with the participation of management, including our President and Chief Financial Officer, of the design and effectiveness of our disclosure
controls and procedures (as defined in rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based
upon that evaluation, our President and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our
disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing and reporting of material
financial and non-financial information within the time periods specified within the Commission's rules and forms. Our President and Chief
Financial Officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be
disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our
President and Chief Financial Officer, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act)
during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as is defined in the
Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial
information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are
reasonable. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and
overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute, assurance with respect
to reporting financial information.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and
criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective
as of February 2, 2013.
Deloitte & Touche LLP, an independent registered public accounting firm, is retained to audit Nordstrom's consolidated financial statements
and the effectiveness of the Company's internal control over financial reporting. They have issued an attestation report on the Company's
internal control over financial reporting as of February 2, 2013, which is included herein.
62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Nordstrom, Inc.
Seattle, Washington
We have audited the internal control over financial reporting of Nordstrom, Inc. and subsidiaries (the "Company") as of February 2, 2013,
based on criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive
and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that
could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 2, 2013,
based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended February 2, 2013 of the Company and our report dated March 18, 2013
expressed an unqualified opinion on those financial statements.
/s/ Deloitte & Touche LLP
Seattle, Washington
March 18, 2013
Nordstrom, Inc. and subsidiaries 63
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required under this item is included in the following sections of our Proxy Statement for our 2013 Annual Meeting of
Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:
Executive Officers
Director Elections
Board Committees and Charters
Director Nominating Process
Website Access to Corporate Governance Documents
Section 16(a) Beneficial Ownership Reporting Compliance
Corporate Governance
The certifications of our President and Chief Financial Officer required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002
are included as exhibits to this Annual Report on Form 10-K and were included as exhibits to each of our quarterly reports on Form 10-Q.
Our President certified to the New York Stock Exchange ("NYSE") on May 21, 2012 pursuant to Section 303A.12(a) of the NYSE's listing
standards, that he was not aware of any violation by the Company of the NYSE's corporate governance listing standards as of that date.
Item 11. Executive Compensation.
The information required under this item is included in the following sections of our Proxy Statement for our 2013 Annual Meeting of
Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:
Compensation of Executive Officers
Compensation Discussion and Analysis
Director Compensation
Compensation Committee Interlocks and Insider Participation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The information required under this item is included in the following sections of our Proxy Statement for our 2013 Annual Meeting of
Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:
Security Ownership of Certain Beneficial Owners and Management
Equity Compensation Plans
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required under this item is included in the following sections of our Proxy Statement for our 2013 Annual Meeting of
Shareholders, which sections are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:
Election of Directors
Certain Relationships and Related Transactions
Item 14. Principal Accounting Fees and Services.
The information required under this item is included in the following section of our Proxy Statement for our 2013 Annual Meeting of
Shareholders, which section is incorporated by reference herein and will be filed within 120 days after the end of our fiscal year:
Ratification of the Appointment of Independent Registered Public Accounting Firm
64
PART IV
Item 15. Exhibits and Financial Statement Schedules.
The following information required under this item is filed as part of this report:
(a)1. FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
(a)3. EXHIBITS
Page
35
36
36
37
38
39
62
63
Exhibits are incorporated herein by reference or are filed with this report as set forth in the Index to Exhibits on pages 68 through 74 hereof.
All other schedules and exhibits are omitted because they are not applicable, not required or because the information required has been
given as part of this report.
Nordstrom, Inc. and subsidiaries 65
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
NORDSTROM, INC.
(Registrant)
/s/ Michael G. Koppel
Michael G. Koppel
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: March 18, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
Principal Financial Officer:
Principal Executive Officer:
/s/
/s/
/s/
/s/
/s/
/s/
/s/
Michael G. Koppel
Michael G. Koppel
Executive Vice President and Chief Financial Officer
Principal Accounting Officer:
James A. Howell
James A. Howell
Vice President, Finance
Phyllis J. Campbell
Phyllis J. Campbell
Director
Enrique Hernandez, Jr.
