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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 2017April 29, 2023
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.NORDSTROM_2019_BLACK_rgb (1).jpg
Nordstrom, Inc.
(Exact name of registrant as specified in its charter)
Washington91-0515058
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
1617 Sixth Avenue, Seattle, Washington98101
(Address of principal executive offices)(Zip Code)
206-628-2111
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, without par valueJWNNew York Stock Exchange
Common stock purchase rightsNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO ¨Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES þ NO ¨Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☑
Large accelerated filer þ
Accelerated Filer		☐
Accelerated filer¨
☐
Non-accelerated filer¨ (Do not check if a smaller reporting company)
☐
Smaller reporting company¨
☐
Emerging growth company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO þYes ☐ No ☑
Common stock outstanding as of November 22, 2017: 166,582,350May 31, 2023: 161,493,792 shares

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NORDSTROM, INC.
TABLE OF CONTENTS
Page
3
6
Item 1.
7
Condensed Consolidated Statements of Earnings
Quarter and Nine Months Ended October 28, 2017 and October 29, 2016
37
Condensed Consolidated Statements of Comprehensive Earnings
Quarter and Nine Months Ended October 28, 2017 and October 29, 2016
37
Condensed Consolidated Balance Sheets
October 28, 2017, January 28, 2017 and October 29, 2016
48
Condensed Consolidated Statements of Shareholders’ Equity
Nine Months Ended October 28, 2017 and October 29, 2016
59
Condensed Consolidated Statements of Cash Flows
Nine Months Ended October 28, 2017 and October 29, 2016
610
Notes to Condensed Consolidated Financial Statements
Note 1: Basis of Presentation
711
Note 2: Canada Wind-down
12
Note 3: Revenue
14
Note 4: Debt and Credit Facilities
14
Note 5: Fair Value Measurements
15
Note 6: Stock-based Compensation
16
Note 7: Shareholders’ Equity
16
Note 8: Earnings Per Share
17
Note 9: Segment Reporting
17
Item 2.
1518
Item 3.
2628
Item 4.
2629
Item 1.
2730
Item 1A.
2730
Item 2.
2830
Item 6.
2830
31
2932
Exhibit Index
30

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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements regarding matters that are not historical facts, and are based on our management’s beliefs and assumptions and on information currently available to our management. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “pursue,” “going forward” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, our anticipated financial outlook for the fiscal year ending February 3, 2024, trends in our operations and the following:
Strategic and Operational
•successful execution of our customer strategy to provide customers superior service, products and experiences, online, through our fulfillment capabilities and in stores,
•timely and effective implementation and execution of our evolving business model, including:
◦winning at our market strategy by providing a differentiated and seamless experience, which consists of the integration of our digital and physical assets, development of new supply chain capabilities and timely delivery of products,
◦broadening the reach of Nordstrom Rack, including delivering great brands at great prices and leveraging our digital and physical assets,
◦enhancing our platforms and processes to deliver core capabilities to drive customer, employee and partner experiences both digitally and in stores,
•our ability to effectively manage our merchandise strategy, including our ability to offer compelling assortments and optimize our inventory to ensure we have the right product mix and quantity in each of our channels and locations, allowing us to get closer to our customers,
•our ability to effectively allocate and scale our marketing strategies and resources, including Nordstrom Media Network, as well as realize the expected benefits between The Nordy Club, advertising and promotional campaigns,
•our ability to respond to the evolving retail environment, including new fashion trends, environmental considerations and our customers’ changing expectations of service and experience in stores and online, and our development and outcome of new market strategies and customer offerings,
•our ability to mitigate the effects of disruptions in the global supply chain, including factory closures, transportation challenges or stoppages of certain imports, and rising prices of raw materials and freight expenses,
•our ability to control costs through effective inventory management and supply chain processes and systems,
•our ability to acquire, develop and retain qualified and diverse talent by providing appropriate training, compelling work environments and competitive compensation and benefits, especially in areas with increased market compensation, all in the context of any labor shortage and competition for talent,
•our ability to realize expected benefits, anticipate and respond to potential risks and appropriately manage costs associated with our credit card revenue sharing program,
•potential goodwill impairment charges, future impairment charges, fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames or if our strategic direction changes,
•COVID-19, which may have a negative impact on our business and results and may exacerbate any risks noted,
Data, Cybersecurity and Information Technology
•successful execution of our information technology strategy, including engagement with third-party service providers,
•the impact of any system or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, or that results in the interruption of business processes or causes financial loss, and our compliance with information security and privacy laws and regulations, as well as third-party contractual obligations in the event of such an incident,
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Reputation and Relationships
•our ability to maintain our reputation and relationships with our customers, employees, vendors and third-party partners and landlords,
•our ability to act responsibly and with transparency with respect to our corporate social responsibility practices and initiatives, meet any communicated targets, goals or milestones and adapt to evolving reporting requirements,
•our ability to market our brand and distribute our products through a variety of third-party publisher or platform channels, as well as access mobile operating system and website identifiers for personalized delivery of targeted advertising,
•the impact of a concentration of stock ownership on our shareholders’ ability to influence corporate matters,
Investment and Capital
•efficient and proper allocation of our capital resources,
•our ability to properly balance our investments in technology, Supply Chain Network facilities and existing and new store locations, including the expansion of our market strategy,
•our ability to maintain or expand our presence, including timely completion of construction associated with Supply Chain Network facilities and new, relocated and remodeled stores, as well as any potential store closures, all of which may be impacted by third parties, consumer demand and other natural or man-made disruptions, and government responses to any such disruptions,
•market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate,
•compliance with debt and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates,
•the actual timing, price, manner and amounts of future share repurchases, dividend payments or share issuances, if any, subject to the discretion of our Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules,
Economic and External
•the length and severity of epidemics or pandemics, or other catastrophic events, and the related impact on customer behavior, store and online operations and supply chain functions, as well as our future consolidated financial position, results of operations and cash flows,
•the impact of the seasonal nature of our business and cyclical customer spending,
•the impact of economic and market conditions, including inflation and measures to control inflation, and resulting changes to customer purchasing behavior, unemployment and bankruptcy rates, as well as any fiscal stimulus or the cessation of any fiscal stimulus, and the resulting impact on consumer spending and credit patterns,
•the impact of economic, environmental or political conditions,
•the impact of changing traffic patterns at shopping centers and malls,
•financial insecurity or potential insolvency experienced by our vendors, suppliers, developers, landlords, competitors or customers,
•weather conditions, natural disasters, climate change, national security concerns, global conflicts, civil unrest, other market and supply chain disruptions, the effects of tariffs, or the prospects of these events, and the resulting impact on consumer spending patterns or information technology systems and communications,
Legal and Regulatory
•our, and our vendors’, compliance with applicable domestic and international laws, regulations and ethical standards, minimum wage, employment and tax, information security and privacy, consumer credit and environmental regulations and the outcome of any claims, litigation and regulatory investigations and resolution of such matters,
•the impact of the current regulatory environment, financial system and tax reforms,
•the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations, or changes in underlying assumptions, estimates or judgments,
•the outcome of events or occurrences related to the wind-down of business operations in Canada.
These and other factors, including those factors we discuss in Part II, Item 1A. Risk Factors, could affect our financial results and cause our actual results to differ materially from any forward-looking information we may provide. Given these risks, uncertainties and other factors, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing, and these estimates and assumptions may prove to be incorrect. This Quarterly Report on Form 10-Q should be read completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
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All references to “we,” “us,” “our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries. On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations (see Note 2: Canada Wind-down) and as of this date, Nordstrom Canada was deconsolidated from Nordstrom, Inc.’s financial statements. Nordstrom Canada results prior to March 2, 2023 are included in the Company’s Condensed Consolidated Financial Statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. In addition, forward-looking statements may be impacted by the actual outcome of events or occurrences related to the wind-down of business operations in Canada.
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DEFINITIONS OF COMMONLY USED TERMS
TermDefinition
2019 Plan2019 Equity Incentive Plan
2022 Annual ReportAnnual Report on Form 10-K filed on March 10, 2023
Adjusted EPSAdjusted earnings (loss) per diluted share (a non-GAAP financial measure)
Adjusted ROICAdjusted return on invested capital (a non-GAAP financial measure)
ASCAccounting Standards Codification
ASUAccounting Standards Update
CCAACompanies’ Creditors Arrangement Act
Digital salesSales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also includes a reserve for estimated returns.
EBITEarnings (loss) before interest and income taxes
EBIT MarginEarnings (loss) before interest and income taxes as a percent of net sales
EBITDAEarnings (loss) before interest, income taxes, depreciation and amortization
EBITDAREarnings (loss) before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant
EPSEarnings (loss) per share
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
First quarter of 202313 fiscal weeks ending April 29, 2023
First quarter of 202213 fiscal weeks ending April 30, 2022
Fiscal year 202353 fiscal weeks ending February 3, 2024
Fiscal year 202252 fiscal weeks ending January 28, 2023
GAAPU.S. generally accepted accounting principles
GMVGross merchandise value
Gross profitNet sales less cost of sales and related buying and occupancy costs
Leverage RatioThe sum of our funded debt and operating lease liabilities divided by the preceding twelve months of Adjusted EBITDAR as defined by our Revolver covenant
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
NAVNet asset value
NMNNordstrom Media Network, where we use our first party data and marketing infrastructure to drive cooperative marketing with vendors across both offsite and onsite marketing platforms
NordstromNordstrom.com, Nordstrom U.S. stores, Nordstrom Local and ASOS | Nordstrom. Nordstrom also included Canada operations prior to March 2, 2023, inclusive of Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, and TrunkClub.com prior to October 2022.
Nordstrom CanadaNordstrom Canada Retail, Inc., Nordstrom Canada Holdings, LLC and Nordstrom Canada Holdings II, LLC
Nordstrom LocalNordstrom Local service hubs, which offer order pickups, returns, alterations and other services
Nordstrom RackNordstromRack.com, Nordstrom Rack U.S. stores and Last Chance clearance stores
The Nordy ClubOur customer loyalty program
NYSENew York Stock Exchange
Operating Lease CostFixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization
PCAOBPublic Company Accounting Oversight Board (United States)
Property incentivesDeveloper and vendor reimbursements
PSUPerformance share unit
RevolverSenior revolving credit facility
Rights PlanOur limited-duration Shareholder Rights Agreement adopted by the Board of Directors in September 2022
ROU assetOperating lease right-of-use asset
RSURestricted stock unit
SECSecurities and Exchange Commission
SERPUnfunded defined benefit Supplemental Executive Retirement Plan
SG&ASelling, general and administrative
Supply Chain NetworkFulfillment centers that primarily process and ship orders to our customers, distribution centers that primarily process and ship merchandise to our stores and other facilities and omni-channel centers that both fulfill customer orders and ship merchandise to our stores
TDToronto-Dominion Bank, N.A.
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Amounts in millions except per share amounts)
(Unaudited)
Quarter Ended Nine Months EndedQuarter Ended
October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
April 29, 2023April 30, 2022
Net sales
$3,541
 
$3,472
 
$10,537
 
$10,255
Net sales$3,064 $3,467 
Credit card revenues, net88
 70
 239
 186
Credit card revenues, net117 102 
Total revenues3,629
 3,542
 10,776
 10,441
Total revenues3,181 3,569 
Cost of sales and related buying and occupancy costs(2,315) (2,261) (6,921) (6,720)Cost of sales and related buying and occupancy costs(2,028)(2,331)
Selling, general and administrative expenses(1,106) (1,029) (3,280) (3,143)Selling, general and administrative expenses(1,103)(1,165)
Goodwill impairment—
 (197) —
 (197)
Earnings before interest and income taxes208
 55
 575
 381
Canada wind-down costsCanada wind-down costs(309)— 
(Loss) earnings before interest and income taxes(Loss) earnings before interest and income taxes(259)73 
Interest expense, net(28) (30) (104) (90)Interest expense, net(28)(35)
Earnings before income taxes180
 25
 471
 291
Income tax expense(66) (35) (185) (138)
Net earnings (loss)
$114
 
($10) 
$286
 
$153
(Loss) earnings before income taxes(Loss) earnings before income taxes(287)38 
Income tax benefit (expense)Income tax benefit (expense)82 (18)
Net (loss) earningsNet (loss) earnings($205)$20 
       
Earnings (Loss) per share:       
(Loss) earnings per share:(Loss) earnings per share:
Basic
$0.68
 
($0.06) 
$1.72
 
$0.88
Basic($1.27)$0.13 
Diluted
$0.67
 
($0.06) 
$1.70
 
$0.87
Diluted($1.27)$0.13 
       
Weighted-average shares outstanding:       Weighted-average shares outstanding:
Basic166.6
 173.4
 166.7
 173.3
Basic160.8 160.1 
Diluted168.8
 173.4
 168.8
 175.6
Diluted160.8 162.9 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.
NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(Amounts in millions)
(Unaudited)
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Net earnings (loss)
$114
 
($10) 
$286
 
$153
Foreign currency translation adjustment(11) (9) 9
 8
Postretirement plan adjustments, net of tax—
 —
 2
 1
Comprehensive net earnings (loss)
$103
 
($19) 
$297
 
$162
Quarter Ended
April 29, 2023April 30, 2022
Net (loss) earnings($205)$20 
Foreign currency translation adjustment(4)(1)
Post retirement plan adjustments, net of tax— 1 
Comprehensive net (loss) earnings($209)$20 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions)
(Unaudited)

October 28, 2017
 January 28, 2017
 October 29, 2016
April 29, 2023January 28, 2023April 30, 2022
Assets     Assets
Current assets:     Current assets:
Cash and cash equivalents
$672
 
$1,007
 
$531
Cash and cash equivalents$581 $687 $484 
Accounts receivable, net211
 199
 216
Accounts receivable, net279 265 297 
Merchandise inventories2,434
 1,896
 2,411
Merchandise inventories2,237 1,941 2,426 
Prepaid expenses and other162
 140
 227
Prepaid expenses and other current assetsPrepaid expenses and other current assets414 316 332 
Total current assets3,479
 3,242
 3,385
Total current assets3,511 3,209 3,539 
     
