April 28, 2012 ___________ to___________ 29 Net sales Credit card revenues Total revenues Cost of sales and related buying and occupancy costs Selling, general and administrative expenses: Retail Credit Earnings before interest and income taxes Interest expense, net Earnings before income taxes Income tax expense Net earnings Earnings per share: Basic Diluted Weighted average shares outstanding: Basic Diluted STATEMENTS OF COMPREHENSIVE EARNINGS Assets Current assets: Cash and cash equivalents Accounts receivable, net Merchandise inventories Current deferred tax assets, net Prepaid expenses and other Total current assets Land, buildings and equipment (net of accumulated depreciation of $3,769, $3,520 and $3,451) Goodwill Other assets Total assets Liabilities and Shareholders’ Equity Current liabilities: Accounts payable Accrued salaries, wages and related benefits Other current liabilities Current portion of long-term debt Total current liabilities Long-term debt, net Deferred property incentives, net Other liabilities Commitments and contingencies Shareholders’ equity: Common stock, no par value: 1,000 shares authorized; 210.1, 218.0 and 218.6 shares issued and outstanding Retained earnings Accumulated other comprehensive loss Total shareholders’ equity Total liabilities and shareholders’ equity 29 BALANCE SHEETS millions) Balance at January 29, 2011 Net earnings Other comprehensive earnings, net of tax Comprehensive net earnings Dividends ($0.69 per share) Issuance of common stock for HauteLook acquisition Issuance of common stock under stock compensation plans Stock-based compensation Repurchase of common stock Balance at October 29, 2011 Balance at January 30, 2010 Net earnings Other comprehensive earnings, net of tax Comprehensive net earnings Dividends ($0.56 per share) Issuance of common stock under stock compensation plans Stock-based compensation Repurchase of common stock Balance at October 30, 2010 29 SHAREHOLDERS' EQUITY millions except per share amounts) Operating Activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization expenses Amortization of deferred property incentives and other, net Deferred income taxes, net Stock-based compensation expense Tax benefit from stock-based compensation Excess tax benefit from stock-based compensation Provision for bad debt expense Change in operating assets and liabilities: Accounts receivable Merchandise inventories Prepaid expenses and other assets Accounts payable Accrued salaries, wages and related benefits Other current liabilities Deferred property incentives Other liabilities Net cash provided by operating activities Investing Activities Capital expenditures Change in credit card receivables originated at third parties Other, net Net cash used in investing activities Financing Activities Proceeds from long-term borrowings, net of discounts Principal payments on long-term borrowings (Decrease) increase in cash book overdrafts Cash dividends paid Payments for repurchase of common stock Proceeds from exercise of stock options Proceeds from employee stock purchase plan Excess tax benefit from stock-based compensation Other, net Net cash (used in) provided by financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental Cash Flow Information Cash paid during the period for: Interest (net of capitalized interest) Income taxes Non-cash investing activity: Issuance of common stock for HauteLook acquisition 29 of 29 HAUTELOOK Maximum total consideration Less: portion attributable to post-acquisition compensation Consideration attributable to purchase price Purchase price at fair value for Credit card receivables: Nordstrom VISA credit card receivables Nordstrom private label card receivables Total credit card receivables Allowance for credit losses Credit card receivables, net Other accounts receivable Accounts receivable, net Allowance at beginning of period Bad debt provision Write-offs Recoveries Allowance at end of period Current 1 – 29 days delinquent 30+ days delinquent: 30 – 59 days delinquent 60 – 89 days delinquent Greater than 90 days delinquent Total 30+ days delinquent Total credit card receivables Receivables not accruing finance charges Receivables greater than 90 days delinquent and still accruing finance charges We also evaluate credit quality using FICO credit scores. The following table illustrates the distribution of our credit card receivables across FICO score ranges: 801+ 720 – 800 660 – 719 600 – 659 001 – 599 Other2 Total credit card receivables Secured Series 2007-2 Class A Notes, one-month LIBOR plus 0.06% per year, due April 2012 Series 2007-2 Class B Notes, one-month LIBOR plus 0.18% per year, due April 2012 Mortgage payable, 7.68%, due April 2020 Other Unsecured Senior notes, 6.75%, due June 2014, net of Senior notes, 6.25%, due January 2018, net of Senior notes, 4.75%, due May 2020, net of Senior notes, 4.00%, due October 2021, net of Senior debentures, 6.95%, due March 2028 Senior notes, 7.00%, due January 2038, net of Other Total long-term debt Less: current portion Total due beyond one year purposes of program and no borrowings under our revolver or our 2007-A VFN. Assets: Interest rate swap Liabilities: HauteLook earn-out liability liabilities that were measured at fair value on a recurring basis as of Balance at beginning of period Acquisition of HauteLook Change in fair value of HauteLook earn-out liability1 Balance at end of period measurement. Financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of cash and cash equivalents, accounts receivable, net and accounts payable approximate fair value due to their short-term nature. The estimated fair value of our long-term debt, including current maturities and issues, and as such, this is considered a Level 1 fair value measurement. Exchange Commission rules. Stock options HauteLook stock compensation Performance share units Employee stock purchase plan Other Total stock-based compensation expense, before income tax benefit Income tax benefit Total stock-based compensation expense, net of income tax benefit Net earnings Basic shares Dilutive effect of stock options and other Diluted shares Earnings per basic share Earnings per diluted share Anti-dilutive stock options and other 29 Quarter Ended October 29, 2011 Net sales Credit card revenues Earnings (loss) before interest and income taxes Interest expense, net Earnings (loss) before income taxes Quarter Ended October 30, 2010 Net sales Credit card revenues Earnings (loss) before interest and income taxes Interest expense, net Earnings (loss) before income taxes Nine Months Ended October 29, 2011 Net sales Credit card revenues Earnings (loss) before interest and income taxes Interest expense, net Earnings (loss) before income taxes Goodwill Total assets Nine Months Ended October 30, 2010 Net sales Credit card revenues Earnings (loss) before interest and income taxes Interest expense, net Earnings (loss) before income taxes Goodwill Total assets Nordstrom Nordstrom Rack Other retail1 Total Retail segment Corporate/Other Total net sales 29 29 the first quarter, resulting in decreased delinquency and write-off trends, while our credit and debit card volumes increased. channels. 