Enrique Hernandez, Jr.
Chairman of the Board of Directors
Blake W. Nordstrom
Blake W. Nordstrom
Director
Peter E. Nordstrom
Peter E. Nordstrom
Director
B. Kevin Turner
B. Kevin Turner
Director
Alison A. Winter
Alison A. Winter
Director
/s/
Directors:
/s/
/s/
/s/
/s/
/s/
/s/
Date: March 18, 2013
66
Blake W. Nordstrom
Blake W. Nordstrom
President
Michelle M. Ebanks
Michelle M. Ebanks
Director
Robert G. Miller
Robert G. Miller
Director
Erik B. Nordstrom
Erik B. Nordstrom
Director
Philip G. Satre
Philip G. Satre
Director
Robert D. Walter
Robert D. Walter
Director
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-166961, 333-161803, 333-63403, 333-40064, 333-40066,
333-79791, 333-101110, 333-118756, 333-146049, 333-174336 and 333-173020 on Form S-8 and 333-173179 and 333-177175 on Form
S-3 of our reports dated March 18, 2013, relating to the consolidated financial statements of Nordstrom, Inc. and subsidiaries, and the
effectiveness of Nordstrom, Inc.'s internal control over financial reporting, appearing in the Annual Report on Form 10-K of Nordstrom, Inc. for
the year ended February 2, 2013.
/s/ Deloitte & Touche LLP
Seattle, Washington
March 18, 2013
Nordstrom, Inc. and subsidiaries 67
1.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Nordstrom, Inc. and Subsidiaries
Exhibit Index
Exhibit
Underwriting Agreement dated October 5, 2011, by and
among the Company and Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Wells Fargo Securities, LLC, as
representatives of the several underwriters of the Notes
Method of Filing
Incorporated by reference from the Registrant's Form 8-K filed
on October 11, 2011, Exhibit 1.1
Articles of Incorporation as amended and restated on May 25,
2005
Incorporated by reference from the Registrant's Form 8-K filed
on May 31, 2005, Exhibit 3.1
Bylaws, as amended and restated on November 19, 2008
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2008, Exhibit 3.1
Indenture between Registrant and Norwest Bank Colorado,
N.A., as trustee, dated March 11, 1998
Incorporated by reference from Registration No. 333-47035,
Exhibit 4.1
Series 2007-2 Note purchase agreement, dated as of April 25,
2007, by and between Nordstrom Credit Card Master Note
Trust II and J.P. Morgan Securities Inc. and Greenwich Capital
Markets, Inc., as representative of the initial purchasers
Amended and Restated Master Indenture, dated as of May 1,
2007, by and between Nordstrom Credit Card Master Note
Trust II and Wells Fargo Bank, National Association, as
indenture trustee
Series 2007-2 Indenture Supplement, dated as of May 1,
2007, by and between Nordstrom Credit Card Master Note
Trust II and Wells Fargo Bank, National Association, as
indenture trustee
Series 2011-1 Indenture Supplement, dated as of November
22, 2011, by and between Nordstrom Credit Card Master Note
Trust II and Wells Fargo Bank, National Association, as
indenture trustee
Note Purchase Agreement, dated as of November 13, 2009,
by and between Nordstrom Credit Card Receivables II LLC,
Nordstrom fsb, Nordstrom Credit, Inc., Falcon Asset
Securitization Company, LLC and J.P. Morgan Chase Bank,
N.A.
First Amendment to the Note Purchase Agreement dated
November 13, 2009, by and between Nordstrom Credit Card
Receivables II LLC, Nordstrom fsb, Nordstrom Credit, Inc.,
Falcon Asset Securitization Company, LLC and J.P. Morgan
Chase Bank, N.A., dated January 20, 2010
Second Amendment to the Note Purchase Agreement dated
November 13, 2009, by and between Nordstrom Credit Card
Receivables II LLC, Nordstrom fsb, Nordstrom Credit, Inc., the
conduit purchasers from time to time party thereto, the
committed purchasers from time to time party thereto, the
agents from time to time party thereto, and the administrative
agent, dated January 11, 2011
Note Purchase Agreement, dated as of November 16, 2011,
by and between Nordstrom Credit Card Receivables II LLC,
Nordstrom fsb, Nordstrom Credit, Inc., RBS Securities Inc.