Land, property and equipment (net of accumulated depreciation of $5,952, $5,596 and $5,462)3,940
 3,897
 3,865
Land, property and equipment (net of accumulated depreciation of $8,133, $8,289 and $7,834)Land, property and equipment (net of accumulated depreciation of $8,133, $8,289 and $7,834)3,197 3,351 3,505 
Operating lease right-of-use assetsOperating lease right-of-use assets1,393 1,470 1,497 
Goodwill238
 238
 238
Goodwill249 249 249 
Other assets529
 481
 478
Other assets478 466 384 
Total assets
$8,186
 
$7,858
 
$7,966
Total assets$8,828 $8,745 $9,174 
     
Liabilities and Shareholders’ Equity     Liabilities and Shareholders’ Equity
Current liabilities:     Current liabilities:
Accounts payable
$1,815
 
$1,340
 
$1,653
Accounts payable$1,674 $1,238 $1,898 
Accrued salaries, wages and related benefits433
 455
 391
Accrued salaries, wages and related benefits246 291 241 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities249 258 250 
Other current liabilities1,166
 1,223
 1,186
Other current liabilities1,236 1,203 1,198 
Current portion of long-term debt57
 11
 11
Current portion of long-term debt249 — — 
Total current liabilities3,471
 3,029
 3,241
Total current liabilities3,654 2,990 3,587 
     
Long-term debt, net2,681
 2,763
 2,767
Long-term debt, net2,608 2,856 2,854 
Deferred property incentives, net510
 521
 532
Non-current operating lease liabilitiesNon-current operating lease liabilities1,406 1,526 1,566 
Other liabilities670
 675
 566
Other liabilities609 634 578 
     
Commitments and contingencies (Note 4)
 
 
Commitments and contingencies (Note 2)Commitments and contingencies (Note 2)
     
Shareholders’ equity:     Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 166.6, 170.0 and 173.2 shares issued and outstanding2,785
 2,707
 2,651
Common stock, no par value: 1,000 shares authorized; 161.4, 160.1 and 160.5 shares issued and outstandingCommon stock, no par value: 1,000 shares authorized; 161.4, 160.1 and 160.5 shares issued and outstanding3,372 3,353 3,301 
Accumulated deficit(1,899) (1,794) (1,742)Accumulated deficit(2,824)(2,588)(2,662)
Accumulated other comprehensive loss(32) (43) (49)
Accumulated other comprehensive gain (loss)Accumulated other comprehensive gain (loss)3 (26)(50)
Total shareholders’ equity854
 870
 860
Total shareholders’ equity551 739 589 
Total liabilities and shareholders’ equity
$8,186
 
$7,858
 
$7,966
Total liabilities and shareholders’ equity$8,828 $8,745 $9,174 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in millions except per share amounts)
(Unaudited)
       Accumulated 
  
       Other
  
 Common Stock Accumulated
 Comprehensive
  
 Shares
 Amount
 Deficit
 Loss
 Total
Balance at January 28, 2017170.0
 
$2,707
 
($1,794) 
($43) 
$870
Net earnings—
 —
 286
 —
 286
Other comprehensive earnings—
 —
 —
 11
 11
Dividends ($1.11 per share)—
 —
 (185) —
 (185)
Issuance of common stock under stock compensation plans0.7
 25
 —
 —
 25
Stock-based compensation0.5
 53
 —
 —
 53
Repurchase of common stock(4.6) —
 (206) —
 (206)
Balance at October 28, 2017166.6
 
$2,785
 
($1,899) 
($32) 
$854
          
          
       Accumulated
  
       Other
  
 Common Stock Accumulated
 Comprehensive
  
 Shares
 Amount
 Deficit
 Loss
 Total
Balance at January 30, 2016173.5
 
$2,539
 
($1,610) 
($58) 
$871
Net earnings—
 —
 153
 —
 153
Other comprehensive earnings—
 —
 —
 9
 9
Dividends ($1.11 per share)—
 —
 (192) —
 (192)
Issuance of common stock under stock compensation plans1.4
 50
 —
 —
 50
Stock-based compensation0.2
 62
 —
 —
 62
Repurchase of common stock(1.9) —
 (93) —
 (93)
Balance at October 29, 2016173.2
 
$2,651
 
($1,742) 
($49) 
$860
Quarter Ended
April 29, 2023April 30, 2022
Common stock
Balance, beginning of period$3,353 $3,283 
Issuance of common stock under stock compensation plans11 8 
Stock-based compensation8 10 
Balance, end of period$3,372 $3,301 
Accumulated deficit
Balance, beginning of period($2,588)($2,652)
Net (loss) earnings(205)20 
Dividends(30)(30)
Repurchase of common stock(1)— 
Balance, end of period($2,824)($2,662)
Accumulated other comprehensive gain (loss)
Balance, beginning of period($26)($50)
Accumulated translation loss reclassified to earnings33 — 
Other comprehensive loss(4)— 
Balance, end of period$3 ($50)
Total shareholders’ equity$551 $589 
Dividends per share$0.19 $0.19 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Quarter Ended
April 29, 2023April 30, 2022
Operating ActivitiesOperating Activities
Net (loss) earningsNet (loss) earnings($205)$20 
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization expensesDepreciation and amortization expenses144 152 
Canada wind-down costsCanada wind-down costs220 — 
Right-of-use asset amortizationRight-of-use asset amortization43 47 
Deferred income taxes, netDeferred income taxes, net(16)(13)
Stock-based compensation expenseStock-based compensation expense14 19 
Other, netOther, net(25)(45)
Change in operating assets and liabilities:Change in operating assets and liabilities:
Merchandise inventoriesMerchandise inventories(296)(19)
Other current and noncurrent assetsOther current and noncurrent assets(112)(42)
Accounts payableAccounts payable301 233 
Accrued salaries, wages and related benefitsAccrued salaries, wages and related benefits(39)(143)
Lease liabilitiesLease liabilities(67)(65)
Other current and noncurrent liabilitiesOther current and noncurrent liabilities54 43 
Net cash provided by operating activitiesNet cash provided by operating activities16 187 
Investing ActivitiesInvesting Activities
Capital expendituresCapital expenditures(106)(96)
Decrease in cash and cash equivalents resulting from Canada deconsolidationDecrease in cash and cash equivalents resulting from Canada deconsolidation(33)— 
Proceeds from the sale of assets and other, netProceeds from the sale of assets and other, net16 85 
Net cash used in investing activitiesNet cash used in investing activities(123)(11)
Financing ActivitiesFinancing Activities
Nine Months Ended
October 28, 2017
 October 29, 2016
Operating Activities   
Net earnings
$286
 
$153
Adjustments to reconcile net earnings to net cash provided by operating activities:   
Depreciation and amortization expenses479
 480
Goodwill impairment—
 197
Amortization of deferred property incentives and other, net(62) (59)
Deferred income taxes, net(82) (14)
Stock-based compensation expense59
 68
Change in operating assets and liabilities:   
Accounts receivable(11) (20)
Merchandise inventories(465) (393)
Prepaid expenses and other assets(35) 25
Accounts payable419
 360
Accrued salaries, wages and related benefits(22) (26)
Other current liabilities(53) 33
Deferred property incentives55
 54
Other liabilities29
 20
Net cash provided by operating activities597

878
Change in cash book overdraftsChange in cash book overdrafts29 16 
Cash dividends paidCash dividends paid(30)(30)
   
Investing Activities   
Capital expenditures(536) (625)
Proceeds from issuances under stock compensation plansProceeds from issuances under stock compensation plans11 8 
Other, net29
 47
Other, net(9)(8)
Net cash used in investing activities(507) (578)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities1 (14)
   
Financing Activities   
Proceeds from long-term borrowings, net of discounts635
 —
Principal payments on long-term borrowings(658) (7)
Decrease in cash book overdrafts(3) (127)
Cash dividends paid(185) (192)
Payments for repurchase of common stock(211) (91)
Proceeds from issuances under stock compensation plans25
 51
Tax withholding on share-based awards(7) (4)
Other, net(21) 6
Net cash used in financing activities(425) (364)
   
Net decrease in cash and cash equivalents(335) (64)
Net (decrease) increase in cash and cash equivalentsNet (decrease) increase in cash and cash equivalents(106)162 
Cash and cash equivalents at beginning of period1,007
 595
Cash and cash equivalents at beginning of period687 322 
Cash and cash equivalents at end of period
$672
 
$531
Cash and cash equivalents at end of period$581 $484 
   
Supplemental Cash Flow Information   Supplemental Cash Flow Information
Cash paid during the period for:   
Income taxes, net
$291
 
$99
Cash paid (received) during the period for:Cash paid (received) during the period for:
Income taxes, net of refundsIncome taxes, net of refunds$2 ($22)
Interest, net of capitalized interest106
 83
Interest, net of capitalized interest40 40 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 1: BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries (the “Company”). All intercompany transactions and balances are eliminated in consolidation. The interim Condensed Consolidated Financial Statements have been prepared on a basis consistent in all material respects with the accounting policies described and applied in our 2016 2022 Annual Report on Form 10-K (“Annual Report”), and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented.
The Condensed Consolidated Financial Statements as of and for the periods ended October 28, 2017April 29, 2023 and October 29, 2016April 30, 2022 are unaudited. The Condensed Consolidated Balance Sheet as of January 28, 20172023 has been derived from the audited Consolidated Financial Statements included in our 2016 2022 Annual Report.Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our 2016 2022 Annual Report.Report.
Principles of Consolidation
The Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations (see Note 2: Canada Wind-down) and as of this date, Nordstrom Canada was deconsolidated from Nordstrom, Inc.’s financial statements. Nordstrom Canada results prior to March 2, 2023 are included in the Company’s Condensed Consolidated Financial Statements.
Fiscal Year
We operate on a 52/53-week fiscal year ending on the Saturday closest to January 31st. References to 2023 relate to the 53-week fiscal year ending February 3, 2024. References to any other years included within this document are based on a 52-week fiscal year.
Seasonality
Our business, like that of other retailers, is subject to seasonal fluctuations and cyclical trends in consumer spending. Our sales are typically higher in our second quarter, which usually includes most of our Anniversary Sale, and in the fourth quarter due to the holidays. Approximately one week of our Anniversary Sale will shift from the second quarter to the third quarter in 2023.
Results for any one quarter are not indicative of the results that may be achieved for a full fiscal year. We plan our merchandise purchases and receipts to coincide with expected sales trends. For instance, our merchandise purchases and receipts increase prior to the Anniversary Sale and in the fall as we prepare for the holiday shopping season (typically from November through December). Consistent with our seasonal fluctuations, our working capital requirements have historically increased during the months leading up to the Anniversary Sale and the holidays as we purchase inventory in anticipation of increased sales.
Use of Estimates
The preparation of our financial statements in conformity with GAAP requires management tothat we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base ourliabilities during the reporting period. Uncertainties regarding such estimates on historical experience and other assumptions that we believe to be reasonable underare inherent in the circumstances. Actualpreparation of financial statements and actual results may differ from these estimates and assumptions. Our most significant accounting judgments and estimates include revenue recognition, inventory valuation, long-lived asset recoverability, income taxes and contingent liabilities, including assumptions related to our Canada wind-down, all of which involve assumptions about future events.
Our business, like thatLeases
We incurred operating lease liabilities arising from lease agreements of other retailers, is subject to seasonal fluctuations. Our sales are typically higher during our Anniversary Sale$72 for the quarter ended April 29, 2023 and $84 for the holidaysquarter ended April 30, 2022.
Trunk Club Wind-down
During the first quarter of 2022, in the fourth quarter. Consistentconjunction with the timing in 2016, our 2017 Anniversary Sale began in July and extended one week intodecision to sunset the third quarter. Results for any quarter are not indicativeTrunk Club brand, we incurred non-cash impairment charges of $10 related to a Trunk Club property to adjust the results that may be achieved for a full fiscal year.
Accounts Receivable
On July 31, 2017, we entered into an agreement with TD Bank USA, N.A. (“TD”) to sell our employee credit card receivables for an amount equalcarrying value to the gross value of the outstanding receivables. Additionally, we entered into an amended long-term program agreement under which TD will continue to be the exclusive issuer of all our U.S. Visa and private label credit cards and we will continue to perform account servicing functions. As of October 28, 2017, our employee credit card receivables of $54,estimated fair value. These charges are included in accounts receivable,our Retail segment SG&A expense on the Condensed Consolidated Statement of Earnings and other operating, net on the Condensed Consolidated Statement of Cash Flows.
Investments
From time to time, we invest in financial interests of private companies and venture capital funds that align with our business and omni-channel strategies, which are recorded in other assets in the Condensed Consolidated Balance Sheets is “held for sale” and as such, is recorded at the lower of cost or fair value (see Note 3: Fair Value Measurements). Subsequent to quarter end, on November 1, 2017, we completedproceeds from the sale of our employee credit card receivables to TD.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which was subsequently modified in August 2015 by ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timingassets and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs which clarify the implementation guidance on principal versus agent considerations, on identifying performance obligations and licensing,other, net on the revenue recognition criteria and other technical corrections.In our ongoing evaluationCondensed Consolidated Statements of this ASU, we have determined that the new standard will primarily impact us in the following ways: gift card breakage will be estimated based on expected customer redemption periods, rather than when redemption is considered remote; sales attributable to the loyalty program benefits (e.g., points, alterations) will be deferred rather than recording the loyalty program expenses as an increase to cost of sales; remaining unamortized balances of deferred revenue and the investment in contract asset related to the 2015 sale of our receivables to TD will be recorded as a cumulative-effect adjustment directly to retained earnings as of the beginning of the adoption period; revenue related to our online sales will be recognized at the shipping point rather than upon receipt by the customer; and estimated costs of returns will be recorded as a current asset rather than netted with our sales return reserve. We plan to adopt this ASU in the first quarter of 2018 and we anticipate using the modified retrospective adoption method. We are continuing to evaluate the impacts this ASU and related disclosures will have on our Consolidated Financial Statements. 
In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as right-of-use assets and lease liabilities. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification dictates whether lease expense is to be recognized based on an effective interest method or on a straight-line basis over the term of the lease. Additional qualitative and quantitative disclosures will be required to give financial statement users information on the amount, timing and judgments related to a reporting entity’s cash flows arising from leases. This ASU is effective for us beginning in the first quarter of 2019. We are currently evaluating the impact of the standard, which will require recognizing and measuring leases at the beginning of the earliest period presented using a modified retrospective approach. We expect adoption of this standard will have a material impact on our Consolidated Financial Statements.