29 The following Net sales Cost of sales and related buying and occupancy costs Gross profit Selling, general and administrative expenses Earnings before interest and income taxes Net sales Cost of sales and related buying and occupancy costs Gross profit Selling, general and administrative expenses Earnings before interest and income taxes Net sales: Nordstrom Nordstrom Rack Other retail1 Total Retail segment sales Corporate/Other Total net sales Net sales increase Same-store sales increase (decrease) by channel: Nordstrom Nordstrom Rack Total Sales per square foot 2011: 29 performance and is reflective of the multiple initiatives under way in e-commerce. Gross profit Gross profit rate Ending inventory per square foot Inventory turnover rate1 quarter of 2011. and in-store growth. Selling, general and administrative expenses Selling, general and administrative expense rate Selling, general and administrative expense per square foot 29 Segment Credit card revenues Interest expense Net credit card income Cost of sales and related buying and occupancy costs – loyalty program Selling, general and administrative expenses Total expense Credit segment earnings before income taxes, as presented in segment disclosure Intercompany merchant fees Credit segment contribution, before income taxes Credit and debit card volume: Outside Inside Total volume Average credit card receivables Average credit card receivable investment (assuming 80% of accounts receivable is funded with debt) Annualized Credit segment contribution, net of tax, as a percentage of average credit card receivable investment accounts receivable is funded with debt. Credit card revenues Interest expense Net credit card income Cost of sales and related buying and occupancy costs – loyalty program Selling, general and administrative expenses Total expense Credit segment earnings before income taxes, as presented in segment disclosure Intercompany merchant fees Credit segment contribution, before income taxes Credit and debit card volume: Outside Inside Total volume Average credit card receivables Average credit card receivable investment (assuming 80% of accounts receivable is funded with debt) Annualized Credit segment contribution, net of tax, as a percentage of average credit card receivable investment Finance charge revenue Interchange – third party Late fees and other revenue Total credit card revenues cards at third parties. 29 Operational and marketing expenses Bad debt provision Total Credit selling, general and administrative expenses Allowance at beginning of period Bad debt provision Write-offs Recoveries Allowance at end of period Annualized net write-offs as a percentage of average credit card receivables Balances 30+ days delinquent as a percentage of ending credit card receivables Allowance as a percentage of ending credit card receivables Income tax expense Effective tax rate Net Operating Profit after Taxes Net earnings Add: income tax expense Add: interest expense Earnings before interest and income tax expense Add: rent expense Less: estimated depreciation on capitalized operating leases1 Net operating profit Estimated income tax expense2 Net operating profit after tax Average total assets3 Less: average non-interest bearing current liabilities4 Less: average deferred property incentives3 Add: average estimated asset base of capitalized operating leases5 Average invested capital Return on assets ROIC Asset base is calculated as described in footnote 5 below. . 29 higher purchases of inventory in conjunction with an increase in sales. in Credit Card Receivables Originated at Third Parties +/ Net cash provided by operating activities Less: capital expenditures Less: cash dividends paid Add (Less): change in credit card receivables originated at third parties (Less) Add: change in cash book overdrafts Free Cash Flow Net cash used in investing activities Net cash (used in) provided by financing activities 29 Standard & Euro-Dollar Rate Loan Base Rate Loan Covenant 29 Debt Add: rent expense x 82 Less: fair value of interest rate swaps included in long-term debt Adjusted Debt Net earnings Add: income tax expense Add: interest expense, net Earnings before interest and income taxes Add: depreciation and amortization expenses Add: rent expense Add: non-cash acquisition-related charges EBITDAR Debt to Net Earnings Adjusted Debt to EBITDAR . 29 29 Total Number of Shares (or Units) Purchased Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs1 August 2011 (July 31, 2011 to August 27, 2011) September 2011 (August 28, 2011 to October 1, 2011) October 2011 (October 2, 2011 to October 29, 2011) Total 29 29October 29, 2011¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934toWashington 91-0515058 1617 Sixth Avenue, Seattle, Washington 98101 (Address of principal executive offices) (Zip Code) ¨o¨o“large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act. ¨o ¨o (Do not check if a smaller reporting company) ¨o¨o NOþDecember 2, 2011: 209,424,143May 23, 2012: 208,010,488 sharescommon stock129 Page Item 1. 3 4 5 6 7 Item 2. 15 Item 3. 28Item 4. Item 4.Controls and Procedures.28 Item 1A.Risk Factors.29 Item 2. 29Item 5. Item 6. 29 SIGNATURES30 31 31 Quarter Ended Nine Months Ended October 29,
2011 October 30,
2010 October 29,
2011 October 30,
2010 $ 2,383 $ 2,087 $ 7,328 $ 6,494 95 95 283 290 2,478 2,182 7,611 6,784 (1,511) (1,331) (4,619) (4,139) (670) (569) (1,989) (1,715) (57) (61) (171) (218) 240 221 832 712 (31) (31) (92) (94) 209 190 740 618 (82) (71) (293) (237) $ 127 $ 119 $ 447 $ 381 $ 0.60 $ 0.54 $ 2.08 $ 1.74 $ 0.59 $ 0.53 $ 2.04 $ 1.71 210.9 219.0 215.3 218.9 215.0 222.5 219.6 222.6 Quarter Ended April 28, 2012 April 30, 2011 Net sales $ 2,535 $ 2,229 Credit card revenues 94 94 Total revenues 2,629 2,323 Cost of sales and related buying and occupancy costs (1,584 ) (1,385 ) Selling, general and administrative expenses: Retail (721 ) (611 ) Credit (44 ) (55 ) Earnings before interest and income taxes 280 272 Interest expense, net (40 ) (31 ) Earnings before income taxes 240 241 Income tax expense (91 ) (96 ) Net earnings $ 149 $ 145 Earnings per share: Basic $ 0.72 $ 0.66 Diluted $ 0.70 $ 0.65 Weighted average shares outstanding: Basic 207.3 219.0 Diluted 211.4 223.3 3 of 31BALANCE SHEETS October 29, 2011 January 29, 2011 October 30, 2010 $ 1,457 $ 1,506 $ 1,046 1,995 2,026 2,015 1,507 977 1,307 216 236 238 147 79 120 5,322 4,824 4,726 2,471 2,318 2,300 200 53 53 346 267 303 $ 8,339 $ 7,462 $ 7,382 $ 1,256 $ 846 $ 1,054 327 375 296 698 652 587 506 6 6 2,787 1,879 1,943 2,810 2,775 2,806 511 495 496 335 292 266 1,436 1,168 1,138 487 882 752 (27) (29) (19) 1,896 2,021 1,871 $ 8,339 $ 7,462 $ 7,382 Quarter Ended April 28, 2012 April 30, 2011 Net earnings $ 149 $ 145 Other comprehensive earnings, net of tax 1 1 Comprehensive net earnings $ 150 $ 146 431STATEMENTS OF SHAREHOLDERS’ EQUITYmillions except per share amounts) Accumulated Other Common Stock Retained Comprehensive Shares Amount Earnings Loss Total 218.0 $ 1,168 $ 882 $ (29) $ 2,021 — — 447 — 447 — — — 2 2 449 — — (149) — (149) 3.5 148 — — 148 2.9 86 — — 86 0.9 34 — — 34 (15.2) — (693) — (693) 210.1 $ 1,436 $ 487 $ (27) $ 1,896 Accumulated Other Common Stock Retained Comprehensive Shares Amount Earnings Loss Total 217.7 $ 1,066 $ 525 $ (19) $ 1,572 — — 381 — 381 — — — — — 381 — — (123) — (123) 1.8 46 — — 46 — 26 — — 26 (0.9) — (31) — (31) 218.6 $ 1,138 $ 752 $ (19) $ 1,871 April 28, 2012 January 28, 2012 April 30, 2011 Assets Current assets: Cash and cash equivalents $ 1,647 $ 1,877 $ 1,433 Accounts receivable, net 2,008 2,033 1,969 Merchandise