and J.P. Morgan Securities LLC
Incorporated by reference from the Registrant's Form 8-K filed
on May 1, 2007, Exhibit 4.2
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 4.3
Incorporated by reference from the Registrant's Form 8-K filed
on November 28, 2011, Exhibit 4.2
Incorporated by reference from the Registrant's Form 8-K filed
on November 18, 2009, Exhibit 4.2
Incorporated by reference from the Registrant's Form 8-K filed
on January 21, 2010, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on January 13, 2011, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on November 28, 2011, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on December 3, 2007, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on May 26, 2009, Exhibit 4.1
Incorporated by reference from the Registrant's Form 8-K filed
on April 23, 2010, Exhibit 4.1
4.10
Form of 6.25% Note due January 2018
4.11
Form of 6.75% Note due June 2014
4.12
Form of 4.75% Note due May 1, 2020
68
4.13
Form of 4.00% Note due 2021
Exhibit
Nordstrom 401(k) Plan & Profit Sharing, amended and
restated on August 27, 2008
Method of Filing
Incorporated by reference from the Registrant's Form 8-K filed
on October 11, 2011, Exhibit 4.1
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 1, 2008,
Exhibit 10.1
Amendment 2009-1 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 8-K filed
on March 3, 2009, Exhibit 10.5
Amendment 2009-2 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended May 1, 2010, Exhibit 10.2
Amendment 2009-3 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended May 1, 2010, Exhibit 10.3
Amendment 2010-1 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended May 1, 2010, Exhibit 10.4
Amendment 2010-2 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended May 1, 2010, Exhibit 10.5
Amendment 2010-3 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended April 30, 2011, Exhibit 10.1
Amendment 2011-1 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-K for
the year ended January 28, 2012, Exhibit 10.8
Amendment 2012-1 to the Nordstrom 401(k) Plan & Profit
Sharing
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended April 28, 2012, Exhibit 10.3
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
Amendment to the Participant Loan Program of the Nordstrom
401(k) Plan & Profit Sharing
Incorporated by reference from the Registrant's Form 10-K for
the year ended January 28, 2012, Exhibit 10.9
10.11*
Nordstrom, Inc. Executive Management Group Bonus Plan
10.12*
Nordstrom, Inc. Executive Management Bonus Plan
Incorporated by reference from the Registrant's definitive proxy
statement filed with the Commission on April 15, 2004
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended May 2, 2009, Exhibit 10.6
10.13*
Amended and Restated Nordstrom, Inc. Executive
Management Bonus Plan
Incorporated by reference from the Registrant's Form DEF 14A
filed on March 30, 2012
10.14*
Nordstrom Executive Deferred Compensation Plan (2007)
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2007, Exhibit 10.40
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
Amendment 2008-1 to the Nordstrom Executive Deferred
Compensation Plan (2007)
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2008, Exhibit 10.2
Amendment 2008-2 to the Nordstrom Executive Deferred
Compensation Plan
Incorporated by reference from the Registrant's Form S-8 filed
on September 9, 2009, Exhibit 10.4
Amendment 2010-2 to the Nordstrom Executive Deferred
Compensation Plan (2007 Restatement)
Incorporated by reference from the Registrant's Form 8-K filed
on December 23, 2010, Exhibit 10.1
Nordstrom, Inc. Employee Stock Purchase Plan, amended
and restated on August 27, 2008
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 1, 2008,
Exhibit 10.2
Nordstrom, Inc. Employee Stock Purchase Plan (2011
Restatement)
Incorporated by reference to Appendix A to the Registrant's
Form DEF 14A filed on March 31, 2011
1997 Nordstrom Stock Option Plan, amended and restated on
February 16, 2000
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended August 2, 2003,
Exhibit 10.1
Form of Notice of 2002 Stock Option Grant and Stock Option