Cash Flows.
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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


In March 2016,During the FASB issued ASU No. 2016-09, Compensation — Stock Compensation — Improvements to Employee Share-Based Payment Accounting, which simplifies several aspectsfirst quarter of 2022, in connection with the accounting for share-based payments and presentation within the financial statements. We adopted ASU No. 2016-09 with an effective datesale of January 29, 2017. The impacta limited partnership interest in a corporate office building, we recognized a gain of the adoption resulted$51 in our Corporate/Other SG&A expense in the following:
Excess tax benefitsCondensed Consolidated Statement of Earnings and deficiencies resulting$73 in proceeds from stock-based compensation arrangements are now recorded within income tax expensethe sale of assets and other, net on the Condensed Consolidated Statement of Earnings when the awards vest or are settled, rather than within equity. Additionally, excess tax benefits are now excluded from assumed future proceedsCash Flows.
Reclassification
We reclassified amounts in our calculationfiscal 2022 Condensed Consolidated Statement of diluted sharesCash Flows to conform with current period presentation. As a result, we aggregated:
•Accounts receivable, net with prepaid expenses and other assets into other current and noncurrent assets
•Other current liabilities with other liabilities into other current and noncurrent liabilities
•Tax withholding on share-based awards with other financing, net
These reclassifications had no impact on cash flows from operations, cash flows from investing or cash flows from financing.
NOTE 2: CANADA WIND-DOWN
Background
On March 2, 2023, as part of our initiatives to drive long-term profitable growth and enhance shareholder value, and after careful consideration of all reasonably available options, we announced the decision to discontinue support for purposesNordstrom Canada’s operations. Accordingly, Nordstrom Canada has commenced a wind-down of determining diluted earnings per share. its business operations, obtaining an Initial Order from the Ontario Superior Court of Justice under the CCAA on March 2, 2023 to facilitate the wind-down in an orderly fashion. Nordstrom Canada’s ecommerce platform ceased operations on March 2, 2023 and we anticipate the wind-down of our six Nordstrom and seven Nordstrom Rack stores, with the help of a third-party liquidator, to be completed by late June 2023.
The prospective adoptionOntario Superior Court of this provision did not haveJustice has appointed a material effectmonitor to oversee the wind-down process. Subsequent to the CCAA filing, Nordstrom has been providing limited support to Nordstrom Canada for the purpose of supporting an orderly wind-down, including providing shared services and temporary use of intellectual property.
Wind-down Costs and Deconsolidation of Nordstrom Canada
The following table provides detail of pre-tax charges associated with the wind-down of operations in Canada:
Quarter Ended April 29, 2023
Loss on Canada write-off1
$187
Accumulated translation loss reclassified to earnings1
33
Contingent liabilities2
77
Other exit costs3
12
Total pre-tax costs$309
1 Non-cash amounts are included in Canada wind-down costs on the Condensed Consolidated Financial Statements forStatement of Cash Flows.
2 Amounts are included in other current liabilities on the nine months ended October 28, 2017. We had no previously unrecognized excess tax benefits that would have resultedCondensed Consolidated Balance Sheets.
3 Other exit costs include funding an employee trust and professional fees.
These charges are primarily included in a cumulative-effect adjustment to beginning retained earnings.
Forfeitures on share-based awards are recorded as they occur, rather than our historical method of estimating forfeitures at the grant date. In evaluating the impact of this change, the adjustment to adopt on a modified retrospective basis was immaterial, therefore no adjustment has been made to beginning retained earnings.
Excess tax benefits from stock-based compensation arrangements are classified as cash flows from operations, rather than as cash flows from financing activities. We adopted this change retrospectively, which resultedcorporate/other in an increase to net cash provided by operating activities and an increaseNote 9: Segment Reporting. The decrease in cash flows useddue to the deconsolidation of Nordstrom Canada is included in financing activities of $2 for the nine months ended October 29, 2016. Additionally, cash flows related to withholding shares for tax purposes on net-settled awards are classified as financing activities, rather than operating activities. This classification change was also adopted retrospectively, resulting in an increase of $4 to net cash provided by operating activities with an offsetting increase to net cash used in financinginvesting activities on the Condensed Consolidated Statement of Cash Flows forand all other impacts are included in operating cash flows.
Loss on Canada Write-off and Accumulated Translation Loss
While Nordstrom continues to own 100% of the nine months ended October 29, 2016.shares of Nordstrom Canada, as of March 2, 2023, the date of the CCAA filing, we no longer have a controlling interest and have deconsolidated Nordstrom Canada. We hold a variable interest in the Nordstrom Canada entities, which are considered variable interest entities, but are not consolidated, as we are no longer the primary beneficiary.
The pre-tax loss on Canada write-off of $187 in the first quarter of 2023 included the derecognition of Nordstrom Canada’s assets and liabilities and the write-down of both our Nordstrom Canada investment and related-party receivables to estimated fair value. In January 2017,addition, we recognized a charge of $33 related to the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other: Simplifyingderecognition of the Test for Goodwill Impairment, which simplifiesaccumulated comprehensive loss on foreign currency translation.
To assess the accounting for goodwill impairment by eliminating step two from the goodwill impairment test. Under this new guidance, if the carrying amount of a reporting unit exceeds its estimated fair value an impairment charge shall be recognizedof our Nordstrom Canada investment and our related-party receivables, we estimated the assets available for distribution in anrelation to expected claims at the time of filing. The estimated amount equalof Nordstrom Canada’s liabilities exceeded the estimated fair value of assets available for distribution to that excess, limitedcreditors, and in relation to the total amountreceivables, we may not recover any proceeds. As a result, our fair value is recorded as zero in our Condensed Consolidated Balance Sheets as of goodwill allocated to that reporting unit. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact this guidance would have on our Consolidated Financial Statements.

April 29, 2023.
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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)

Prior to deconsolidation, Nordstrom made loans to and incurred receivables from the Canadian subsidiaries. These loans were considered intercompany transactions and were eliminated in consolidation of Nordstrom. Subsequent to deconsolidation, these receivables were no longer eliminated through consolidation, are considered related-party transactions and are recorded in our Condensed Consolidated Balance Sheets at estimated fair value. Nordstrom has an outstanding liability to Nordstrom Canada of $62 related to certain intercompany charges incurred prior to deconsolidation, which will be addressed as part of the wind-down process.
Contingent Liabilities and Guarantees
In the first quarter of 2023, we recorded a contingent liability of $77 as our current best estimate of expected payments for claims that may be asserted against us, primarily consisting of lease guarantees. Nordstrom has guaranteed certain lease obligations of Nordstrom Canada, with payment required by Nordstrom, Inc. upon failure of Nordstrom Canada to fulfill its obligations under the leases. Our estimate is based on expectations that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable that we would be found liable were these claims to be litigated and for how much. The maximum potential undiscounted future minimum lease and real estate tax payments under these guarantees were approximately $178 as of April 29, 2023.
Employee Trust
In connection with the filing, Nordstrom established an employee trust to fund termination and severance payments to employees of Nordstrom Canada. We provided an initial contribution of $10 based on our best estimate to fully fund the employee trust, and we have committed to provide up to an additional $8 depending on eligible employee claims. The cash balance of the employee trust is not recorded in Nordstrom, Inc.’s Condensed Consolidated Balance Sheets.
Debtor-in-Possession Financing
If needed, Nordstrom has agreed to provide Nordstrom Canada debtor-in-possession financing up to $11. However, we believe Nordstrom Canada has sufficient liquidity to sustain operations through the wind-down period. As of April 29, 2023, there were no outstanding borrowings.
Estimates
All our estimates are dependent on the outcome of the Nordstrom Canada wind-down process, including the amount of third-party and Nordstrom claims asserted and recognized in the claims process, the amount of assets available for distribution, the negotiation of a CCAA plan of arrangement approved by the creditors and the Ontario Superior Court of Justice and the outcome of negotiations regarding the leases. We are in the early stages of the wind-down process and our estimates of losses are based on currently available information and our assessment of the validity of certain expected claims. These estimates may change as new information becomes available and it is reasonably possible that they may materially change from the estimated amounts. Increases in estimated costs to settle claims and decreases in estimated assets available for distribution may result in additional material charges. At the same time, any future decreases in estimated costs to settle claims or increases in estimated assets available for distribution may result in a gain, which will reduce our estimated charges.
Amendment of Revolver Agreement
On March 1, 2023, we amended our Revolver originally dated May 6, 2022. Prior to this amendment, Nordstrom Canada Retail, Inc. was a loan party under the Revolver and the obligations under the Revolver were secured, in part, by the assets of this subsidiary. As a result of this amendment, Nordstrom Canada Retail, Inc. has been removed as a loan party and obligations under the Revolver will no longer be secured by these assets. In addition, this amendment excludes as subsidiaries or affiliates all Nordstrom Canada entities and carves out certain CCAA-related expenses and obligations from financial covenants under the Revolver.
Income Taxes
In the first quarter of 2023, we recognized net tax benefits of $93 primarily related to the write-off of excess tax basis in our investment in Canada, net of tax expense related to an increase in valuation allowance for Canada deferred tax assets.
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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)
NOTE 3: REVENUE
Contract Liabilities
Contract liabilities represent our obligation to transfer goods or services to customers and include deferred revenue for The Nordy Club (including points and Nordstrom Notes), gift cards and our amended 2022 TD program agreement. Our contract liabilities are classified on the Condensed Consolidated Balance Sheets as follows:
Other current liabilitiesOther liabilities
Balance as of January 29, 2022$478 $— 
Balance as of April 30, 2022442 — 
Balance as of January 28, 2023536 136 
Balance as of April 29, 2023489 123 
Revenues recognized from our beginning contract liability balance were $137 for the quarter ended April 29, 2023 and $128 for the quarter ended April 30, 2022.
Disaggregation of Revenue
The following table summarizes our disaggregated net sales:
Quarter Ended
April 29, 2023April 30, 2022
Nordstrom$2,027 $2,289 
Nordstrom Rack1,037 1,178 
Total net sales$3,064 $3,467 
Digital sales as a % of total net sales36 %39 %
The following table summarizes the percent of net sales by merchandise category:
Quarter Ended
April 29, 2023April 30, 2022
Women’s Apparel29 %30 %
Shoes26 %26 %
Men’s Apparel15 %14 %
Accessories12 %13 %
Beauty12 %11 %
Kids’ Apparel3 %3 %
Other3 %3 %
Total net sales100 %100 %
NOTE 2:4: DEBT AND CREDIT FACILITIES
Debt
A summary of our long-term debt, including capital leases, is as follows:
 October 28, 2017

January 28, 2017

October 29, 2016
Secured     
Mortgage payable, 7.68%, due April 2020
$20
 
$24
 
$26
Other1
 3
 3
Total secured debt21
 27
 29
      
Unsecured     
Net of unamortized discount:     
Senior notes, 6.25%, due January 2018—
 650
 650
Senior notes, 4.75%, due May 2020499
 499
 499
Senior notes, 4.00%, due October 2021500
 500
 500
Senior notes, 4.00%, due March 2027349
 —
 —
Senior debentures, 6.95%, due March 2028300
 300
 300
Senior notes, 7.00%, due January 2038146
 146
 146
Senior notes, 5.00%, due January 2044891
 602
 602
Other32
 50
 52
Total unsecured debt2,717
 2,747
 2,749
      
Total long-term debt2,738
 2,774
 2,778
Less: current portion(57) (11) (11)
Total due beyond one year
$2,681
 
$2,763
 
$2,767

During the first quarter of 2017, we issued $350 aggregate principal amount of 4.00% senior unsecured notes due March 2027 and $300 aggregate principal amount of 5.00% senior unsecured notes due January 2044. With the proceeds of these new notes, we retired our $650 senior unsecured notes that were due January 2018. We incurred $18 of net interest expense related to the refinancing, which included the write-off of unamortized balances associated with the debt discount, issue costs and fair value hedge adjustment resulting from the sale of our interest rate swap agreements in 2012. It also included a one-time payment of $24 to 2018 Senior Note holders under a make-whole provision, which represents the net present value of expected coupon payments had the notes been outstanding through the original maturity date.
Credit Facilities
As of October 28, 2017,April 29, 2023, we had total short-term borrowing capacity of $800 and no outstanding borrowings under our senior unsecured revolving credit facility (“revolver”)the Revolver that expires in April 2020. UnderMay 2027. Provided that we obtain written consent from the terms of our revolver,lenders, 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. We have the option to increase the revolving commitmentRevolver by up to $200, to a total of $1,000, provided that we obtain written consent fromand two options to extend the lenders. From time to time we utilize our commercial paper program to fund working capital needs, which has the effect of reducing available liquidity under the revolver until repaid.
As of October 28, 2017, we had no issuances outstanding under our commercial paper program and no borrowings outstanding under our revolver.
The revolver requires that we maintain an adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) leverage ratio of no more than four times. As of October 28, 2017, we were in compliance with this covenant.