inventories 1,372 1,148 1,149 Current deferred tax assets, net 215 220 222 Prepaid expenses and other 79 282 80 Total current assets 5,321 5,560 4,853 Land, buildings and equipment (net of accumulated depreciation of $3,865, $3,791 and $3,600) 2,472 2,469 2,361 Goodwill 175 175 200 Other assets 290 287 333 Total assets $ 8,258 $ 8,491 $ 7,747 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 1,176 $ 917 $ 1,035 Accrued salaries, wages and related benefits 232 388 232 Other current liabilities 793 764 715 Current portion of long-term debt 6 506 506 Total current liabilities 2,207 2,575 2,488 Long-term debt, net 3,137 3,141 2,276 Deferred property incentives, net 503 500 506 Other liabilities 328 319 343 Commitments and contingencies Shareholders' equity: Common stock, no par value: 1,000 shares authorized; 208.6, 207.6 and 219.8 shares issued and outstanding 1,557 1,484 1,362 Retained earnings 570 517 800 Accumulated other comprehensive loss (44 ) (45 ) (28 ) Total shareholders' equity 2,083 1,956 2,134 Total liabilities and shareholders' equity $ 8,258 $ 8,491 $ 7,747 531CASH FLOWSmillions) Nine Months Ended October 29, 2011 October 30, 2010 $ 447 $ 381 273 244 (41) (40) 18 (16) 42 29 17 10 (19) (10) 82 125 (56) (46) (444) (362) (62) (36) 331 267 (53) (40) 30 (20) 61 77 2 (2) 628 561 (398) (295) 10 (59) (3) 4 (391) (350) 499 498 (5) (354) (20) 2 (149) (123) (693) (31) 55 23 14 13 19 10 (6) 2 (286) 40 (49) 251 1,506 795 $ 1,457 $ 1,046 $ 73 $ 69 $ 340 $ 335 $ 148 $ — Accumulated Other Common Stock Retained Comprehensive Shares Amount Earnings Loss Total Balance at January 28, 2012 207.6 $ 1,484 $ 517 $ (45 ) $ 1,956 Net earnings — — 149 — 149 Other comprehensive earnings — — — 1 1 Dividends ($0.27 per share) — — (56 ) — (56 ) Issuance of common stock under stock compensation plans 1.8 60 — — 60 Stock-based compensation — 13 — — 13 Repurchase of common stock (0.8 ) — (40 ) — (40 ) Balance at April 28, 2012 208.6 $ 1,557 $ 570 $ (44 ) $ 2,083 Accumulated Other Common Stock Retained Comprehensive Shares Amount Earnings Loss Total Balance at January 29, 2011 218.0 $ 1,168 $ 882 $ (29 ) $ 2,021 Net earnings — — 145 — 145 Other comprehensive earnings — — — 1 1 Dividends ($0.23 per share) — — (50 ) — (50 ) Issuance of common stock for HauteLook acquisition 3.5 148 — — 148 Issuance of common stock under stock compensation plans 1.3 36 — — 36 Stock-based compensation 0.9 10 — — 10 Repurchase of common stock (3.9 ) — (177 ) — (177 ) Balance at April 30, 2011 219.8 $ 1,362 $ 800 $ (28 ) $ 2,134 631 Quarter Ended April 28, 2012 April 30, 2011 Operating Activities Net earnings $ 149 $ 145 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization expenses 101 86 Amortization of deferred property incentives and other, net (18 ) (14 ) Deferred income taxes, net — 1 Stock-based compensation expense 13 11 Tax benefit from stock-based compensation 13 7 Excess tax benefit from stock-based compensation (14 ) (8 ) Provision for bad debt expense 13 25 Change in operating assets and liabilities: Accounts receivable (6 ) 4 Merchandise inventories (204 ) (143 ) Prepaid expenses and other assets 2 (2 ) Accounts payable 203 154 Accrued salaries, wages and related benefits (156 ) (147 ) Other current liabilities 33 52 Deferred property incentives 21 29 Other liabilities 9 9 Net cash provided by operating activities 159 209 Investing Activities Capital expenditures (98 ) (116 ) Change in restricted cash 200 — Change in credit card receivables originated at third parties 17 30 Other, net — (2 ) Net cash provided by (used in) investing activities 119 (88 ) Financing Activities Principal payments on long-term borrowings (502 ) (1 ) Increase (decrease) in cash book overdrafts 48 (9 ) Cash dividends paid (56 ) (50 ) Payments for repurchase of common stock (57 ) (171 ) Proceeds from issuances under stock compensation plans 47 29 Excess tax benefit from stock-based compensation 14 8 Other, net (2 ) — Net cash used in financing activities (508 ) (194 ) Net decrease in cash and cash equivalents (230 ) (73 ) Cash and cash equivalents at beginning of period 1,877 1,506 Cash and cash equivalents at end of period $ 1,647 $ 1,433 Supplemental Cash Flow Information Cash paid during the period for: Interest (net of capitalized interest) $ 24 $ 12 Income taxes $ 46 $ 36 Non-cash investing activity: Issuance of common stock for HauteLook acquisition $ — $ 148 20102011 Annual Report on Form 10-K, and reflect all adjustments that are, in management’smanagement's opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented.October 29,April 28, 2012 and April 30, 2011 and October 30, 2010 are unaudited. The condensed consolidated balance sheet as of January 29, 201128, 2012 has been derived from the audited consolidated financial statements included in our 20102011 Annual Report on Form 10-K. The interim condensed consolidated financial statements should be read together with the consolidated financial statements and related footnote disclosures contained in our 20102011 Annual Report on Form 10-K.Accordingly, resultsIn 2012, our Anniversary Sale will shift to the last week of July and the first week of August to align with the historical timing of our sale event. This will move one week of event sales to the third quarter. Results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year.AprilDecember 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”("ASU") No. 2011-02,A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.2011-11, Disclosures about Offsetting Assets and Liabilities, which has requirements that are disclosure-only in nature. This ASU clarifies existing guidance on whether a loan modification constitutes a troubled debt restructuring (“TDR”) for accounting purposes, and requires certain disclosures related to TDRs. The provisions of this ASU, which are effective with this quarterly report for the period ended October 29, 2011, did not have a material impact on our consolidated financial statements.In May 2011, the FASB issued ASU No. 2011-04,Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.This ASU clarifies existing fair value measurement and disclosure requirements, amends certain fair value measurement principles and requires additional disclosures about fair value measurements.offsetting and related arrangements for financial instruments and derivative instruments, including gross and net information and evaluation of the effect of netting arrangements on the statement of financial position. We do not expect the provisions of this ASU, which are effective for us beginning with the first quarter of 2012,2013, to have a material impact on our consolidated financial statements.In June 2011, the FASB issued ASU No. 2011-05,Presentation of Comprehensive Income. This ASU amends existing presentation and disclosure requirements concerning comprehensive income, most significantly by requiring that comprehensive income be presented with net income in a continuous financial statement, or in a separate but consecutive financial statement. The provisions of this ASU, which are currently effective for us beginning with the first quarter of 2012, will result in changes to the presentation of comprehensive net earnings in our consolidated financial statements, but will have no effect on the calculation of net earnings, comprehensive net earnings or earnings per share.In September 2011, the FASB issued ASU