Agreement under the Nordstrom, Inc. 1997 Equity Incentive
Plan
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.41
* This exhibit is a management contract, compensatory plan or arrangement
Nordstrom, Inc. and subsidiaries 69
10.22*
10.23*
Exhibit
Form of Notice of 2003 Stock Option Grant and Stock Option
Agreement under the Nordstrom, Inc. 1997 Equity Incentive
Plan
Method of Filing
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.42
Form of Notice of 2004 Stock Option Grant and Stock Option
Agreement under the Nordstrom, Inc. 1997 Equity Incentive
Plan
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.43
10.24*
2004 Equity Incentive Plan
Incorporated by reference from the Registrant's definitive proxy
statement filed with the Commission on April 15, 2004
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
Nordstrom, Inc. 2004 Equity Incentive Plan (2007
Amendment)
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2007, Exhibit 10.44
Nordstrom, Inc. 2004 Equity Incentive Plan (2008
Amendment)
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2008, Exhibit 10.1
Form of Notice of 2005 Stock Option Grant and Stock Option
Agreement under the Nordstrom, Inc. 2004 Equity Incentive
Plan
Incorporated by reference from the Registrant's Form 8-K filed
on March 1, 2005, Exhibit 10.1
Form of Notice of 2006 Stock Option Grant and Stock Option
Agreement under the Nordstrom, Inc. 2004 Equity Incentive
Plan
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.45
2007 Stock Option Notice Award Agreement and Form of
Notice
Incorporated by reference from the Registrant's Form 8-K filed
on February 26, 2007, Exhibit 10.1
2008 Stock Option Notice Award Agreement and Form of
Notice
Incorporated by reference from the Registrant's Form 8-K filed
on February 22, 2008, Exhibit 10.1
2009 Nonqualified Stock Option Grant Agreement and Form of
Notice
Incorporated by reference from the Registrant's Form 8-K filed
on March 3, 2009, Exhibit 10.2
10.32*
2010 Stock Option Award Agreement
10.33*
Nordstrom, Inc. 2010 Equity Incentive Plan
10.34*
Form of 2011 Stock Option Award Agreement
10.35*
Form of 2012 Nonqualified Stock Option Grant Agreement
10.36*
Form of 2013 Nonqualified Stock Option Grant Agreement
10.37*
Nordstrom, Inc. Leadership Separation Plan (Effective March
1, 2005)
10.38*
Amendment 2006-1 to the Nordstrom, Inc. Leadership
Separation Plan
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2009, Exhibit 10.1
Incorporated by reference to Appendix A to the Registrant's
Form DEF 14A filed on April 8, 2010
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2010, Exhibit 10.1
Incorporated by reference from the Registrant's Form 8-K filed
on November 18, 2011, Exhibit 10.1
Incorporated by reference from the Registrant's Form 8-K filed
on November 14, 2012, Exhibit 10.1
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended January 29, 2005, Exhibit
10.43
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.56
10.39*
10.40*
Amendment 2008-1, Nordstrom, Inc. Leadership Separation
Plan
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2008, Exhibit 10.3
Amendment 2011-1 to the Nordstrom Leadership Separation
Plan
Incorporated by reference from the Registrant's Form 8-K filed
on August 25, 2011, Exhibit 10.1
10.41*
2008 Performance Share Unit Agreement and Form of Notice
Incorporated by reference from the Registrant's Form 8-K filed
on February 22, 2008, Exhibit 10.2
10.42*
2009 Performance Share Unit Award Agreement and Form of
Notice
Incorporated by reference from the Registrant's Form 8-K filed
on March 3, 2009, Exhibit 10.3
* This exhibit is a management contract, compensatory plan or arrangement
70
10.43*
2010 Performance Share Unit Award Agreement
Exhibit
10.44*
Form of 2011 Performance Share Unit Award Agreement
10.45*
Form of 2012 Performance Share Unit Agreement
10.46*
Form of 2013 Performance Share Unit Award Agreement
10.47*
Nordstrom Supplemental Executive Retirement Plan (2008)
Method of Filing
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2009, Exhibit 10.2
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2010, Exhibit 10.2