Revolver for additional one-year terms.
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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


Any outstanding borrowings under the Revolver are secured by substantially all our personal and intellectual property assets and are guaranteed by certain of our subsidiaries. Under the Revolver, our obligation to secure any outstanding borrowings will be eliminated if no default exists and we either have an unsecured investment-grade debt rating from two of three specified ratings agencies, or we have one investment-grade rating and achieve two consecutive fiscal quarters with a Leverage Ratio of less than 2.5 times. On March 1, 2023, we amended our Revolver agreement (see Note 2: Canada Wind-down).
Under the Revolver, we have two financial covenant tests that need to be met on a quarterly basis: a Leverage Ratio that is less than or equal to 4 times and a fixed charge coverage ratio that is greater than or equal to 1.25 times. As of April 29, 2023, we were in compliance with all covenants.
The Revolver contains customary representations, warranties, covenants and terms, including paying a variable rate of interest and a facility fee based on our debt rating, and is available for working capital, capital expenditures and general corporate purposes. The Revolver allows us to issue dividends and repurchase shares provided we are not in default and no default would arise as a result of such payments. If the pro-forma Leverage Ratio after such payments is less than 3 times, then such payments are unlimited. If the pro-forma Leverage Ratio is greater than or equal to 3 times but less than 3.5 times, then we are limited to $100 per fiscal quarter and if the pro-forma Leverage Ratio is greater than or equal to 3.5 times then the limit is $60 per fiscal quarter.
Our $800 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 of reducing available liquidity under the Revolver by an amount equal to the principal amount of commercial paper outstanding. Conversely, borrowings under our Revolver have the effect of reducing the available capacity of our commercial paper program by an amount equal to the amount outstanding. As of April 29, 2023, we had no issuances outstanding under our commercial paper program.
NOTE 3:5: FAIR VALUE MEASUREMENTS
We disclose our financial assets and liabilities that are measured at fair value in our Condensed 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
Financial Instruments Not Measured at FairCarrying Value
Financial instruments not measured at faircarrying value on a recurring basis include cash and cash equivalents, accounts receivable, (excluding employee credit card receivables “held for sale”), accounts payable and certificates of deposit,our Revolver, which approximate fair value due to their short-term nature, andnature.
Long-term debt is recorded at carrying value. If long-term debt.
We estimate thedebt was measured at fair value, of our long-term debt usingwe would use quoted market prices of the same or similar issues, and, as such, thiswhich is considered a Level 2 fair value measurement. The following table summarizes the carrying value and fair value estimate of our long-term debt, including current maturities:
 October 28, 2017
 January 28, 2017
 October 29, 2016
Carrying value of long-term debt
$2,738
 
$2,774
 
$2,778
Fair value of long-term debt2,840
 2,949
 3,064
Financial Instruments Measured at Fair Value on a Nonrecurring Basis
Our employee credit card receivables are classified as “held for sale” (“receivables held for sale”) and are recorded at the lower of cost or fair value (see Note 1: Basis of Presentation). We estimate the fair value of our receivables held for sale based on a discounted cash flow model using estimates and assumptions regarding future credit card portfolio performance. This fair value estimate is primarily based on Level 3 inputs in the fair value hierarchy. Based upon this assessment, the carrying value of the receivables held for sale approximated fair value at October 28, 2017.
April 29, 2023January 28, 2023April 30, 2022
Carrying value of long-term debt$2,857 $2,856 $2,854 
Fair value of long-term debt2,224 2,278 2,544 
Non-financial Assets Measured at Fair Value on a Nonrecurring Basis
We also measure certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, investment in contract asset and long-lived tangible and intangibleROU assets, in connection with periodic evaluations for potential impairment. In the first quarter of 2023, we also measured our investment in Nordstrom Canada, our related-party receivables and related lease guarantees at fair value (see Note 2: Canada Wind-down for additional information). We estimate the fair value of these assets and liabilities using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements.
During the third quarter of 2016, the long-term operating plan for Trunk Club was updated to reflect current expectations for future growth and profitability which were lower than previous expectations. Due to lowered expectations, we tested Trunk Club goodwill for impairment in the third quarter, one quarter prior to the annual evaluation. Step 1 test results indicated that the estimated fair value of the reporting unit was less than the carrying value.
In our Step 2 analysis, we used a combination of the expected present value of future cash flows (income approach) and comparable public companies (market approach) to determine the fair value of the reporting unit. These approaches use primarily unobservable inputs, including discount, sales growth and profit margin rates, which are considered Level 3 fair value measurements. The fair value analysis took into account recent and expected operating performance as well as the overall decline in the retail industry. Within our Retail Segment, we recognized a goodwill impairment charge of $197, reducing Trunk Club goodwill to $64 as of October 29, 2016 from $261 as of January 30, 2016.
There were no material impairment charges for these assets for the nine months ended October 28, 2017.
NOTE 4: COMMITMENTS AND CONTINGENCIES
Plans for our Manhattan full-line store, which we currently expect to open in 2019, ultimately include owning a condominium interest in a mixed-use tower and leasing certain nearby properties. As of October 28, 2017, we had approximately $249 of fee interest in land, which is expected to convert to a condominium interest once the store is constructed. We have committed to make future installment payments based on the developer meeting pre-established construction and development milestones. In the event that this project is not completed, the opening may be delayed and we may be subject to future losses or capital commitments in order to complete construction or to monetize our investment in the land.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


Investments Measured at NAV
We have certain investments that are measured at fair value using the NAV per share, or its equivalent, as a practical expedient. This class of investments consists of partnership interests that mainly invest in venture capital strategies with a focus on privately held consumer and technology companies. The NAV is based on the fair value of the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets. Our interest in these partnerships is generally not redeemable and is subject to significant restrictions regarding transfers. Distributions from each fund will be received as the underlying assets of the funds are liquidated. Liquidation is triggered by clauses within the partnership agreements or at the funds’ stated end date. The contractual terms of the partnership interests range from six to ten years.
NOTE 5: SHAREHOLDERS’ EQUITY
In February 2017, our Board of Directors authorized a program to repurchase up to $500 of our outstanding common stock through August 31, 2018. Our October 1, 2015 Board authorized share repurchase program expired in March 2017, which had $409 of unused capacity upon program expiration.
During the nine months ended October 28, 2017, we repurchased 4.6 shares of our common stock for an aggregate purchase price of $206 and had $414 remaining in share repurchase capacity as of October 28, 2017. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission (“SEC”) rules.
In November 2017, subsequent to quarter end, we declared a quarterly dividend of $0.37 per share, which will be paid on December 12, 2017.
NOTE 6: STOCK-BASED COMPENSATION
On May 16, 2017, our shareholders approved an amendment to the 2010 Equity Incentive Plan. The amendment increases common stock available for issuance by 6.2. As of October 28, 2017, the aggregate number of shares to be issued under the Plan may not exceed 36.6, plus any shares currently outstanding under the 2004 Plan that are forfeited or expire during the term of the 2010 plan.
The following table summarizes our stock-based compensation expense:
Quarter Ended
Quarter Ended Nine Months EndedApril 29, 2023April 30, 2022
October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Restricted stock units
$13
 
$10
 
$40
 
$25
RSUsRSUs$10 $12 
Stock options5
 9
 13
 28
Stock options2 5 
Acquisition-related stock compensation—
 2
 1
 10
Other1
 —
 5
 5
Other1
Other1
2 2 
Total stock-based compensation expense, before income tax benefit19
 21
 59
 68
Total stock-based compensation expense, before income tax benefit14 19 
Income tax benefit(7) (7) (22) (22)Income tax benefit(4)(5)
Total stock-based compensation expense, net of income tax benefit
$12
 
$14
 
$37
 
$46
Total stock-based compensation expense, net of income tax benefit$10 $14 
In 2014, restricted stock units became a growing component of our1 Other stock-based compensation mix. During 2017, this trend has continued as our annual grant allocation shifted towards more restrictedexpense includes PSUs, ESPP and nonemployee director stock units and less options to better align with our compensation program’s guiding principles. awards.
The following table summarizes our grants:grant allocations:
Quarter Ended
April 29, 2023April 30, 2022
GrantedWeighted-average grant-date fair value per unitGrantedWeighted-average grant-date fair value per unit
RSUs2.1 $17 1.4 $23 
Stock options1.2 $8 1.1 $10 
PSUs0.4 $16 0.5 $23 
Under our deferred and stock-based compensation plan arrangements, we issued 1.4 shares of common stock during the first quarter of 2023 and 1.2 shares during the first quarter of 2022.
NOTE 7: SHAREHOLDERS’ EQUITY
 Nine Months Ended
 October 28, 2017 October 29, 2016
 Granted
 Weighted-average grant-date fair value per unit
 Granted
 Weighted-average grant-date fair value per unit
Restricted stock units1.9
 
$42
 1.9
 
$44
Stock options0.3


$16
 2.9
 
$15
Performance share units0.1
 
$40
 0.1
 
$44
Share Repurchases

In May 2022, our Board of Directors authorized a new program to repurchase up to $500 of our outstanding common stock, with no expiration date. We repurchased 0.03 shares of common stock for $1 at an average purchase price per share of $19.41 during the first quarter of 2023, compared with no shares repurchased in the first quarter of 2022, and had $438 remaining in share repurchase capacity as of April 29, 2023.
Dividends
In May 2023, subsequent to quarter end, we declared a quarterly dividend of $0.19 per share, which will be paid on June 14, 2023 to shareholders of record at the close of business on May 30, 2023.
We have certain limitations with respect to the payment of dividends and share repurchases under our Revolver agreement (see Note 4: Debt and Credit Facilities).
Rights Plan
In September 2022, our Board of Directors approved a shareholder rights agreement and declared a dividend of one right for each outstanding share of Nordstrom common stock to shareholders of record on September 30, 2022. The Rights Plan expires September 19, 2023, unless redeemed, exchanged or terminated earlier by our Board of Directors. Each right entitles holders to purchase one newly issued share of Nordstrom common stock at an exercise price of $94 per right, subject to adjustment. Initially, the rights are not exercisable and trade with our shares of common stock.
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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


In general, the rights become exercisable following a public announcement that a person acquires 10% or more of the outstanding shares of Nordstrom common stock. If the rights are exercised, each holder (except the acquiring person) will have the right to receive common stock equal to two times the exercise price of the right. The Company may redeem the rights for $0.001 per right anytime prior to the rights becoming exercisable. The agreement also provides for exceptions and additional terms for other certain situations and circumstances. There is currently no impact to our Condensed Consolidated Financial Statements.
In June 2023, subsequent to quarter end, shareholders voted at our Annual Meeting to approve the advisory vote on the extension of our Rights Plan until September 19, 2025.
NOTE 7:8: EARNINGS (LOSS) PER SHARE
The computation of earnings (loss) per shareEPS is as follows:
Quarter Ended
April 29, 2023April 30, 2022
Net (loss) earnings($205)$20 
Basic weighted-average shares outstanding160.8 160.1 
Dilutive effect of common stock equivalents— 2.8 
Diluted weighted-average shares outstanding160.8 162.9 
Basic EPS($1.27)$0.13 
Diluted EPS($1.27)$0.13 
Anti-dilutive common stock equivalents11.4 10.1 
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Net earnings (loss)
$114
 
($10) 
$286
 
$153
        
Basic shares166.6
 173.4
 166.7
 173.3
Dilutive effect of common stock equivalents1
2.2
 —
 2.1
 2.3
Diluted shares168.8
 173.4
 168.8
 175.6
        
Earnings (Loss) per basic share
$0.68
 
($0.06) 
$1.72
 
$0.88
Earnings (Loss) per diluted share
$0.67
 
($0.06) 
$1.70
 
$0.87
        
Anti-dilutive common stock equivalents10.0
 6.5
 10.8
 9.0
1 Due to the anti-dilutive effect resulting from the reported net loss for the quarter ended October 29, 2016, the impact of potentially dilutive securities on the weighted-average shares outstanding has been omitted from the quarterly calculation of loss per diluted share. The impact of these potentially dilutive securities has been included in the calculation of weighted-average shares for the nine months ended October 29, 2016.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


NOTE 8: SEGMENT REPORTING
The following table sets forth information for our reportable segments:
  Retail
 Corporate/Other
 
Retail
Business

 Credit
 Total
Quarter Ended October 28, 2017          
Net sales 
$3,351
 
$190
 
$3,541
 
$—
 
$3,541
Credit card revenues, net —
 —
 —
 88
 88
Earnings (loss) before interest and income taxes 168
 (8) 160
 48
 208
Interest expense, net —
 (28) (28) —
 (28)
Earnings (loss) before income taxes 168
 (36) 132
 48
 180
           
Quarter Ended October 29, 2016         
Net sales 
$3,317
 
$155
 
$3,472
 
$—
 
$3,472
Credit card revenues, net —
 —
 —
 70
 70
Earnings before interest and income taxes 18
 5
 23
 32
 55
Interest expense, net —
 (30) (30) —
 (30)
Earnings (loss) before income taxes 18
 (25) (7) 32
 25
           
Nine Months Ended October 28, 2017         
Net sales 
$10,698
 
($161) 
$10,537
 
$—
 
$10,537
Credit card revenues, net —
 —
 —
 239
 239
Earnings (loss) before interest and income taxes 767
 (316) 451
 124
 575
Interest expense, net —
 (104) (104) —
 (104)
Earnings (loss) before income taxes 767
 (420) 347
 124
 471
      
   
Nine Months Ended October 29, 2016     
   
Net sales 
$10,446
 
($191) 
$10,255
 
$—
 
$10,255
Credit card revenues, net —
 —
 —
 186
 186
Earnings (loss) before interest and income taxes 590
 (274) 316
 65
 381
Interest expense, net —
 (90) (90) —
 (90)
Earnings (loss) before income taxes 590
 (364) 226
 65
 291
Retail Business represents a subtotal of the Retail segment and Corporate/Other and is not a reportable segment.