No. 2011-08,Testing for Goodwill Impairment. This ASU amends existing guidance by permitting an entity to first assess qualitative factors before calculating the fair value of a reporting unit in the two-step goodwill impairment test described in Accounting Standards Codification Topic 350,Intangibles – Goodwill and Other. If it is determined that it is more likely than not that the fair value of a reporting unit is not less than its carrying amount, further testing is not needed. We do not expect the provisions of this ASU, which are effective for us beginning with the first quarter of 2012, to have a material impact on our consolidated financial statements.7 of 31NORDSTROM, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar and share amounts in millions except per share and per option amounts)(Unaudited)ACQUISITIONlimited timelimited-time sale events on fashion and lifestyle brands. We believe the acquisition will enable us to participate in the fast-growing private sale marketplace and provide a platform to increase innovation and speed in the way we serve customers across channels. The terms of this acquisition included upfront consideration of $180 in Nordstrom stock and an “earn-out” provision for up to $90 of additional consideration payable in Nordstrom stock over a three-year period, subject to HauteLook’s performance in meeting certain targets for sales and earnings before interest, taxes, depreciation and amortization (EBITDA).HauteLook’s results of operations are included in our consolidated results from the acquisition date, and were not material to our consolidated results for the quarter and nine months ended October 29, 2011. We have not presented pro forma results of operations for periods prior to the acquisition because HauteLook’s results of operations were not material to our consolidated results for any previous period.Purchase Price$180Both the $180 upfront payment and the $90 earn-out consideration include amounts attributable to HauteLook employees that are subject to ongoing vesting requirements. These amounts will be recorded as compensation expense as the related service is performed over the respective employee vesting periods of up to four years after the acquisition date. The remaining (non-compensation) consideration was measured at its acquisition-date fair value to determine the purchase price, as summarized in the following table: Upfront Earn-out Total $ 180 $ 90 $ 270 (27) (15) (42) $ 153 $ 75 $ 228 $ 153 $ 42 $ 195 The $153 upfront component of the purchase price consisted of 3.5 shares of Nordstrom common stock at a closing stock price of $42 per share on the acquisition date. Earn-out payments will range from $0 to $90, also in Nordstrom common stock with amounts attributable to the purchase price ranging from $0 to $75 and to post-acquisition compensation of $0 to $15. We estimated the $42 acquisition-date fair value of the earn-out attributable to the purchase price using a valuation model, and recorded this amountan "earn-out" provision ultimately settled in other liabilities on our condensed consolidated balance sheet. As of October 29, 2011 the estimated fair value was $39 (see Note 5: Fair Value Measurements). We will adjust the recorded earn-out obligation on a quarterly basis to the extent our projections change based on HauteLook’s actual performance or other factors, with a corresponding charge to expense or credit to income. If HauteLook achieves the maximum performance thresholds, we will incur additional expense of $36 through 2013 associated with adjustments to the recorded earn-out obligation, compared with $39 of income if the minimum targets are not met.Net Assets Acquired$30We allocated the total purchase price of $195 to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on in Nordstrom common stock. On the acquisition date, with the remaining unallocated purchase price recorded as goodwill. As a result of the purchase price allocation, we recorded intangible assets of $62$62 and goodwill of $146,$146, offset by other net liabilities of $13.Intangible assets consist$13. In the fourth quarter of $272011, we recognized a goodwill impairment charge of trademarks/trade names, $20$25, reducing the HauteLook goodwill to $121 due to a reorganization of technologyHauteLook, changes in expected business results and $15 of customer relationships. We estimated the fair valuesmarket dynamics. Additionally, as part of the acquired intangible assets based on discounted cash flow models using estimates and assumptions regarding future operations and cash flows. We will amortize the acquired intangible assets over their estimated livesreorganization, we recorded income of two to seven years on a straight-line basis, which approximates the pattern of expected economic benefit. We expect to record total amortization expense of $54 associated with these intangible assets over the next five years, including $16 in 2011.Goodwill of $146 is equal$12 related to the excesssettlement of the purchase price over the net assets recognized and represents the acquisition’s benefits that are not attributable to individually identified and separately recognized assets. These benefits include our expected ability to increase innovation and speed in the way we serve customers across channels, HauteLook’s assembled workforce including its key management and the going-concern valueearn-out liability.acquiring HauteLook’s business as a whole. We include this goodwill, which is not deductible for tax purposes, in our Retail segment.829 October 29, 2011 January 29, 2011 October 30, 2010 $ 1,344 $ 1,431 $ 1,450 691 672 652 2,035 2,103 2,102 (125) (145) (160) 1,910 1,958 1,942 85 68 73 $ 1,995 $ 2,026 $ 2,015 April 28, 2012 January 28, 2012 April 30, 2011 Credit card receivables: Nordstrom VISA credit card receivables $ 1,309 $ 1,347 $ 1,367 Nordstrom private label card receivables 718 727 656 Total credit card receivables 2,027 2,074 2,023 Allowance for credit losses (105 ) (115 ) (135 ) Credit card receivables, net 1,922 1,959 1,888 Other accounts receivable 86 74 81 Accounts receivable, net $ 2,008 $ 2,033 $ 1,969 quarterquarters endedApril 28, 2012 and nine months ended October 29,April 30, 2011 and October 30, 2010 is as follows: Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 125 $ 175 $ 145 $ 190 31 28 82 125 (37) (48) (119) (168) 6 5 17 13 $ 125 $ 160 $ 125 $ 160 Quarter Ended April 28, 2012 April 30, 2011 Allowance at beginning of period $ 115 $ 145 Bad debt provision 13 25 Write-offs (30 ) (40 ) Recoveries 7 5 Allowance at end of period $ 105 $ 135 (“TDRs”("TDRs"), include reduced or waived fees and finance charges, and/or reduced minimum payments. Receivables classified as TDRs were $62,$54, or 3.1%2.7% of our total credit card receivables as of October 29, 2011, $56,April 28, 2012, $58, or 2.7%2.8% of our total credit card receivables as of January 29, 201128, 2012 and $54,$54, or 2.6%2.7% of our total credit card receivables as of OctoberApril 30, 2010.2011. As with other aged receivables in our portfolio, the allowance for credit losses related to receivables classified as TDRs is primarily based on our historical aging and delinquency trends and write-off experience, with qualitative consideration of factors affecting the credit quality of our portfolio, including amounts of and trends in TDRs. October 29, 2011 January 29, 2011 