Incorporated by reference from the Registrant's Form 8-K filed
on November 18, 2011, Exhibit 10.2
Incorporated by reference from the Registrant's Form 8-K filed
on November 14, 2012, Exhibit 10.2
Incorporated by reference from the Registrant's Form 8-K filed
on November 24, 2008, Exhibit 10.4
Amendment 2009-1 to the Nordstrom Supplemental Executive
Retirement Plan
Incorporated by reference from the Registrant's Form 8-K filed
on March 3, 2009, Exhibit 10.4
Nordstrom Directors Deferred Compensation Plan (2002
Restatement)
10.50
Nordstrom Directors Deferred Compensation Plan (2007)
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended January 31, 2004, Exhibit
10.55
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2007, Exhibit 10.41
Amendment 2009-1 to the Nordstrom Directors Deferred
Compensation Plan
Incorporated by reference from the Registrant's Form S-8 filed
on September 9, 2009, Exhibit 10.5
2009 Form of Independent Director Indemnification
Agreement
Incorporated by reference from the Registrant's Form 8-K filed
on March 3, 2009, Exhibit 10.1
2010 Form of Independent Director Indemnification
Agreement
10.54
The 2002 Nonemployee Director Stock Incentive Plan
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended January 29, 2011, Exhibit
10.78
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 2002,
Exhibit 10.1
Nordstrom, Inc. 2002 Nonemployee Director Stock Incentive
Plan (2007 Amendment)
Incorporated by reference from the Registrant's Form 8-K filed
on November 19, 2007, Exhibit 10.39
Form of Restricted Stock Award under the 2002 Nonemployee
Director Stock Incentive Plan
10.57
Form of 2012 Restricted Stock Unit Agreement
10.58
Form of 2013 Restricted Stock Unit Award Agreement
Promissory Note dated April 18, 2002 between 1700 Seventh,
L.P. and New York Life Insurance Company
Promissory Note dated April 18, 2002 between 1700 Seventh,
L.P. and Life Investors Insurance Company of America
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 3, 2007,
Exhibit 10.1
Incorporated by reference from the Registrant's Form 8-K filed
on November 18, 2011, Exhibit 10.3
Incorporated by reference from the Registrant's Form 8-K filed
on November 14, 2012, Exhibit 10.3
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 2002,
Exhibit 10.2
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 2002,
Exhibit 10.3
Guaranty Agreement dated April 18, 2002 between Registrant,
New York Life Insurance Company and Life Investors
Insurance Company of America
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended April 30, 2002,
Exhibit 10.4
Commitment of Nordstrom, Inc. to Nordstrom fsb dated June
17, 2004
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 2004,
Exhibit 10.4
10.48*
10.49
10.51
10.52
10.53
10.55
10.56
10.59
10.60
10.61
10.62
* This exhibit is a management contract, compensatory plan or arrangement
Nordstrom, Inc. and subsidiaries 71
10.63
Exhibit
Nordstrom fsb Segregated Earmarked Deposit Agreement and
Security Agreement by and between Nordstrom fsb and
Nordstrom, Inc. dated July 1, 2004
10.64
Merchant Agreement dated August 30, 1991 between
Registrant and Nordstrom National Credit Bank
Method of Filing
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 2004,
Exhibit 10.5
Incorporated by reference from the Registrant's Quarterly
Report on Form 10-Q for the quarter ended July 31, 1991,
Exhibit 10.1
10.65
10.66
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
First Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated March 1, 2000
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.32
Second Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated March 2, 2000
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.33
Third Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated October 1, 2001
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.34
Fourth Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated November 1, 2002
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.35
Fifth Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated November 1, 2005
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.36