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NORDSTROM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar and share amounts in millions except per share, per option and per unit amounts)
(Unaudited)


The following table summarizes net sales within our reportable segments:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Nordstrom full-line stores - U.S.1

$1,488
 
$1,568
 
$4,858
 
$5,128
Nordstrom.com534
 497
 1,901
 1,675
Full-price2,022
 2,065
 6,759
 6,803
        
Nordstrom Rack966
 958
 2,910
 2,777
Nordstromrack.com/HauteLook212
 159
 609
 482
Off-price1,178
 1,117
 3,519
 3,259
        
Other retail2
151
 135
 420
 384
Retail segment3,351
 3,317
 10,698
 10,446
Corporate/Other190
 155
 (161) (191)
Total net sales
$3,541
 
$3,472
 
$10,537
 
$10,255
1 Nordstrom full-line stores - U.S. includes Nordstrom Local.
2 Other retail includes Nordstrom Canada full-line stores, Trunk Club and Jeffrey boutiques.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.NOTE 9: SEGMENT REPORTING
(Dollar and share amounts in millions except per share and per square foot amounts)The following table sets forth information for our reportable segment:
Quarter Ended
April 29, 2023April 30, 2022
Retail segment EBIT$140 $87 
Corporate/Other EBIT(399)(14)
Interest expense, net(28)(35)
(Loss) earnings before income taxes($287)$38 
For information about disaggregated revenues, see Note 3: Revenue.
17

CAUTIONARY STATEMENT
Certain statements in this Quarterly Report on Form 10-Q 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, our anticipated financial outlook for the fiscal year ending February 3, 2018, our anticipated annual total and comparable sales rates, our anticipated new store openings in existing, new and international markets, our anticipated Return on Invested Capital and trends in our operations. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Our actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to:
Strategic and Operational
successful execution of our customer strategy, including expansion into new domestic and international markets, acquisitions, investments in our stores and online, as well as investments in technology, our ability to realize the anticipated benefits from growth initiatives and our ability to provide a seamless experience across all channels,
our ability to respond to the business and retail environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online, and evolve our business model,
timely and effective execution of our ecommerce initiatives and ability to manage the costs and organizational changes associated with this evolving business model,
successful execution of our information technology strategy,
our ability to effectively utilize data in strategic planning and decision making,
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,
efficient and proper allocation of our capital resources,
the impact of any systems or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident,
effective inventory management processes and systems, fulfillment processes and systems, disruptions in our supply chain and our ability to control costs,
the effect of the announcement by the members of the Nordstrom family relating to the exploration of a possible “going private transaction” on our relationships with our customers, employees, suppliers and partners, operating results and business generally,
our ability to safeguard our reputation and maintain our vendor relationships,
our ability to maintain relationships with and motivate our employees and to effectively attract, develop and retain our future leaders, which could be impacted by the uncertainty about the possibility of a “going private transaction,”
our ability to realize the expected benefits, respond to potential risks and appropriately manage costs associated with our program agreement with TD Bank USA, N.A. (“TD”),
the effectiveness of planned advertising, marketing and promotional campaigns in the highly competitive and promotional retail industry,
potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames,
the timing, price, manner and amounts of future share repurchases by the Company, if any, or any share issuances by the Company, including issuances associated with option exercises or other matters,
Economic and External
the impact of economic and market conditions and the resultant impact on consumer spending patterns,
the impact of economic or political conditions in the U.S. and countries where our third party vendors operate,
weather conditions, natural disasters, health hazards, national security or other market disruptions, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications,
Legal and Regulatory
our compliance with applicable domestic and international laws, regulations and ethical standards, including those related to banking, employment and tax and the outcome of claims and litigation and resolution of such matters,
the impact of the current regulatory environment and financial system and health care reforms, and
compliance with debt covenants, availability and cost of credit, changes in our credit rating, changes in interest rates, debt repayment patterns and personal bankruptcies.
These and other factors, including those factors described in Part I, “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K and Part II, “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q 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, except as may be required by law.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)



OVERVIEW
Our third quarter net earnings were $114, or $0.67 per diluted share. The estimated reduction in earnings from three hurricanes affecting our business in Puerto Rico, Florida, and Texas in the quarter was approximately $0.04 per diluted share.
Our net sales increased 2.0%, and comparable sales decreased 0.9% during the quarter. The estimated lost sales impact from the hurricanes was approximately $20, or 60 basis points. When adjusted for this impact, our overall sales performance was generally in-line with our expectations. This reflected consistent trends in our full-price business while we experienced softer sales in our off-price business. Our merchandise margins continued to be relatively stable, reflecting our ongoing progress in supporting a healthy regular-price selling business. For the third quarter and the balance of the year, our inventory plans are aligned with our current sales trends.
Core to our strategy, we are focused on providing a differentiated selection of the best products, coupled with a high level of service and experience. We are continually testing and learning from new concepts to deliver experiences that improve speed, convenience, and personalization for our customers:
Our most recent example is Nordstrom Local, a test retail concept in West Hollywood, California focused on services. This location allows customers more convenient access to personal stylists, alterations and online order pickups and returns.
We recently expanded Reserve Online and Try-In Store to more than 50 stores across the country. This service is a convenient way for customers to shop and it frees up their time. If they use that time to do additional shopping in our stores, it may result in a lift in their spend. Another way we are connecting the digital and in-store experience is through Style Boards. This digital selling tool leverages the expertise of our salespeople and enables customers to receive personalized product recommendations on their mobile phones.
Collaborating with popular fashion influencer Something Navy, we launched an exclusive capsule collection with our in-house Treasure & Bond brand. This launch was our largest ever, generating $2 in demand on the first day. We continue to grow limited distribution products and our private label brands continue to outperform the company average.
Looking ahead to the remainder of the year, we are focused on making Nordstrom a convenient place for customers to do their holiday shopping.
We have invested in key categories and brands that resonate most with our customers. To support peak volumes we expect during the holidays, we are expanding our online selection.
To make shopping faster and easier, we offer:
◦Buy Online Pick up In-Store with an option for curbside service in our full-line stores. In major markets, including Seattle, Chicago, Dallas and San Diego, 24-hour curbside pickup will be available for the holidays.
◦Reserve Online and Try In-Store in more than 50 of our full-line stores
◦Same-day delivery services in several markets
The combination of our physical and digital assets represents a competitive advantage. Our omni-channel business model provides for favorable economics related to driving customer spend, reducing the cost of serving customers, and elevating the Nordstrom and Nordstrom Rack brands. We are well-positioned to execute on our customer strategy and remain focused on delivering a differentiated customer experience.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


RESULTS OF OPERATIONS
Our reportable segments are Retail and Credit. We analyze our results of operations through earnings before interest and income taxes for our Retail Business and Credit, while interest expense, income taxes and earnings per share are discussed on a total Company basis.
Retail Business
Our Retail Business includes our Nordstrom U.S. and Canada full-line stores (including Nordstrom Local), Nordstrom.com, Nordstrom Rack stores, Nordstromrack.com/HauteLook, Trunk Club, Jeffrey boutiques and Last Chance clearance stores. For purposes of discussion and analysis of our results of operations of our Retail Business, we combine our Retail segment results with revenues and expenses in the “Corporate/Other” column of Note 8: Segment Reporting in Item 1 (collectively, the “Retail Business”).
Certain metrics we use to evaluate the Retail Business may not be calculated in a consistent manner among industry peers. Provided below are definitions of metrics we present within our analysis of the Retail Business:
Comparable Sales – includes sales from stores that have been open at least one full year at the beginning of the year
Total Company comparable sales includes sales from our online channels
Gross Profit – net sales less cost of sales and related buying and occupancy costs
Inventory Turnover Rate – trailing 12-months cost of sales and related buying and occupancy costs (for all segments) divided by the trailing 4-quarter average inventory
Total Sales Per Square Foot – net sales divided by weighted-average square footage
4-wall Sales Per Square Foot – sales for Nordstrom U.S. and Canada full-line stores, Nordstrom Rack stores, Trunk Club clubhouses, Jeffrey boutiques and Last Chance clearance stores divided by their weighted-average square footage
Summary
The following table summarizes the results of our Retail Business:
 Quarter Ended
 October 28, 2017 October 29, 2016
 Amount
 
% of net sales1

 Amount
 
% of net sales1

Net sales
$3,541
 100.0% 
$3,472
 100.0%
Cost of sales and related buying and occupancy costs(2,311) (65.3%) (2,262) (65.2%)
Gross profit1,230
 34.7% 1,210
 34.8%
Selling, general and administrative expenses(1,070) (30.2%) (990) (28.5%)
Goodwill impairment—
 —
 (197) (5.7%)
Earnings before interest and income taxes
$160
 4.5% 
$23
 0.6%
 
 Nine Months Ended
 October 28, 2017 October 29, 2016
 Amount
 
% of net sales1

 Amount
 
% of net sales1

Net sales
$10,537
 100.0% 
$10,255
 100.0%
Cost of sales and related buying and occupancy costs(6,914) (65.6%) (6,718) (65.5%)
Gross profit3,623
 34.4% 3,537
 34.5%
Selling, general and administrative expenses(3,172) (30.1%) (3,024) (29.5%)
Goodwill impairment—
 —
 (197) (1.9%)
Earnings before interest and income taxes
$451
 4.3% 
$316
 3.1%
1 Subtotals and totals may not foot due to rounding.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


Retail Business Net Sales
In our ongoing effort to enhance the customer experience, we are focused on providing customers with a seamless experience across our channels. While our customers may engage with us through multiple channels, we know they value the overall Nordstrom brand experience and view us simply as Nordstrom, which is ultimately how we view our business. The following is a summary of our net sales by channel for our Retail Business:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Net sales by channel:       
Nordstrom full-line stores - U.S.1

$1,488
 
$1,568
 
$4,858
 
$5,128
Nordstrom.com534
 497
 1,901
 1,675
Full-price2,022
 2,065
 6,759
 6,803
        
Nordstrom Rack966
 958
 2,910
 2,777
Nordstromrack.com/HauteLook212
 159
 609
 482
Off-price1,178
 1,117
 3,519
 3,259
        
Other retail2
151
 135
 420
 384
Retail segment3,351
 3,317
 10,698
 10,446
Corporate/Other190
 155
 (161) (191)
Total net sales
$3,541
 
$3,472
 
$10,537
 
$10,255
        
Net sales increase2.0% 7.2% 2.7% 3.0%
        
Comparable sales increase (decrease) by channel:       
Nordstrom full-line stores - U.S.(4.9%) (4.5%) (5.2%) (6.3%)
Nordstrom.com7.5% 20.1% 13.5% 10.3%
Full-price(1.9%) 0.5% (0.5%) (2.6%)
Nordstrom Rack(5.0%) 0.9% (2.3%) 0.4%
Nordstromrack.com/HauteLook33.6% 23.2% 26.3% 32.9%
Off-price0.8% 3.9% 2.0% 4.6%
Total Company(0.9%) 2.4% 0.1% (0.2%)
        
Sales per square foot:       
Total sales per square foot
$118
 
$119
 
$353
 
$355
4-wall sales per square foot86
 90
 271
 283
Full-line sales per square foot - U.S.72
 76
 235
 247
Nordstrom Rack sales per square foot118
 127
 361
 376
1 Nordstrom full-line stores - U.S. includes Nordstrom Local.
2 Other retail includes Nordstrom Canada full-line stores, Trunk Club and Jeffrey boutiques.
Total Company net sales increased 2.0% for the third quarter and 2.7% for the nine months ended October 28, 2017, compared with the same periods in 2016, while comparable sales decreased 0.9% for the third quarter and increased 0.1% for the nine months ended October 28, 2017. The estimated lost sales impact from the hurricanes impacting Puerto Rico, Florida and Texas was approximately $20, or 60 basis points for the third quarter and 20 basis points for the nine months ended October 28, 2017. To date in fiscal 2017, we opened 17 Nordstrom Rack stores, one Canada full-line store and one Nordstrom Local store, relocated two U.S. full-line stores and one Nordstrom Rack store and closed two U.S. full-line stores.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


Full-price net sales, which consists of U.S. full-line and Nordstrom.com channels, decreased 2.1% for the third quarter and 0.7% for the nine months ended October 28, 2017, compared with the same periods in 2016, while comparable sales decreased 1.9% for the third quarter and 0.5% for the nine months ended October 28, 2017. Also on a comparable basis for the third quarter and the nine months ended October 28, 2017, full-price experienced a decrease in the total number of items sold, partially offset by an increase in the average selling price per item sold. The top-performing merchandise category was Men’s Apparel for the third quarter and Women’s Apparel for the nine months ended October 28, 2017. The West was the top-performing U.S. geographic region for the third quarter and the nine months ended October 28, 2017.
Off-price net sales, which consists of Nordstrom Rack and Nordstromrack.com/HauteLook channels, increased 5.5% for the third quarter and 8.0% for the nine months ended October 28, 2017, compared with the same periods in 2016, while comparable sales increased 0.8% and 2.0% for the third quarter and nine months ended October 28, 2017. For the quarter and year-to-date period ended October 28, 2017, Nordstrom Rack experienced a decrease in the average selling price per item sold and in the total number of items sold on a comparable basis. The top-performing Nordstrom Rack merchandise category was Cosmetics for the third quarter and the nine months ended October 28, 2017. The West was the top-performing geographic region for the third quarter and the nine months ended October 28, 2017.
Other retail net sales increased for the third quarter and nine months ended October 28, 2017, compared with the same periods in 2016 due to increases in Canada sales, partially offset by lower sales in Trunk Club.
Retail Business Gross Profit
The following table summarizes the Retail Business gross profit (“Retail GP”):
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Retail gross profit
$1,230


$1,210


$3,623


$3,537
Retail gross profit as a % of net sales34.7%
34.8%
34.4%
34.5%
        
     October 28, 2017
 October 29, 2016
Ending inventory per square foot    
$80.54
 
$80.94
Inventory turnover rate    4.39
 4.31
Retail GP decreased 12 basis points for the third quarter and 11 basis points for the nine months ended October 28, 2017, compared with the same periods in 2016, primarily due to higher planned occupancy expenses related to new store growth for Nordstrom Rack and Canada. Continued focus on inventory execution led to improvements in both ending inventory per square foot and the inventory turnover rate as of October 28, 2017.
Retail Business Selling, General and Administrative Expenses 
Retail Business selling, general and administrative expenses (“Retail SG&A”) are summarized in the following table:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Retail selling, general and administrative expenses
$1,070
 
$990
 
$3,172
 
$3,024
Retail selling, general and administrative expenses as a % of net sales30.2% 28.5% 30.1% 29.5%
Retail SG&A increased $80 and 168 basis points for the third quarter and increased $148 and 61 basis points for the nine months ended October 28, 2017, primarily due to planned increases in technology and supply chain expenses associated with our growth initiatives.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


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 our credit business allows us to build deeper relationships with our customers by fully integrating the Nordstrom Rewards program with our retail business and provide better service, which in turn fosters greater customer loyalty. Nordstrom cardholders tend to visit our stores more frequently and spend more than non-cardholders. Nordstrom private label credit and debit cards can be used at all of our U.S. retail channels, while Nordstrom Visa credit cards may also be used for purchases outside of Nordstrom (“outside volume”).
Summary
The table below provides a detailed view of the operational results of our Credit segment, consistent with Note 8: Segment Reporting in Item 1:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Credit card revenues, net
$88
 
$70
 
$239
 
$186
Credit expenses(40) (38) (115) (121)
Earnings before interest and income taxes
$48
 
$32
 124
 65
        
Credit and debit card volume1:
       
Inside
$1,205
 
$1,239
 
$4,202
 
$4,215
Outside1,084
 1,023
 3,146
 3,106
Total volume
$2,289
 
$2,262
 
$7,348
 
$7,321
1 Credit and debit card volume represents sales on the total portfolio plus applicable sales taxes.
Credit Card Revenues, net
The following is a summary of our credit card revenues, net:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Credit program revenues, net
$85
 