October 30, 2010 Balance % of Total Balance % of Total Balance % of Total $ 1,899 93.3% $ 1,942 92.4% $ 1,929 91.8% 80 3.9% 97 4.6% 100 4.7% 21 1.1% 24 1.1% 25 1.2% 15 0.7% 17 0.8% 19 0.9% 20 1.0% 23 1.1% 29 1.4% $ 56 2.8% $ 64 3.0% $ 73 3.5% $ 2,035 100.0% $ 2,103 100.0% $ 2,102 100.0% $ 18 $ 14 $ 29 $ 11 $ 21 $ 13 9 of 31 April 28, 2012 January 28, 2012 April 30, 2011 Balance % of Total Balance % of Total Balance % of Total Current $ 1,903 93.9 % $ 1,928 93.0 % $ 1,863 92.1 % 1 – 29 days delinquent 77 3.8 % 92 4.4 % 92 4.6 % 30+ days delinquent: 30 – 59 days delinquent 17 0.8 % 20 1.0 % 22 1.1 % 60 – 89 days delinquent 11 0.6 % 13 0.6 % 17 0.8 % 90 days or more delinquent 19 0.9 % 21 1.0 % 29 1.4 % Total 30+ days delinquent 47 2.3 % 54 2.6 % 68 3.3 % Total credit card receivables $ 2,027 100.0 % $ 2,074 100.0 % $ 2,023 100.0 % Receivables not accruing finance charges $ 11 $ 15 $ 14 Receivables 90 days or more delinquent and still accruing finance charges $ 10 $ 11 $ 15 NORDSTROM, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar and share amounts in millions except per share and per option amounts)(Unaudited)NOTE 3: ACCOUNTS RECEIVABLE (CONTINUED) October 29, 2011 January 29, 2011 October 30, 2010 FICO Score Range1 Balance % of Total Balance % of Total Balance % of Total $ 331 16.3% $ 314 14.9% $ 332 15.8% 728 35.7% 731 34.8% 729 34.7% 545 26.8% 558 26.5% 550 26.1% 253 12.4% 274 13.0% 268 12.8% 115 5.7% 155 7.4% 161 7.7% 63 3.1% 71 3.4% 62 2.9% $ 2,035 100.0% $ 2,103 100.0% $ 2,102 100.0% April 28, 2012 January 28, 2012 April 30, 2011 Balance % of Total Balance % of Total Balance % of Total 801+ $ 331 16.3 % $ 307 14.8 % $ 304 15.0 % 720 – 800 710 35.1 % 741 35.7 % 708 35.0 % 660 – 719 539 26.6 % 572 27.6 % 536 26.5 % 600 – 659 256 12.6 % 270 13.0 % 255 12.6 % 001 – 599 118 5.8 % 120 5.8 % 135 6.7 % 73 3.6 % 64 3.1 % 85 4.2 % Total credit card receivables $ 2,027 100.0 % $ 2,074 100.0 % $ 2,023 100.0 % typically updated at least every 60 days. Amounts listed in the table reflect the most recently obtained credit scores as of the dates indicated. indicated.customers’customers' accounts and receivables from customers for whom FICO scores are temporarily unavailable. October 29, 2011 January 29, 2011 October 30, 2010 $ 454 $ 454 $ 454 46 46 46 52 55 57 13 14 13 565 569 570
unamortized discount 399 399 399
unamortized discount 648 647 647
unamortized discount 498 498 498
unamortized discount 499 — — 300 300 300
unamortized discount 343 343 343 64 25 55 2,751 2,212 2,242 3,316 2,781 2,812 (506) (6) (6) $ 2,810 $ 2,775 $ 2,806 10 of 31 April 28, 2012 January 28, 2012 April 30, 2011 Secured Series 2007-2 Class A Notes, one-month LIBOR plus 0.06% per year, due April 2012 — $ 454 $ 454 Series 2007-2 Class B Notes, one-month LIBOR plus 0.18% per year, due April 2012 — 46 46 Series 2011-1 Class A Notes, 2.28%, due October 2016 $ 325 325 — Mortgage payable, 7.68%, due April 2020 50 51 55 Other 11 12 13 386 888 568 Unsecured Senior notes, 6.75%, due June 2014, net of unamortized discount 399 399 399 Senior notes, 6.25%, due January 2018, net of unamortized discount 648 648 647 Senior notes, 4.75%, due May 2020, net of unamortized discount 498 498 498 Senior notes, 4.00%, due October 2021, net of unamortized discount 499 499 — Senior debentures, 6.95%, due March 2028 300 300 300 Senior notes, 7.00%, due January 2038, net of unamortized discount 344 343 343 Other 69 72 27 2,757 2,759 2,214 Total long-term debt 3,143 3,647 2,782 Less: current portion (6 ) (506 ) (506 ) Total due beyond one year $ 3,137 $ 3,141 $ 2,276 NORDSTROM, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollar and share amounts in millions except per share and per option amounts)(Unaudited)NOTE 4: DEBT AND CREDIT FACILITIES (CONTINUED)On October 5, 2011,In April 2012, we issued $500 of senior unsecured notes at 4.00%, due October 15, 2021. After deducting retired our Series 2007-2 Class A & B Notes ("the original issue discount of $1, net proceeds from the offering were $499. We intend to use the net proceeds from the issuance of the notes for general corporate purposes.Our interest rate swap agreements (collectively, the “swap”Notes") totaling $500, which havehad been secured by our restricted receivables. The Notes were retired using cash that had been accumulated monthly into a $650 notional amount maturingrestricted account beginning in 2018, are intendedDecember 2011. Prior to hedge the exposure of changes inretirement, the fair value of our fixed-rate senior notes due in 2018 from interest rate risk. Under the swap, we receive a fixed rate of 6.25% and pay a variable rate based on one-month LIBOR plus a margin of 2.9% (3.1% at October 29, 2011). The swap is designated as a fully effective fair value hedge. As such, the interest rate swap fair value isaccumulated cash was included in other assets or other liabilities on our condensed consolidated balance sheet with an offsetting adjustment to the carrying valuein prepaid expenses and other.our long-term debt (included in other unsecured debt in the table above). See Note 5: Fair Value Measurements for additional information about our swap.On November 22, 2011,issued $325 Series 2011-1 Class A Notes at 2.28%, due October 17, 2016. The notes are secured by a portion of our credit card receivables. We intend to use the net proceeds from the issuance of the noteshad total short-term borrowing capacity available for general corporate purposes.Credit Facilities$800On June 23, 2011,. Of the total capacity, we entered into a newhad $600 under our commercial paper program, which is backed by our unsecured revolving credit facility (“revolver”("revolver") with a capacity of $600, which is scheduled to expirethat expires in June 2016. This revolver replaced2016, and $200 under our previous $650 unsecured line of credit which was scheduled to expire2007-A Variable Funding Note ("2007-A VFN") that expires in August 2012. UnderJanuary 2013. During the terms of the revolver,quarter ended April 28, 2012, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is available for working capital, capital expenditures and general corporate purposes, including liquidity support forhad no issuances under our commercial paper program. We have the option to increase the revolving commitment by up to $100, to a total of $700, provided that we obtain written consent from the lenders.(“EBITDAR”("EBITDAR"), of less than four times. As of October 29, 2011,April 28, 2012, we were in compliance with this covenant.AscovenantOctober 29 2011, we had total short-term borrowing capacity available for general corporate purposes$300 under our Variable Funding Note facility (“2007-A VFN”) that expiresshare amounts in January 2012. As of October 29, 2011, we had no issuances under our commercial paper programmillions except per share and no borrowings under our revolver or our 2007-A VFN.per option amounts)The following table presents Fair Value