Sixth Amendment to Merchant Agreement and Operating
Procedures dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank, dated May 1, 2007
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended February 2, 2008, Exhibit
10.37
Revolving Credit Facility Agreement dated August 14, 2009,
between Registrant and each of the initial lenders named
therein as Lenders; Bank of America, N.A., as Agent; Wells
Fargo Bank, N.A., as Syndication Agent; The Royal Bank of
Scotland PLC and U.S. Bank National Association, as Co-
Documentation Agents; and Banc of America Securities LLC
and Wells Fargo Securities, LLC, as Joint Lead Arrangers and
Co-Book Managers
Revolving Credit Facility Agreement dated June 23, 2011,
between Registrant and each of the initial lenders named
therein as Lenders; Bank of America Merrill Lynch, as
Administrative Agent; Wells Fargo Bank, N.A., as Syndication
Agent; and RBS Citizens, N.A. and U.S. Bank, National
Association, as Documentation Agents
Officers' Certificate pursuant to Section 1.2 of the Indenture,
dated as of December 3, 2007, between Nordstrom, Inc. and
Wells Fargo Bank, N.A., in connection with the issuance of
$400M 6.75% Notes due 2014
Officers' Certificate pursuant to Section 5(h) of the
Underwriting Agreement, dated May 20, 2009, among
Nordstrom, Inc. and several underwriters, in connection with
the issuance and sale of $400M 6.75% Notes due 2014
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended July 31, 2010, Exhibit 10.1
Incorporated by reference from the Registrant's Form 8-K filed
on June 23, 2011, Exhibit 10.1
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended July 31, 2010, Exhibit 10.3
Incorporated by reference from the Registrant's Form 10-Q for
the quarter ended July 31, 2010, Exhibit 10.2
10.75
Performance Undertaking dated December 4, 2001 between
Registrant and Bank One, N.A.
Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the year ended January 31, 2002, Exhibit
10.38
10.76
Servicing Agreement, dated as of May 1, 2007, by and
between Nordstrom fsb, and Nordstrom Credit, Inc.
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.2
72
10.77
10.78
10.79
10.80
10.81
10.82
10.83
10.84
10.85
10.86
10.87
Exhibit
Amended and Restated Transfer and Servicing Agreement,
dated as of May 1, 2007, by and between Nordstrom Credit
Card Receivables II LLC, as transferor, Nordstrom fsb, as
servicer, Wells Fargo Bank, National Association, as indenture
trustee, and Nordstrom Credit Card Master Note Trust II, as
issuer
Second Amended and Restated Trust Agreement, dated as of
May 1, 2007, by and between Nordstrom Credit Card
Receivables II LLC, as transferor, and Wilmington Trust
Company, as owner trustee
Amended and Restated Administration Agreement, dated as
of May 1, 2007, by and between Nordstrom Credit Card
Master Note Trust II, as issuer, and Nordstrom fsb, as
administrator
Amended and Restated Receivables Purchase Agreement,
dated as of May 1, 2007, by and between Nordstrom Credit,
Inc., as seller and Nordstrom Credit Card Receivables II LLC,
as purchaser
Participation Agreement, dated as of May 1, 2007, by and
between Nordstrom fsb, as seller and Nordstrom Credit, Inc.,
as purchaser
Confirmation of transaction between The Royal Bank of
Scotland plc and Nordstrom Inc., dated as of December 22,
2009
Method of Filing
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.4
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.5
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.6
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.3
Incorporated by reference from the Registrant's Form 8-K filed
on May 8, 2007, Exhibit 99.1
Incorporated by reference from the Registrant's Form 8-K filed
on December 23, 2009, Exhibit 10.1
Confirmation of transaction between Wachovia Bank N.A. and
Nordstrom Inc., dated as of December 22, 2009
Incorporated by reference from the Registrant's Form 8-K filed
on December 23, 2009, Exhibit 10.2
Press release dated August 19, 2010 announcing that its
Board of Directors authorized a $500 million share repurchase
program
Press release dated May 12, 2011 announcing that its Board
of Directors authorized a $750 million share repurchase