$67
 
$229
 
$176
Other3
 3
 10
 10
Total credit card revenues, net
$88
 
$70
 
$239
 
$186
Pursuant to our program agreement with TD, we receive our portion of the ongoing credit card revenue, net of credit losses, from both sold and newly generated credit card receivables, which is recorded in credit program revenues, net. Asset amortization and deferred revenue recognition associated with the assets and liabilities recorded as part of the transaction are also recognized in credit program revenues, net. Revenue earned under the program agreement is impacted by the credit quality of receivables, both owned and serviced, and factors such as deteriorating economic conditions, declining creditworthiness of cardholders and the execution of account management and collection activities may heighten the risk of credit losses. Other credit card revenues include finance charge revenue, interchange fees and late fees on our accounts receivable retained (including debit and employee receivables). Subsequent to quarter end, on November 1, 2017, we completed the sale of our employee credit card receivables to TD (see Note 1: Basis of Presentation in Item 1).
Credit card revenues, net increased $18 for the third quarter and $53 for the nine months ended October 28, 2017, compared with the same periods in 2016, reflecting our strategic partnership with TD to responsibly grow our receivables and associated revenues. There was also a reduction in amortization expense related to the sale of the credit card portfolio.
Credit Expenses
Total credit expenses were relatively flat for the third quarter, compared with the same period in 2016, and decreased $6 for the nine months ended October 28, 2017, primarily due to lower processing costs driven by operational efficiencies.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


Total Company Results
Interest Expense, net
Interest expense, net was $28 for the third quarter, compared with $30 for the same period in 2016, and $104 for the nine months ended October 28, 2017, compared with $90 for the same period in 2016. The increase for the nine months ended October 28, 2017 was primarily due to a net interest expense charge of $18 related to the $650 debt refinancing completed in the first quarter of 2017 (see Note 2: Debt and Credit Facilities in Item 1).
Income Tax Expense
Income tax expense is summarized in the following table:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Income tax expense
$66
 
$35
 
$185
 
$138
Effective tax rate36.7% 140.3% 39.2% 47.4%
The effective tax rate decreased for the third quarter and nine months ended October 28, 2017, compared with the same periods in 2016, primarily due to the non-deductible goodwill impairment charge of $197 related to Trunk Club in the third quarter of 2016. Excluding the impact of the Trunk Club impairment, our effective tax rate for both the third quarter and nine months ended October 28, 2017 increased approximately 300 basis points primarily due to changes in tax reserves and an increase in the valuation allowance for foreign net operating losses.
Earnings (Loss) Per Share
Earnings (Loss) per share is as follows:
 Quarter Ended Nine Months Ended
 October 28, 2017
 October 29, 2016
 October 28, 2017
 October 29, 2016
Basic
$0.68
 
($0.06) 
$1.72
 
$0.88
Diluted
$0.67
 
($0.06) 
$1.70
 
$0.87
Earnings per diluted share increased for the third quarter and nine months ended October 28, 2017 primarily due to the Trunk Club goodwill impairment charge of $197 in 2016, which had an impact of approximately $0.90 per share for both the quarter and nine months ended October 29, 2016. Excluding the impact of the impairment, earnings per diluted share decreased for the quarter and nine months ended October 28, 2017 primarily due to planned increases in technology and supply chain expenses associated with our growth initiatives. Additionally, the estimated reduction in earnings from three hurricanes affecting stores in Puerto Rico, Florida and Texas in the quarter was approximately $0.04 per share.
2017 Outlook
We updated our annual earnings per diluted share expectations to incorporate our third quarter results and the estimated impacts of the three hurricanes. Nordstrom’s expectations for fiscal 2017, which include the impact of the 53rd week, are as follows:
Current Outlook
Net sales (percent)Approximately 4
Comparable sales (percent)Approximately flat
Retail EBIT$755 to $785
Credit EBITApproximately $165
Earnings per diluted share (excluding the impact of any future share repurchases)$2.85 to $2.95
The income tax rate is estimated to be approximately in line with the rate for the nine months ended October 28, 2017. The 53rd week is expected to add approximately $200 to net sales and approximately $0.02 to $0.03 to earnings per diluted share. The 53rd week is not included in comparable sales calculations. The full-year impact from three hurricanes that occurred in the third quarter is estimated to impact sales by $26, EBIT by $17 and EPS by $0.06 per share. The damage in Puerto Rico was extensive, requiring us to close the store as we continue our repair efforts.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


Return on Invested Capital (“ROIC”) (Non-GAAP financial measure)
We believe ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of our use of capital and believe ROIC is an important component of shareholders’ return over the long term. In addition, we incorporate ROIC in our executive incentive compensation measures. For the 12 fiscal months ended October 28, 2017, our ROIC increased to 10.7% compared with 7.2% for the 12 fiscal months ended October 29, 2016. Results for the prior period were negatively impacted by approximately 340 basis points due to the Trunk Club non-cash goodwill impairment charge in the third quarter of 2016.
We define ROIC as our net operating profit after tax divided by our average invested capital using the trailing 12-month average. ROIC is not a measure of financial performance under generally accepted accounting principles (“GAAP”) and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to ROIC is return on assets. The following is a reconciliation of the components of ROIC and return on assets:
 12 Fiscal Months Ended
 October 28, 2017
 October 29, 2016
Net earnings
$488
 
$333
Add: income tax expense376
 252
Add: interest expense139
 121
Earnings before interest and income tax expense1,003
 706
    
Add: rent expense237
 195
Less: estimated depreciation on capitalized operating leases1
(126) (103)
Net operating profit1,114
 798
    
Less: estimated income tax expense(486) (383)
Net operating profit after tax
$628
 
$415
    
Average total assets
$8,009
 
$7,987
Less: average non-interest-bearing current liabilities2
(3,211) (3,105)
Less: average deferred property incentives and deferred rent liability2
(646) (541)
Add: average estimated asset base of capitalized operating leases3
1,718
 1,452
Average invested capital
$5,870
 
$5,793
    
Return on assets4
6.1% 4.2%
ROIC4
10.7% 7.2%
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 or we had purchased the property. Asset base is calculated as described in footnote 3 below.
2 Balances associated with our deferred rent liability have been classified as long-term liabilities in the current period.
3 Based upon the trailing 12-month average of the monthly asset base. The asset base for each month is calculated as the trailing 12 months of 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.
4 Results for the 12 fiscal months ended October 29, 2016 include the $197 impact of the Trunk Club non-cash goodwill impairment charge in the third quarter of 2016, which negatively impacted the prior period return on assets by approximately 250 basis points and ROIC by 340 basis points.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


LIQUIDITY AND CAPITAL RESOURCES
We strive to 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 October 28, 2017, our existing cash and cash equivalents on-hand of $672, available credit facilities of $800 and potential future operating cash flows and borrowings will be sufficient to fund these scheduled future payments and potential long-term initiatives.
Operating Activities
Net cash provided by operating activities decreased $281 for the nine months ended October 28, 2017, compared with the same period in 2016, primarily due to the timing of a tax refund received in 2016 and tax payments in 2017.
Investing Activities
Net cash used in investing activities decreased $71 for the nine months ended October 28, 2017, compared with the same period in 2016, primarily due to a planned reduction in capital expenditures associated with fewer Canadian store openings.
Financing Activities
Net cash used in financing activities increased $61 for the nine months ended October 28, 2017, compared with the same period in 2016, primarily due to increased share repurchase activity, which occurred in the first quarter of 2017.
Short-term and Long-term Borrowing Activity
During the first quarter of 2017, we issued $350 aggregate principal amount of 4.00% senior unsecured notes due March 2027 and $300 aggregate principal amount of 5.00% senior unsecured notes due January 2044. We recorded debt issuance costs incurred as a result of the issuance in other financing activities, net in the Condensed Consolidated Statements of Cash Flows in Item 1. With the proceeds of these new notes, we retired our $650 senior unsecured notes that were due January 2018. See Note 2: Debt and Credit Facilities in Item 1 for additional information.
Free Cash Flow (Non-GAAP financial measure)
Free Cash Flow is one of our key liquidity measures, and when used in conjunction with GAAP measures, provides investors with a meaningful analysis of our ability to generate cash from our business. For the nine months ended October 28, 2017, we had Free Cash Flow of ($127) compared with ($66) for the nine months ended October 29, 2016.
Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:
 Nine Months Ended
 October 28, 2017
 October 29, 2016
Net cash provided by operating activities
$597
 
$878
Less: capital expenditures(536) (625)
Less: cash dividends paid(185) (192)
Less: change in cash book overdrafts(3) (127)
Free Cash Flow
($127) 
($66)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


Credit Capacity and Commitments
As of October 28, 2017, we had total short-term borrowing capacity of $800 under our senior unsecured revolving credit facility (“revolver”) that expires in April 2020. Under the terms of our 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. We have the option to increase the revolving commitment by up to $200, to a total of $1,000, provided that we obtain written consent from the lenders. From time to time we utilize our commercial paper program to fund working capital needs, which has the effect of reducing our available liquidity under the revolver until repaid.
As of October 28, 2017, we had no issuances outstanding under our commercial paper program and no borrowings outstanding under our revolver.
Impact of Credit Ratings
Under the terms of our revolver, any borrowings we may enter into will accrue interest for Euro-Dollar Rate Loans at a floating base rate tied to LIBOR, for Canadian Dealer Offer Rate Loans at a floating rate tied to CDOR, 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:
Credit
Ratings
Outlook
Moody’sBaa1Stable
Standard & Poor’sBBB+Negative
Base Interest
Rate
Applicable
Margin

Euro-Dollar Rate LoanLIBOR1.02%
Canadian Dealer Offer Rate LoanCDOR1.02%
Base Rate Loanvarious—
Should the ratings assigned to our long-term unsecured debt improve, the applicable margin associated with any such borrowings may decrease, resulting in a lower borrowing cost 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 higher borrowing cost under this facility.
Debt Covenants
The revolver requires that we maintain an adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) leverage ratio of no more than four times (see the following additional discussion of Adjusted Debt to EBITDAR). As of October 28, 2017, we were in compliance with this covenant.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)


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 goal is to manage debt levels to maintain an investment-grade credit rating and operate with an efficient capital structure. In evaluating our debt levels, this measure provides a reflection of our credit worthiness that could impact our credit rating and borrowing costs. We also have a debt covenant that requires an adjusted debt to EBITDAR leverage ratio of no more than four times. As of October 28, 2017 and October 29, 2016, our Adjusted Debt to EBITDAR was 2.5.
Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted Debt to EBITDAR is debt to net earnings. The following is a reconciliation of the components of Adjusted Debt to EBITDAR and debt to net earnings:
 
20171

 
20161

Debt
$2,738
 
$2,778
Add: estimated capitalized operating lease liability2
1,896
 1,561
Less: fair value hedge adjustment included in long-term debt—
 (14)
Adjusted Debt
$4,634
 
$4,325
    
Net earnings
$488
 
$333
Add: income tax expense376
 252
Add: interest expense, net135
 121
Earnings before interest and income taxes999
 706
    
Add: depreciation and amortization expenses644
 631
Add: rent expense237
 195
Add: non-cash acquisition-related charges3
10
 197
EBITDAR
$1,890
 