Hierarchy October 29, 2011 January 29, 2011 October 30, 2010 Level 2 $ 64 $ 25 $ 55 Level 3 $ 39 — — entity’sentity's own1131NORDSTROM, INC.April 28, 2012NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS or (DollarJanuary 28, 2012. The following table presents our financial assets and share amounts in millions except per share and per option amounts)(Unaudited)NOTE 5: FAIR VALUE MEASUREMENTS (CONTINUED)April 30, 2011We, by level within the fair value hierarchy: April 30, 2011 Assets: Interest rate swap Level 2 $ 27 Liabilities: HauteLook earn-out liability Level 3 $ 42 risk (see Note 4: Debtrisk. As such, these were considered Level 2 fair value measurements.Credit Facilities for additional information about our swap). Wehave no remaining liability related to the earn-out. During 2011, before the settlement, we estimated the fair value of the HauteLook earn-out liability using a valuation model based on our expectations of HauteLook’s future performance, estimates of volatility around those expectations and the risk-adjusted discount rate. Prior to the acquisition of HauteLook in March 2011, we did not have anyAs such, this was considered a Level 3 fair value measurements.The following table provides a reconciliation between the beginning and ending balances of our HauteLook earn-out liability for the quarter and nine months ended October 29, 2011: Quarter Ended Nine Months Ended October 29, 2011 October 29, 2011 $ 44 $ — — 42 (5) (3) $ 39 $ 39 1Included in Retail selling, general and administrative expenses in the condensed consolidated statement of earnings.excluding the remaining fair value ofadjustment from our interest rate swap,previous effective fair value hedge, was $3,687$3,681 as of October 29, 2011,April 28, 2012, compared with a carrying value of $3,316.$3,143. We estimated the fair value of long-term debt using quoted market prices of the same or similar issues.nonrecurringnon-recurring basis, primarily goodwill and long-lived tangible and intangible assets, in connection with periodic evaluations for potential impairment. We recorded no impairment charges for these assets for the nine monthsquarters ended October 29,April 28, 2012 and April 30, 2011 and October 30, 2010..SHAREHOLDERS’SHAREHOLDERS' EQUITYIn August 2010, our Board of Directors authorized a program (the “2010 Program”) to repurchase up to $500 of our outstanding common stock, through January 28, 2012. new program (the “2011 Program”"2011 Program") to repurchase up to $750$750 of our outstanding common stock, through February 2, 2013,2013. In February 2012, our Board of Directors authorized a new program (the "2012 Program") to repurchase up to $800 of our outstanding common stock, through February 1, 2014, in addition to the remaining amount available for repurchase under the 20102011 Program. For the nine monthsquarter ended October 29, 2011,April 28, 2012, we repurchased 15.20.8 shares of our common stock for an aggregate purchase price of $693,$40 and had $468$1,070 in remaining share repurchase capacity. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions.12 of 31NORDSTROM, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollarconditions and share amounts in millions except per shareapplicable Securities and per option amounts)(Unaudited)STOCKSTOCK-BASED COMPENSATION PLANS Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 8 $ 8 $ 26 $ 25 3 — 9 — 3 1 4 2 — — 1 1 — — 2 1 $ 14 $ 9 $ 42 $ 29 (5) (4) (16) (11) $ 9 $ 5 $ 26 $ 18 Quarter Ended April 28, 2012 April 30, 2011 Stock options $ 10 $ 8 HauteLook stock compensation 2 2 Performance share units — 1 Employee stock purchase plan 1 — Total stock-based compensation expense, before income tax benefit $ 13 $ 11 Income tax benefit (4 ) (4 ) Total stock-based compensation expense, net of income tax benefit $ 9 $ 7 nine monthsquarters ended October 29,April 28, 2012 and April 30, 2011 and October 30, 2010,, we granted 2.72.9 and 2.62.7 options with weighted average grant-date fair values per option of $15 and $13.As discussedNote 2: Acquisition, portions of both the upfront and earn-out consideration for our acquisition of HauteLook are payable in Nordstrom stock, subject to ongoing vesting requirements for HauteLook’s employees. These amounts will therefore be recorded as compensation expense as the related service is performed over the respective employee vesting periods of up to four years after the acquisition date (subject also to HauteLook’s financial performance in the case of the earn-out consideration). These shares are not issued from our 2010 Equity Incentive Plan, but rather from our unallocated and unissued shares.each period. Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 127 $ 119 $ 447 $ 381 210.9 219.0 215.3 218.9 4.1 3.5 4.3 3.7 215.0 222.5 219.6 222.6 $ 0.60 $ 0.54 $ 2.08 $ 1.74 $ 0.59 $ 0.53 $ 2.04 $ 1.71 3.8 7.1 4.0 7.0 13 Quarter Ended April 28, 2012 April 30, 2011 Net earnings $ 149 $ 145 Basic shares 207.3 219.0 Dilutive effect of stock options and other 4.1 4.3 Diluted shares 211.4 223.3 Earnings per basic share $ 0.72 $ 0.66 Earnings per diluted share $ 0.70 $ 0.65 Anti-dilutive stock options and other 6.0 4.5 31 Retail Credit Corporate/Other Total $ 2,350 — $ 33 $ 2,383 — $ 95 — 95 307 22 (89) 240 — (2) (29) (31) 307 20 (118) 209 $ 2,051 — $ 36 $ 2,087 — $ 95 — 95 278 21 (78) 221 — (4) (27) (31) 278 17 (105) 190 $ 7,427 — $ (99) $ 7,328 — $ 283 — 283 1,061 60 (289) 832 — (9) (83) (92) 1,061 51 (372) 740 200 — — 200 3,949 2,338 2,052 8,339 $ 6,565 — $ (71) $ 6,494 — $ 290 — 290 931 25 (244) 712 — (16) (78) (94) 931 9 (322) 618 53 — — 53 3,319 2,031 �� 2,032 7,382 Retail Credit Corporate/Other Total Quarter ended April 28, 2012 Net sales $ 2,576 — $ (41 ) $ 2,535 Credit card revenues — $ 94 — 94 Earnings (loss) before interest and income taxes 372 27 (119 ) 280 Interest expense, net — (6 ) (34 ) (40 ) Earnings (loss) before income taxes 372 21 (153 ) 240 Goodwill 175 — — 175 Quarter ended April 30, 2011 Net sales $ 2,259 — $ (30 ) $ 2,229 Credit card revenues — $ 94 — 94 Earnings (loss) before interest and income taxes 347 25 (100 ) 272 Interest expense, net — (4 ) (27 ) (31 ) Earnings (loss) before income taxes 347 21 (127 ) 241 Goodwill 200 — — 200 Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 1,773 $ 1,615 $ 5,825 $ 5,331 528 427 1,478 1,209 49 9 124 25 2,350 2,051 7,427 6,565 33 36 (99) (71) $ 2,383 $ 2,087 $ 7,328 $ 6,494 Quarter Ended April 28, 2012 April 30, 2011 Nordstrom full-line stores $ 1,716 $ 1,599 Direct 242 168 Nordstrom 1,958 1,767 Nordstrom Rack 557 466 61 26 Total Retail segment 2,576 2,259 Corporate/Other (41 ) (30 ) Total net sales $ 2,535 $ 2,229 1431The following discussion should be read in conjunction with the Management’s Discussion and Analysis section of our 2010 Annual Report on Form 10-K.