program
Press release dated February 17, 2012 announcing that its
Board of Directors authorized an $800 million share
repurchase program
Press release dated February 27, 2013 announcing that its
Board of Directors authorized an $800 million share
repurchase program
Incorporated by reference from the Registrant's Form 8-K filed
on August 19, 2010, Exhibit 99.1
Incorporated by reference from the Registrant's Form 8-K filed
on May 12, 2011, Exhibit 99.3
Incorporated by reference from the Registrant's Form 8-K filed
on February 21, 2012, Exhibit 99.1
Incorporated by reference from the Registrant's Form 8-K filed
on February 28, 2013, Exhibit 99.1
Nordstrom, Inc. and subsidiaries 73
21.1
23.1
31.1
31.2
32.1
Significant subsidiaries of the Registrant
Filed herewith electronically
Exhibit
Method of Filing
Consent of Independent Registered Public Accounting Firm
Filed as page 67 of this report
Certification of President required by Section 302(a) of the
Sarbanes-Oxley Act of 2002
Filed herewith electronically
Certification of Chief Financial Officer required by Section
302(a) of the Sarbanes-Oxley Act of 2002
Filed herewith electronically
Certification of President and Chief Financial Officer pursuant
to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Furnished herewith electronically
101.INS XBRL Instance Document
Filed herewith electronically
101.SCH XBRL Taxonomy Extension Schema Document
Filed herewith electronically
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
Filed herewith electronically
101.LAB XBRL Taxonomy Extension Labels Linkbase Document
Filed herewith electronically
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith electronically
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
Filed herewith electronically
74
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Shareholder information cover page — right-hand option
Executive Officers
Teri Bariquit, 47
Executive Vice President,
Nordstrom Merchandise Group
Laurie M. Black, 54
Executive Vice President,
General Merchandise Manager,
Cosmetics Division
Robert E. Campbell, 57
Treasurer and Vice President,
Investor Relations
Brian Dennehy, 47
Executive Vice President and
Chief Marketing Officer
James A. Howell, 47
Vice President, Finance
Michael G. Koppel, 56
Executive Vice President and
Chief Financial Officer
Daniel F. Little, 51
Executive Vice President and
Chief Administrative Officer
Steven C. Mattics, 44
Executive Vice President,
Chairman and Chief Executive Officer,
Nordstrom fsb,
President of Nordstrom Credit, Inc.
Scott A. Meden, 50
Executive Vice President,
General Merchandise Manager,
Shoe Division
Margaret Myers, 66
Executive Vice President,
General Merchandise Manager,
Accessories and Women's
Specialized Divisions
Blake W. Nordstrom, 52
President
76
Erik B. Nordstrom, 49
Executive Vice President,
President, Stores
James F. Nordstrom, Jr., 40
Executive Vice President,
President, Nordstrom Direct
Peter E. Nordstrom, 51
Executive Vice President,
President, Merchandising
R. Michael Richardson, 56
Executive Vice President,
Chief Information Officer
Robert B. Sari, 57
Executive Vice President,
General Counsel and Secretary
Tricia D. Smith, 41
Executive Vice President,
General Merchandise Manager,
Women's Apparel
Delena M. Sunday, 52
Executive Vice President,
Human Resources and Diversity Affairs
Geevy S. K. Thomas, 48
Executive Vice President,
President, Nordstrom Rack
Paige L. Thomas, 41
Executive Vice President,
General Merchandise Manager,
Nordstrom Rack
Mark J. Tritton, 49
Executive Vice President,
President, Nordstrom Product Group
David M. Witman, 54
Executive Vice President,
General Merchandise Manager,
Men's Apparel
Kenneth Worzel, 48
Executive Vice President,
Strategy and Development
Board of Directors and Committees
Board of Directors
Phyllis J. Campbell, 61
Chairman of the Pacific Northwest
JPMorgan Chase & Co.
Seattle, Washington
Michelle M. Ebanks, 51
President & Group Publisher
Essence Communications
New York, New York
Enrique Hernandez, Jr., 57
Nordstrom, Inc. Chairman of the Board
President and Chief Executive Officer
Inter-Con Security Systems, Inc.