$1,729
    
Debt to Net Earnings4
5.6
 8.3
Adjusted Debt to EBITDAR2.5
 2.5
1 The components of Adjusted Debt are as of October 28, 2017 and October 29, 2016, while the components of EBITDAR are for the 12 months ended October 28, 2017 and October 29, 2016.
2 Based upon the estimated lease liability as of the end of the period, calculated as the trailing 12 months of rent expense multiplied by eight. The multiple of eight times rent expense 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.
3 Non-cash acquisition-related charges for the 12 months ended October 29, 2016 include the goodwill impairment charge of $197 related to Trunk Club.
4 Results for the period ended October 29, 2016 include the $197 impact of the Trunk Club goodwill impairment charge, which approximates 310 basis points.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
The following MD&A provides a narrative of our financial performance and is intended to promote understanding of our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, Item 1. Financial Statements (Unaudited) and generally discusses the results of operations for the quarter ended April 29, 2023 compared with the quarter ended April 30, 2022. The following discussion and analysis contains forward-looking statements and should also be read in conjunction with cautionary statements and risks described elsewhere in this Form 10-Q before deciding to purchase, hold or sell shares of our common stock.
Overview
19
Results of Operations
20
Liquidity
24
Capital Resources
26
Critical Accounting Estimates
27
Recent Accounting Pronouncements
28
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
OVERVIEW
First quarter results reflected progress on our 2023 key priorities of improving Nordstrom Rack performance, increasing our inventory productivity and optimizing our supply chain. We reported a net loss of $205 and a $1.27 loss per diluted share, and after excluding charges from the wind-down of Canadian operations, Adjusted EPS1 was $0.07. Loss before interest and tax was $259 in the first quarter of 2023, compared with EBIT of $73 during the same period in 2022. Adjusted EBIT1 was $50 in the first quarter of 2023 compared with $32 in the first quarter of 2022.
Total Company net sales decreased 11.6% compared with the first quarter of 2022 and included a negative 175 basis point impact from the wind-down of Canadian operations. Most categories were down compared with the first quarter of 2022, which benefited from strong pent-up demand for a return to occasions as the pandemic receded.
We are encouraged by the improvements in efficiency and profitability as a result of our focus on our key priorities. We are committed to delivering profitable growth while improving the customer experience through three key initiatives.
Nordstrom Rack – Consistent with our customer promise to deliver great brands at great prices, we increased the penetration of our top performing strategic brands. We also continued to expand our reach and convenience for customers by opening two new stores during the quarter. Collectively, these new stores and the two stores opened last year have performed well so far, with sales productivity exceeding the fleet average. We believe that Rack stores are a great investment, with returns that exceed our cost of capital and have a short payback period. We are excited to roll out to more markets and increase our Rack footprint, with six more stores opened in May 2023 and plans to open 13 additional stores later this year.
Inventory Productivity – We are focused on better inventory discipline to provide customers with relevant and new assortments and improve our earnings and returns on invested capital. In the first quarter of 2023, we managed with leaner and more current inventories after clearing out excess inventory in the second half of fiscal year 2022. We improved sell-through and had faster turns across most of our categories, resulting in a 110 basis point increase in our gross profit rate compared with the first quarter of 2022. Overall inventory levels were 8% lower than last year with non-Designer inventory down 11%. Moving into the second quarter, we are focusing on clearing excess Designer product, which will include incremental markdowns over the balance of the year. Designer sales in the first quarter of 2023 remained above pre-pandemic levels, and the category overall continues to be a strong contributor to our core offering and a key differentiator to our unique breadth of selection.
Supply Chain Optimization – We continue to make significant progress on our supply chain initiatives, which drive improvement in customer experience and profitability. During the quarter, we increased productivity throughout our network and reduced transportation costs, while also delivering better service to our customers through shortened delivery times. For the third consecutive quarter, variable supply chain costs fell by over 100 basis points compared with the prior year, helping to mitigate overall SG&A deleverage on lower sales. Supply chain is the largest component of our SG&A expenses, and we believe there is more opportunity to improve our efficiency and help drive overall expense leverage as sales improve.
Despite continued macroeconomic uncertainty, we are making progress on our priorities to improve profitability. We believe continued focus and execution will drive incremental improvement over the remainder of the year and will position us well to build capabilities to better serve our customers, drive profitable growth and increase shareholder value.
1Adjusted EBIT and Adjusted EPS are non-GAAP financial measures. For a reconciliation between GAAP and non-GAAP financial measures, see Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures) below.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
RESULTS OF OPERATIONS
In our ongoing effort to enhance the customer experience, we are focused on providing a seamless retail experience across our Company. We invested early in integrating our operations, merchandising and technology across our stores and online in both our Nordstrom and Nordstrom Rack banners. By connecting our digital and physical assets across Nordstrom and Nordstrom Rack, we are able to better serve customers when, where and how they want to shop. We have one Retail reportable segment and analyze our results on a total Company basis, using customer, market share, operational and net sales metrics.
We monitor a number of key operating metrics to evaluate our Company’s performance. In addition to net sales, net earnings (loss) and other results under GAAP, two other key operating metrics we use are GMV and inventory turnover rate. Beginning in the first quarter of 2023, we made changes to how we calculate these metrics to more closely align with how our business is operated. Changes in the methodologies are discussed below and prior periods have been adjusted to reflect a comparable presentation.
•GMV: calculated as the total dollar value of merchandise sold through our digital platforms and stores. GMV includes net merchandise sales from inventory we own, as well as the retail value of merchandise sold under our unowned inventory models with our vendors. We use GMV as an indicator of the scale and growth of our operations and the impact of our unowned inventory models. Prior to the first quarter of 2023, we also included non-merchandise sales in our GMV calculation.
•Inventory Turnover Rate: calculated as the trailing 4-quarter merchandise cost of sales divided by the trailing 13-month average inventory. Inventory turnover rate is an indicator of our success in optimizing inventory volumes in accordance with customer demand. Prior to the first quarter of 2023, we calculated inventory turnover rate as the trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory.
Net Sales
The following table summarizes net sales:
Quarter Ended
April 29, 2023April 30, 2022
Net sales:
Nordstrom$2,027 $2,289 
Nordstrom Rack1,037 1,178 
Total net sales$3,064 $3,467 
Net sales (decrease) increase:
Nordstrom(11.4 %)23.5 %
Nordstrom Rack(11.9 %)10.3 %
Total Company(11.6 %)18.7 %
Digital sales as a % of total net sales36 %39 %
Digital sales decrease(17 %)— %
Nordstrom GMV (decrease) increase(11.8 %)24.1 %
Total Company GMV (decrease) increase(11.9 %)19.1 %
Total Company net sales and GMV decreased for the first quarter of 2023, compared with the same period in 2022. Approximately 175 basis points of the decrease was due to the deconsolidation of our Canadian operations as of March 2, 2023 (see Note 2: Canada Wind-down). Most categories were down in the first quarter of 2023, compared with the same period in 2022, which benefited from strong pent-up demand for a return to occasions after the pandemic. Active was the strongest category, while beauty and men’s apparel performed above average.
Total Company digital sales decreased in the first quarter of 2023, compared with the same period in 2022, and represented 36% of total net sales. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of 2022 and sunsetting Trunk Club earlier in 2022 negatively impacted first quarter digital sales by approximately 800 basis points.
Nordstrom net sales and GMV decreased for the first quarter of 2023, compared with the first quarter of 2022, which reflected a decrease in the number of items sold, partially offset by an increase in the average selling price per item sold. The wind-down of Canadian operations had a negative impact on Nordstrom net sales of approximately 270 basis points.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
Nordstrom Rack net sales decreased for the first quarter of 2023 compared with the same period in 2022, which reflected a decrease in the number of items sold, partially offset by an increase in the average selling price per item sold. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of 2022 negatively impacted Nordstrom Rack sales by approximately 600 basis points.
There were two Nordstrom Rack store openings during the first quarter of 2023. Subsequent to quarter end, we opened five Nordstrom Rack stores and relocated one Nordstrom Rack store. We deconsolidated six Nordstrom and seven Nordstrom Rack stores in Canada as of March 2, 2023 (see Note 2: Canada Wind-down in Item 1).
Credit Card Revenues, Net
Credit card revenues, net were $117 for the first quarter of 2023, compared with $102 for the same period in 2022. The increase was due to higher finance charges from both higher rates and outstanding balances, and higher revenue recognized in connection with our 2022 TD program agreement amendment. The increase was partially offset by increased credit losses.
Fiscal Year 2023 Total Revenue Outlook
In fiscal 2023, which includes a 53rd week, we expect total revenue, including retail sales and credit card revenues, to decline 4 to 6 percent compared with fiscal 2022. Our outlook includes approximately 250 basis points of negative impact from the wind-down of business operations in Canada (see Note 2: Canada Wind-down for more information) and approximately 130 basis points of positive impact from the 53rd week.
Gross Profit
The following table summarizes gross profit:
Quarter Ended
April 29, 2023April 30, 2022
Gross profit$1,036 $1,136 
Gross profit as a % of net sales33.8 %32.8 %
Inventory turnover rate3.4 3.4 
Gross profit decreased $100 during the first quarter of 2023, compared with the same period in 2022, due to lower sales, partially offset by increased inventory productivity. Gross profit increased 110 basis points as a rate of net sales, primarily due to our focus on increasing inventory productivity. Ending inventory decreased 8% compared with the same period in 2022, versus a 12% decrease in sales.
Selling, General and Administrative Expenses
SG&A is summarized in the following table:
Quarter Ended
April 29, 2023April 30, 2022
SG&A expenses$1,103 $1,165 
SG&A expenses as a % of net sales36.0 %33.6 %
SG&A decreased $62 during the first quarter of 2023, compared with the same period in 2022, due to a decrease in variable expenses on lower sales and supply chain efficiencies. The first quarter of 2022 included a $51 gain on sale of our interest in a corporate office building. SG&A rate increased 240 basis points primarily due to a 120 basis point net impact in the first quarter of 2022 from a gain on sale of our interest in a corporate office building and an impairment charge related to costs associated with the wind-down of Trunk Club. SG&A rate also increased due to deleverage on lower sales volume, partially offset by improvements in variable costs from supply chain efficiency initiatives.
Canada Wind-down Costs
We recognized charges associated with the wind-down of Nordstrom Canada of $309 in the first quarter of 2023 (see Note 2: Canada Wind-down in Item 1).
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
Earnings (Loss) Before Interest and Income Taxes
EBIT is summarized in the following table:
Quarter Ended
April 29, 2023April 30, 2022
EBIT($259)$73 
EBIT as a % of net sales(8.5 %)2.1 %
EBIT decreased $332 and 1,060 basis points during the first quarter of 2023, compared with the same period in 2022. The decrease was due to $309 of expenses associated with the wind-down of Canadian operations in the first quarter of 2023 and lower sales volume, partially offset by supply chain efficiencies and improved inventory productivity. The first quarter of 2022 also included a $51 gain on sale of our interest in a corporate office building and a $10 impairment charge related to costs associated with the wind-down of Trunk Club.
Interest Expense, Net
Interest expense, net was$28for the first quarter of 2023, compared with $35 for the same period in 2022. The decrease was primarily due to an increase in interest income.
Income Tax Expense
Income tax expense is summarized in the following table:
Quarter Ended
April 29, 2023April 30, 2022
Income tax (benefit) expense($82)$18 
Effective tax rate28.6 %46.8 %