“forward-looking”"forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial results (including, but not limited to, ouroutlook for the fiscal year ending February 2, 2013, anticipated total andannual same-store sales results, credit card revenues, gross profit rate, selling, general and administrative expenses, net interest expense, effective tax rate, earnings per share, operating cash flows andanticipated Return on Invested Capital (“ROIC”)), anticipated store openings, capital expenditures, dividend payout,and trends in our operations, compliance with debt covenants, outcome of claims and litigation, the anticipated financial performance of HauteLook and the anticipated impact of the HauteLook acquisition on the company’s performance.operations. Such statements are based upon the current beliefs and expectations of the company’scompany's management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to:—the impact of economic and market conditions and the resultant impact on consumer spending patterns,—our ability to maintain our relationships with vendors,—our ability to respond to the business environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online,—effective inventory management,—successful execution of our growth strategy, including possible expansion into new markets, technological investments and acquisitions, including our ability to realize the anticipated benefits from such acquisitions, and the timely completion of construction associated with newly planned stores, relocations and remodels, which may be impacted by the financial health of third parties,—our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders,—successful execution of our multi-channel strategy,—our compliance with applicable banking and related laws and regulations impacting our ability to extend credit to our customers,—impact of the current regulatory environment and financial system and health care reforms,—the impact of any systems failures and/or security breaches, including any security breaches that result in the theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident,—our compliance with employment laws and regulations and other laws and regulations applicable to us,—trends in personal bankruptcies and bad debt write-offs,—changes in interest rates,—efficient and proper allocation of our capital resources,—availability and cost of credit,—our ability to safeguard our brand and reputation,—successful execution of our information technology strategy,—weather conditions, natural disasters, health hazards or other market disruptions, or the prospects of these events and the impact on consumer spending patterns,—disruptions in our supply chain,—the geographic locations of our stores,—the effectiveness of planned advertising, marketing and promotional campaigns,—our ability to control costs and—the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances associated with option exercises or other matters.“Item"Item 1A. Risk Factors”Factors" in our 20102011 Annual Report on Form 10-K, and in Part II, “Item 1A. Risk Factors” on page 29 of this report, 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.1531(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)thirdfirst quarter results reflected continued the performance from the first half of 2011,strength across all channels, with eightten consecutive quarters of total company same-store sales increases and double-digit increases in total sales. This is a result of consistent execution across all channels, providing compelling new fashionin our core business and our healthy financial position which gives us the flexibility to aggressively pursue growth opportunities, particularly in e-commerce. As customers' expectations of service evolve, expanded selection, speed and convenience are becoming even more important. We are accelerating our customers, and efforts to improveenhance the customer experience infrom our storesestablished foundation of multi-channel capabilities and online.We believe there is significant potential to driveincrease our relevance with existing and new customers.sales volume and achieve profitable growth by improving the customer experience across all channels. As customers’ expectations broadenfunctionality of our mobile apps. Combined with greater emphasis on speed and convenience, we are increasing our investments in e-commerce to better respond to how customers want to shop. Our online channel continues to be the fastest growing partspeed of our business,delivery and during the quarter we began offering free standard shipping and returns, for online purchases. We believe this change makes it easier and more convenient to shop with us. Our combined efforts to enhancewe are seeing the online experience led to meaningfulbenefits reflected in the continuing strong sales growth in our online salesDirect channel, with a 44.2% increase in the third quarter.Our strong financial position enables us to continue to make these investments while alsofirst quarter, our fastest growing our business through new stores, remodels and other initiatives. During the first nine months of 2011,channel. Last year at this time we opened three Nordstrom full-line stores, eighteen Nordstrom Rack stores and relocated two Nordstrom Rack stores. We also opened a philanthropic store in New York called treasure&bond, and acquired HauteLook, a leader in the online private sale marketplace. In April of this year, we announced our partnership with Bonobos, a fast-moving online retailer that has been successful in connecting and gaining relevance with a contemporary customer. With this partnership, we can learn through an up-close view of their web-driven brand while gaining access to an energetic clothing line to add to our men's assortment.believe this acquisition willalso continue to grow through new stores, remodels and other initiatives. During the quarter, we opened one Nordstrom full-line store and four Nordstrom Rack stores, and relocated one Nordstrom Rack store. Our recent store openings also offer examples of our evolution in responding to how our customers want to shop. Although we introduced mobile devices in our stores last year, at our new Salt Lake City full-line store we provided three times the number of mobile point-of-sale devices as cash registers to help us further developmake shopping faster and more convenient. We continue to add functionality and build in new features to these devices to make them even more helpful to our customers. At our relocated downtown Seattle Nordstrom Rack store, we also increased the number of mobile and e-commerce capabilities and enable us to participatepoint-of-sale devices, resulting in the fast-growing private sales channel.Our increased investmentsa significantly quicker check-out, which translates into a better service experience.and technologysupported by the increased level of investments we are part of what will enable usmaking in this channel, our operating model is evolving. Our overall goals to achieve our overall goals of mid-to-highhigh single-digit total sales growth and mid-teens Return on Invested Capital (“ROIC”("ROIC"). As we make are unchanged, as these measures correlate strongly with shareholder return. We believe our investments will increase our ROIC through high growth in sales dollars and earnings before interest and income taxes ("EBIT"), as opposed to enhance the customer experience,EBIT margin, with an incrementally productive capital base. Even with these additional investments, in 2012 we expect thatto produce the increased spending on e-commerce and technology will flow throughhighest level of EBIT results in our expenses at a faster pace than other investments in previous years. These investments are important to our ability to evolve with customers and achieve our long-term growth plans.Our credit business continues to contribute to an improved customer experience and to our overall performance. In September, our history, driven by strong sales.customer event drove significant incremental sales compared to the same event in the prior year. For the third quarter of 2011, Fashion Rewards sales increased 22% compared with the same period last year. Fashion Rewards continue to grow and isplays an important part of our loyalty strategy, asin building customer loyalty. Our Fashion Rewards members shop more frequently and spend more with us on average than non-members. During