Pasadena, California
Robert G. Miller, 68
Chief Executive Officer
Albertsons LLC
Boise, Idaho
Blake W. Nordstrom, 52
President
Nordstrom, Inc.
Seattle, Washington
Erik B. Nordstrom, 49
Executive Vice President,
President, Stores
Nordstrom, Inc.
Seattle, Washington
Peter E. Nordstrom, 51
Executive Vice President,
President, Merchandising
Nordstrom, Inc.
Seattle, Washington
Philip G. Satre, 63
Private Investor
Retired Chief Executive Officer
Harrah's Entertainment, Inc.
Reno, Nevada
B. Kevin Turner, 47
Chief Operating Officer
Microsoft Corporation
Redmond, Washington
Robert D. Walter, 67
Private Investor
Founder and Retired Chairman and
Chief Executive Officer
Cardinal Health, Inc.
Columbus, Ohio
Alison A. Winter, 66
Chief Executive Officer and Founder
Braintree Holdings, LLC
Pasadena, California
Audit Committee
Phyllis J. Campbell, Chair
Michelle M. Ebanks
Robert G. Miller
Alison A. Winter
Compensation Committee
Robert D. Walter, Chair
Enrique Hernandez, Jr.
Philip G. Satre
B. Kevin Turner
Corporate Governance and
Nominating Committee
Philip G. Satre, Chair
Enrique Hernandez, Jr.
Robert D. Walter
Alison A. Winter
Finance Committee
Robert G. Miller, Chair
Phyllis J. Campbell
Michelle M. Ebanks
B. Kevin Turner
Nordstrom, Inc. and subsidiaries 77
Form 10-K
The Company's Annual Report on Form 10-K
for the year ended February 2, 2013 will be
provided to shareholders upon request to:
Nordstrom Investor Relations
PO Box 2737
Seattle, Washington 98111
(206) 233-6564
invrelations@nordstrom.com
Shareholder Information
Additional shareholder information, including
Nordstrom's Corporate Governance Guidelines
and Code of Business Conduct and Ethics, is
available online at www.nordstrom.com
(Investor Relations, Corporate Governance).
The Company intends to provide disclosure
of any amendments or waivers to its Code of
Business Conduct and Ethics online within
four business days following the date of
amendment or waiver. In addition, the
Company is always willing to discuss matters
of concern to shareholders. Shareholders may
contact the Company at:
(206) 233-6564
invrelations@nordstrom.com
Certifications
We have filed the required certifications under
Section 302 of the Sarbanes-Oxley Act of 2002
regarding the quality of our public disclosures
as Exhibits 31.1 and 31.2 to our annual report on
Form 10-K for the year ended February 2, 2013.
After our 2013 Annual Meeting of Shareholders,
we intend to file with the New York Stock
Exchange the CEO certification regarding
our compliance with the NYSE's corporate
governance listing standards as required
by NYSE Rule 303A.12(a).
© 2013 Nordstrom, Inc.
Shareholder Information
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Seattle, Washington
Counsel
Lane Powell PC
Seattle, Washington
Transfer Agent and Registrar
Computershare
PO Box 43006
Providence, Rhode Island 02940
Telephone (800) 318-7045
TDD for Hearing Impaired (800) 231-5469
Foreign Shareholders (201) 680-6578
TDD Foreign Shareholders (201) 680-6610
www.computershare.com/investor
General Offices
1617 Sixth Avenue
Seattle, Washington 98101
Telephone (206) 628-2111
Annual Meeting
May 14, 2013 at 11:00 a.m.
Pacific Daylight Time
Nordstrom Downtown Seattle Store
John W. Nordstrom Room, fifth floor
1617 Sixth Avenue
Seattle, Washington 98101
Printed on recycled material.
The body pages of this report contain 30%
post consumer waste (PCW), and the
cover
contains 100% PCW.
This catalog is printed on FSC® certified paper.
The recycled content of our paper is 30% post-consumer waste.
©2013 Nordstrom, Inc. All rights reserved.
342487650 PLEASE RECYCLE.
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