The effective tax rate decreased in the first quarter of 2023, compared with the same period in 2022, primarily due to net tax benefits of $93 related to the wind-down of Canadian operations recorded in the first quarter of 2023. Excluding the approximate 22 percentage point impact of the wind-down, income tax expense in the first quarter of 2023 was 50.7% of pretax earnings. Both periods were impacted by additional tax expense related to stock-based compensation, however the loss before income taxes in the first quarter of 2023 resulted in a favorable impact on the overall effective tax rate compared with an unfavorable impact to the first quarter of 2022, which had earnings before income taxes.
Earnings Per Share
EPS is as follows:
Quarter Ended
April 29, 2023April 30, 2022
Basic($1.27)$0.13 
Diluted($1.27)$0.13 
Diluted EPS decreased $1.40 for the first quarter of 2023, compared with the same period in 2022, primarily due to charges related to the wind-down of Canadian operations that reduced diluted EPS by $1.34 per share. The quarter ended April 30, 2022 includes a net favorable impact of $0.19 per diluted share due to the gain on sale of our interest in a corporate office building, partially offset by an impairment charge related to costs associated with the wind-down of Trunk Club.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures)
The following are key financial metrics and, when used in conjunction with GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS exclude certain items that we do not consider representative of our core operating performance. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBIT and Adjusted EBITDA is net (loss) earnings. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBIT margin is net earnings as a percent of net sales. The financial measure calculated under GAAP which is most directly comparable to Adjusted EPS is diluted EPS.
Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for, net earnings, net earnings as a percent of net sales, operating cash flows, earnings per share, earnings per diluted share or other financial measures performed in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ financial measures and therefore may not be comparable to methods used by other companies.
The following is a reconciliation of net (loss) earnings to Adjusted EBIT and Adjusted EBITDA and net earnings as a percent of net sales to Adjusted EBIT margin:
Quarter Ended
April 29, 2023April 30, 2022
Net (loss) earnings($205)$20 
Income tax (benefit) expense(82)18 
Interest expense, net28 35 
(Loss) earnings before interest and income taxes(259)73 
Canada wind-down costs309 — 
Trunk Club wind-down costs— 10 
Gain on sale of interest in a corporate office building— (51)
Adjusted EBIT50 32 
Depreciation and amortization expenses144 152 
Amortization of developer reimbursements(17)(18)
Adjusted EBITDA$177 $166 
Net sales$3,064 $3,467 
Net earnings as a % of net sales(6.7 %)0.6 %
EBIT margin %(8.5 %)2.1 %
Adjusted EBIT margin %1.6 %0.9 %
The following is a reconciliation of diluted EPS to Adjusted EPS:
Quarter Ended
April 29, 2023April 30, 2022
Diluted EPS($1.27)$0.13 
Canada wind-down costs1.92 — 
Trunk Club wind-down costs— 0.06 
Gain on sale of interest in a corporate office building— (0.32)
Income tax impact on adjustments1
(0.58)0.07 
Adjusted EPS$0.07 ($0.06)
1 The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate for the respective non-GAAP adjustment.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
Adjusted ROIC (Non-GAAP financial measure)
We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. In addition, we have incorporated it in our executive incentive measures and we believe it is an important indicator of shareholders’ return over the long term.
Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets. The following shows the components to reconcile the return on assets calculation to Adjusted ROIC:
Four Quarters Ended
April 29, 2023April 30, 2022
Net earnings$20 $364 
Income tax (benefit) expense(8)142 
Interest expense138 145 
Earnings before interest and income tax expense150 651 
Operating lease interest1
85 86 
Adjusted net operating profit235 737 
Estimated income tax benefit (expense)2
166 (206)
Adjusted net operating profit after tax$401 $531 
Average total assets$9,061 $9,228 
Average deferred property incentives in excess of ROU assets3
(188)(223)
Average non-interest bearing current liabilities(3,203)(3,347)
Average invested capital$5,670 $5,658 
Return on assets0.2 %3.9 %
Adjusted ROIC4
7.1 %9.4 %
1 Operating lease interest is a component of operating lease cost recorded in occupancy costs. We add back operating lease interest for purposes of calculating adjusted net operating profit for consistency with the treatment of interest expense on our debt.
2 Estimated income tax benefit (expense) is calculated by multiplying the adjusted net operating profit by the effective tax rate for the trailing twelve-month periods ended April 29, 2023 and April 30, 2022. The effective tax rate is calculated by dividing income tax by earnings before income taxes for the same trailing twelve-month periods.
3 For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities on the Condensed Consolidated Balance Sheets. The current and non-current amounts are used to reduce average total assets above, as this better reflects how we manage our business.
4 Results for the four quarters ended April 29, 2023 included the $309 impact of the Canada wind-down in the first quarter of 2023, which negatively impacted return on assets by approximately 240 basis points and had an immaterial impact on Adjusted ROIC.
LIQUIDITY
We strive to maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to maintain appropriate levels of short-term borrowings. In the short term, our ongoing working capital and capital expenditure requirements, and any dividend payments or share repurchases, are generally funded through cash flows generated from operations. In addition, we have access to the commercial paper market and can draw on our Revolver for working capital, capital expenditures and general corporate purposes. 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, share repurchases and other future investments.
We ended the first quarter of 2023 with $581 in cash and cash equivalents and $800 of additional liquidity available on our Revolver. Cash and cash equivalents in the first quarter of 2023 increased from $484 in the first quarter of 2022, driven by cash flow from earnings, partially offset by capital expenditures and dividends. We believe that our operating cash flows are sufficient to meet our cash requirements for the next 12 months and beyond. Our cash requirements are subject to change as business conditions warrant and opportunities arise and we may elect to raise additional funds in the future through the issuance of either debt or equity.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
The following is a summary of our cash flows by activity:
Quarter Ended
April 29, 2023April 30, 2022
Net cash provided by operating activities$16 $187 
Net cash used in investing activities(123)(11)
Net cash provided by (used in) financing activities1 (14)
Operating Activities
Net cash provided by operating activities decreased $171 for the quarter ended April 29, 2023 due to a seasonal increase in working capital in the first quarter of 2023, compared with a reduction of excess inventory levels in the first quarter of 2022, partially offset by performance-related payments.
Investing Activities
Net cash used in investing activities increased $112 for the quarter ended April 29, 2023, compared with the same period in 2022, primarily due to the sale of our interest in a corporate office building in 2022 and the decrease in cash and cash equivalents resulting from the deconsolidation of Canada in 2023 (see Note 1: Basis of Presentation and Note 2: Canada Wind-down in Item 1).
Capital Expenditures
Our capital expenditures, net are summarized as follows:
Quarter Ended
April 29, 2023April 30, 2022
Capital expenditures$106 $96 
Deferred property incentives1
(4)(5)
Capital expenditures, net$102 $91 
Capital expenditures as a % of net sales3.4 %2.8 %
1 Deferred property incentives are included in our cash provided by operations in our Condensed Consolidated Statements of Cash Flows in Item 1. We operationally view the property incentives we receive from our developers and vendors as an offset to our capital expenditures.
Financing Activities
Net cash from financing activities increased $15 for the quarter ended April 29, 2023, compared with the same period in 2022, primarily due to payment timing of cash book overdrafts.
Share Repurchases
We repurchased $1 for the quarter ended April 29, 2023, compared with no share repurchases in the quarter ended April 30, 2022.
Dividends
We paid $30, or $0.19 per share, for both the quarter ended April 29, 2023 and the quarter ended April 30, 2022.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
Free Cash Flow (Non-GAAP financial measure)
Free Cash Flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business.
Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:
Quarter Ended
April 29, 2023April 30, 2022
Net cash provided by operating activities$16 $187 
Capital expenditures(106)(96)
Change in cash book overdrafts29 16 
Free Cash Flow($61)$107 
CAPITAL RESOURCES
Borrowing Capacity and Activity
As of April 29, 2023, we had total short-term borrowing capacity of $800 under the Revolver that expires in May 2027. As of April 29, 2023, we had no borrowings outstanding under our Revolver and no issuances outstanding under our commercial paper program. For more information about our credit facilities, see Note 4: Debt and Credit Facilities in Item 1.
Impact of Credit Ratings and Revolver Covenants
Changes in our credit ratings may impact our costs to borrow, whether our personal property secures our Revolver and whether and to what extent we are permitted to pay dividends or conduct share repurchases.
For our Revolver, the interest rate applicable to any borrowings we may enter into depends upon the type of borrowing incurred plus an applicable margin, which is determined based on our credit ratings. At the time of this report, our credit ratings and outlook were as follows:
Credit RatingsOutlook
Moody’sBa1Negative
S&P Global RatingsBB+Negative
FitchBB+Stable
Should the ratings assigned to our long-term debt improve, the applicable margin associated with any borrowings under the Revolver may decrease, resulting in a lower borrowing cost under this facility. Conversely, should the ratings assigned to our long-term debt worsen, the applicable margin associated with any borrowings under the Revolver may increase, resulting in a higher borrowing cost under this facility.
As of April 29, 2023, we were in compliance with all covenants. We have certain limitations with respect to the payment of dividends and share repurchases under our Revolver agreement. For more information about our Revolver covenants, see Note 4: Debt and Credit Facilities in Item 1.
On March 1, 2023, we amended our Revolver agreement. See Note 2: Canada Wind-down in Item 1.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
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, as it provides a reflection of our creditworthiness which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with the updates in our Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases. Our goal is to manage debt levels to achieve and maintain investment-grade credit ratings while operating with an efficient capital structure. For more information regarding our Revolver, see Note 4: Debt and Credit Facilities in Item 1.
Adjusted debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies’ methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted debt to EBITDAR is debt to net earnings. The following shows the components to reconcile the debt to net earnings calculation to Adjusted debt to EBITDAR:
April 29, 2023
Debt$2,857
Operating lease liabilities1,655
Adjusted debt$4,512
Four Quarters Ended April 29, 2023
Net earnings$20
Income tax benefit(8)
Interest expense, net121
Earnings before interest and income taxes133
Depreciation and amortization expenses597
Operating Lease Cost275
Amortization of developer reimbursements1
71
Other Revolver covenant adjustments2
418
Adjusted EBITDAR$1,494
Debt to Net Earnings141.4
Adjusted debt to EBITDAR3.0
1 Amortization of developer reimbursements is a non-cash reduction of Operating Lease Cost and is therefore added back to Operating Lease Cost for purposes of our Revolver covenant calculation.
2 Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended April 29, 2023, other Revolver covenant adjustments primarily included costs associated with the wind-down of our Canadian operations, a supply chain technology and related asset impairment and the wind-down of Trunk Club.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with GAAP requires that we make estimates, judgments and assumptions 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. We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in our 2022 Annual Report have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates. Our management has discussed the development and selection of these critical accounting estimates with the Audit & Finance Committee of our Board of Directors. There have been no material changes to our significant accounting policies or critical accounting estimates as described in our 2022 Annual Report, except as noted below, and the following should be read in conjunction with Note 2: Canada Wind-down in Item 1.
Canada Wind-down
To assess the estimated fair value of our Nordstrom Canada investment and our related-party receivables, we estimated the assets available for distribution in relation to expected claims at the time of filing. The estimated amount of Nordstrom Canada’s liabilities exceeded the estimated fair value of assets available for distribution to creditors, and in relation to the receivables, we may not recover any proceeds. As a result, our fair value is recorded as zero in our Condensed Consolidated Balance Sheets as of April 29, 2023.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions except per share amounts and where noted otherwise)
In the first quarter of 2023, we recognized a liability for certain Nordstrom, Inc. guarantees related to a portion of Nordstrom Canada leases. The estimated liability is our current best estimate and is based on expectations that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable that we would be found liable were these claims to be litigated and for how much.
Our estimates are dependent on the outcome of the Nordstrom Canada wind-down process, including the amount of third-party and Nordstrom claims asserted and recognized in the claims process, the amount of assets available for distribution, the negotiation of a CCAA plan of arrangement approved by the creditors and the Ontario Superior Court of Justice and the outcome of negotiations regarding the leases. We are in the early stages of the wind-down process and our estimates of losses are based on currently available information and our assessment of the validity of certain expected claims. These estimates may change as new information becomes available and it is reasonably possible that they may materially change from the estimated amounts. Increases in estimated costs to settle claims and decreases in estimated assets available for distribution may result in additional material charges. At the same time, any future decreases in estimated costs to settle claims or increases in estimated assets available for distribution may result in a gain, which will reduce our estimated charges. See Note 2: Canada Wind-down for additional information.
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2023, the SEC adopted the final rule under SEC Release No. 34-97424, Share Repurchase Disclosure Modernization, requiring disclosures related to issuers’ share repurchases that will provide investors with enhanced information to assess the purposes and effects of the repurchases.Disclosure requirements under this rule will be effective for us in the fourth quarter of 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.
In December 2022, the SEC adopted the final rule under SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures, which requires new disclosures regarding insider trading policies and procedures, the use of certain insider trading plans and director and executive compensation regarding equity compensation awards made close in time to our disclosure of material nonpublic information. Quarterly disclosure requirements under this final rule will be effective for us in the second quarter of 2023 and annual disclosure requirements will be effective for us in the fourth quarter of 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We discussed our interest rate risk and our foreign currency exchange risk in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2016 2022 Annual Report on Form 10-K filed with the SEC on March 20, 2017.. There have been no material changes to these risks since that time.
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Item 4. Controls and Procedures.
DISCLOSURE CONTROLS AND PROCEDURES
AsOn May 10, 2023, we filed an 8-K announcing the appointment of Cathy R. Smith to Chief Financial Officer and Treasurer, and the Company’s principal financial officer, effective May 29, 2023. The 8-K also announced the departure of Michael W. Maher, who has been serving as our interim principal financial officer since the third quarter of 2022, as an officer, employee and the Company’s principal financial officer for the purposes of the endExchange Act. We do not believe that the announcement of Mr. Maher’s resignation has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our Chief Executive Officer, Erik B. Nordstrom, serves as our principal executive officer for the purposes of the period covered by this Quarterly Report on Form 10-Q, the Company performed an evaluation underExchange Act.
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we have performed an evaluation of the design and effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) underas of the Exchange Act). last day of the period covered by this report.
Based upon that evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effectiveeffective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed in the timelyreports that we file or submit under the Exchange Act is recorded, processed, summarized and accurate recording, processing, summarizing and reporting of material financial and non-financial informationreported within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosureDisclosure controls and procedures were effectiveinclude, without limitation, controls and procedures designed 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 principal executive officer and principal 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.

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PART II — OTHER INFORMATION
Item 1. 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 may include certified classes of litigants, or 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 reservesaccruals in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimable liabilities.
On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations. Nordstrom Canada entities obtained an Initial Order from the Ontario Superior Court of Justice under the CCAA to facilitate the wind-down in an orderly fashion. See Note 2: Canada Wind-down in Part I for more information.
As of the date of this report, we do not believe any other 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 1A. Risk Factors.
We discussed our risk factors in Part I, “Item 1A.There have been no material changes to the Risk Factors”Factors described in our 2016 2022 Annual Report on Form 10-K filed with the SEC on March 20, 2017. The following is an update to our risk factors as previously disclosed:.
The exploration of a possible “going private transaction” by the Nordstrom family could impact our relationships with our customers, employees, suppliers and partners, operating results and business.
In June 2017, members of the Nordstrom family formed a group (the “Group”) to explore the possibility of pursuing a “going private transaction” involving the acquisition by the Group of 100% of our outstanding shares of common stock (a “Going Private Transaction”). Our Board of Directors also formed a special committee (the “Special Committee”) comprised of independent directors to act on our behalf in connection with such exploration by the Group and any possible transaction. As of October 2017, the Group has suspended active exploration of a Going Private Transaction for the balance of the year, with the intent to resume such exploration after the conclusion of the holiday season. The Group has not made a proposal to us regarding any such Going Private Transaction and may never make such a proposal. We do not plan to disclose developments or provide updates on the progress or status of any potential Going Private Transaction until the Special Committee deems further disclosure is appropriate or required. Accordingly, speculation regarding any developments related to the review of a Going Private Transaction and perceived uncertainties related to our future could cause our stock price to fluctuate significantly.
The exploration of a potential Going Private Transaction or alternative may expose us and our operations to a number of risks and uncertainties, including the potential failure to retain, attract or strengthen our relationships with key personnel, current and potential customers, suppliers, and partners which may cause them to terminate, or not to renew or enter into, arrangements with us; the potential incurrence of expenses associated with the retention of legal, financial and other advisors regardless of whether any transaction is consummated; distractions and disruptions in our business; and exposure to potential litigation in connection with this process and effecting any transaction, any of which could adversely affect our business, financial condition and results of operations as well as the market price of our common stock. 
If we do not effectively design and implement our strategic and business planning processes to attract, retain, train and develop talent and 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, and the talents of our workforce to execute our business strategies and objectives. If unexpected turnover occurs without adequate succession plans, the loss of the services of any of these individuals, or any resulting negative perceptions of our business, could damage our reputation and our business. Additionally, our ability to maintain relationships with and motivate our employees and to effectively attract, develop and retain our future leaders, could be impacted by the uncertainty about the possibility of a Going Private Transaction.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(c) SHARE REPURCHASES
(Dollar and share amounts in millions, except per share amounts)
In February 2017, our Board of Directors authorizedThe following is a program to repurchase up to $500summary of our outstanding common stock through August 31, 2018.During the thirdfirst quarter of 2017, we did not repurchase any shares ofshare repurchases:
Total Number
of Shares
Purchased		Average
Price Paid
per Share		Total Number of Shares Purchased
as Part of Publicly Announced
Plans or Programs		Approximate Dollar Value
of Shares that may
yet be Purchased Under
the Plans or Programs
February 2023
(January 29, 2023 to February 25, 2023)		0.03 $19.41 0.03 $438 
March 2023
(February 26, 2023 to April 1, 2023)		— — — $438 
April 2023
(April 2, 2023 to April 29, 2023)		— — — $438 
Total0.03 $19.41 0.03 
See Note 7: Shareholders’ Equity in Item 1 for more information about our common stock and do not plan to do so while the Group explores the possibility of a “going private transaction.” We had $414 remaining inMay 2022 share repurchase capacity as of October 28, 2017. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable SEC rules.program.
Item 6. Exhibits.
Exhibits are(a) The information required under this item is incorporated herein by reference or are filed or furnished withas part of this report at:
Page
Nordstrom, Inc. and Subsidiaries Exhibit Index
31
All other exhibits are omitted because they are not applicable, not required or because the information required has been given as set forth in the Exhibit Index on page 30 hereof.

part of this report.
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NORDSTROM, INC.
Exhibit Index
Incorporated by Reference
ExhibitFormExhibitFiling Date
10.1*DEF 14AAppendix B4/28/2023
10.2*8-K10.15/10/2023
31.1†
31.2†
32.1‡
101.INS†Inline XBRL Instance Document
101.SCH†Inline XBRL Taxonomy Extension Schema Document
101.CAL†Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB†Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE†Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF†Inline XBRL Taxonomy Extension Definition Linkbase Document
104†Cover Page Interactive Data File (Inline XBRL)
* Management contract, compensatory plan or arrangement
† Filed herewith electronically
‡ Furnished herewith electronically
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
                        
NORDSTROM, INC.
(Registrant)
/s/ Anne L. Bramman
Anne L. Bramman
Chief Financial Officer
(Principal Financial Officer)
Date:November 28, 2017


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NORDSTROM, INC.
Exhibit Index
ExhibitMethod of FilingNORDSTROM, INC.
31.1
Certification of Co-President required by Section 302(a) of the Sarbanes-Oxley Act of 2002
Filed herewith electronically(Registrant)
31.2
Certification of Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002
Filed herewith electronically/s/ Michael W. Maher
Michael W. Maher
32.1
Certification of Co-President and Chief FinancialAccounting Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Furnished herewith electronically
(Principal Accounting Officer)
101.INSXBRL Instance DocumentFiled herewith electronically
Date:
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith electronically
101.CALXBRL Taxonomy Extension Calculation Linkbase DocumentFiled herewith electronically
101.LABXBRL Taxonomy Extension Labels Linkbase DocumentFiled herewith electronically
101.PREXBRL Taxonomy Extension Presentation Linkbase DocumentFiled herewith electronically
101.DEFXBRL Taxonomy Extension Definition Linkbase DocumentFiled herewith electronically
June 7, 2023

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