the quarter, we saw a favorable response from our customers to the enhancements we made to our Fashion Rewards program, with new Fashion Rewards accounts increasing by almost 50% from the first quarter of last year. Our key credit metrics of delinquency, write-offnew program gives customers more control over how and when they can earn rewards and extends more benefits to our cardholders. We also saw customer payment rates continue to improve although at a moderating pace in comparison to previous quarters.our goal of improving customer service and providing a superior shopping experience. We believe our customer-focused strategy allows uscustomer experience both in-store and online and see many opportunities to execute our current operating plansdrive growth across all channels while targeting investments in e-commerce and technology to sustain long-term profitable growth.online store,website, our Nordstrom Rack stores, and our other retail channels including HauteLook, our Jeffrey stores and our treasure&bond store. For purposes of discussion and analysis of our results of operations, we combine our Retail segment results with revenues and expenses in the “Corporate/Other”"Corporate/Other" column of our segment reporting footnote (collectively, the “Retail Business”"Retail Business"). We analyze our results of operations through earnings before interest and income taxes for our Retail Business and earnings before income taxes for Credit, while interest expense and income taxes and net earnings are discussed on a total company basis.1631(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)Summarytables summarizetable summarizes the results of our Retail Business for the quarter and nine months ended October 29, 2011,April 28, 2012, compared with the quarter and nine months ended OctoberApril 30, 2010: Quarter Ended October 29, 2011 October 30, 2010 Amount % of net sales Amount % of net sales $ 2,383 100.0% $ 2,087 100.0% (1,495) (62.7%) (1,318) (63.1%) 888 37.3% 769 36.9% (670) (28.1%) (569) (27.3%) $ 218 9.1% $ 200 9.6% Nine Months Ended October 29, 2011 October 30, 2010 Amount % of net sales Amount % of net sales $ 7,328 100.0% $ 6,494 100.0% (4,567) (62.3%) (4,092) (63.0%) 2,761 37.7% 2,402 37.0% (1,989) (27.1%) (1,715) (26.4%) $ 772 10.5% $ 687 10.6% Retail Business Net Sales Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 1,773 $ 1,615 $ 5,825 $ 5,331 528 427 1,478 1,209 49 9 124 25 2,350 2,051 7,427 6,565 33 36 (99) (71) $ 2,383 $ 2,087 $ 7,328 $ 6,494 14.2% 11.7% 12.8% 13.5% 8.5% 7.3% 8.1% 10.2% 6.8% (2.2%) 4.3% (0.4%) 7.9% 5.8% 7.2% 8.6% $ 98 $ 88 $ 303 $ 279 Quarter Ended April 28, 2012 April 30, 2011 Amount % of net sales Amount % of net sales Net sales $ 2,535 100.0 % $ 2,229 100.0 % Cost of sales and related buying and occupancy costs (1,561 ) (61.6 %) (1,371 ) (61.5 %) Gross profit 974 38.4 % 858 38.5 % Selling, general and administrative expenses (721 ) (28.4 %) (611 ) (27.4 %) Earnings before interest and income taxes $ 253 10.0 % $ 247 11.1 % Quarter Ended April 28, 2012 April 30, 2011 Net sales by channel: Nordstrom full-line stores $ 1,716 $ 1,599 Direct 242 168 Nordstrom 1,958 1,767 Nordstrom Rack 557 466 61 26 Total Retail segment 2,576 2,259 Corporate/Other (41 ) (30 ) Total net sales $ 2,535 $ 2,229 Net sales increase 13.7 % 12.0 % Same-store sales increase by channel: Nordstrom full-line stores 5.6 % 6.9 % Direct 44.2 % 16.6 % Nordstrom 9.3 % 7.8 % Nordstrom Rack 6.8 % 1.2 % Total 8.5 % 6.5 % Sales per square foot $ 102 $ 93 $ 92 $ 86 Total net14.2%13.7% for the quarter and 12.8% for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in the prior year.2011. Overall same-store sales increased 7.9% for the quarter8.5%, with increases of 9.3% at Nordstrom and 7.2% for the nine months ended October 29, 2011.6.8% at Nordstrom Rack. During the nine monthsquarter ended October 29, 2011,April 28, 2012, we opened threeone Nordstrom full-line stores, eighteenstore, four Nordstrom Rack stores and one treasure&bond store, relocated twoone Nordstrom Rack stores and acquired HauteLook.17store.31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)thirdfirst quarter of 20112012 were $1,773,$1,958, an increase of 9.8%10.8% compared with the same period in 2010, while net sales of $5,825 for the nine months ended October 29, 2011 increased 9.3% compared, with the same period in 2010. Nordstrom same-store sales increased 8.5% for the quarter and 8.1% for the nine months ended October 29, 2011, compared with the same periods in 2010.up 9.3%. Both the average selling price and the number of sales transactionsitems sold increased for the quarter and nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod last year. Category highlights for the quarter ended April 28, 2012 included Handbags, Women's Shoes and nine months ended October 29, 2011, included Designer, Handbags and Dresses.Men's Shoes. Full-line same-store sales increased 5.6% compared with the same period in 2011. The South and Midwest were the top-performing geographic regions for Nordstrom full-line stores for both the quarter and nine months ended October 29, 2011.regions. The Direct channel continued to show strong sales growth outpacingwith an increase of 44.2% in the first quarter of 2012, compared with the same period in the prior year. This increase significantly outpaced our overall Nordstrom increase.$101,$91, or 23.6%19.6%, for the quarter and $269, or 22.2%, for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in 2010. Same-store2011, while same-store sales at Nordstrom Rack increased 6.8% for. Both the quarternumber of items sold and 4.3% for the nine months ended October 29, 2011. Both the average selling price of Nordstrom Rack merchandise and the number of sales transactions increased for the quarter and nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod last year. Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 888 $ 769 $ 2,761 $ 2,402 37.3% 36.9% 37.7% 37.0% October 29, 2011 October 30, 2010 $ 60.90 $ 54.94 5.23 5.19 Quarter Ended April 28, 2012 April 30, 2011 Gross profit $ 974 $ 858 Gross profit rate 38.4 % 38.5 % Ending inventory per square foot $ 55.09 $ 47.50 5.37 5.44 $119$116 for the quarter and $359 for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in 2010,2011, due to higher grosssales and margin, partially offset by an increase in occupancy costs for stores opened during 20112012 and 2010.2011. Our retail gross profit rate improved 40decreased 10 basis points for the quarter and 69 basis points for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in 2010. The increase was2011, primarily due to leveraging buying and occupancy costs on higher net sales and strengtha reduction in regular-price selling. These factors were partially offset by reduced shipping revenue associated with the introductionas a result of launching free standard shipping and free returns for online purchases in the third quarter.increaseddecreased to 5.235.37 times for the nine monthsquarter ended October 29, 2011,April 28, 2012, from 5.195.44 times for the same period in the prior year. We ended the quarter with a 10.8%16.0% increase in ending inventory per square foot on a 10.4%10.1% increase in sales per square foot, compared with the thirdfirst quarter of 2010. This reflects a widening selection2011. The increase in ending inventory per square foot relative to the increase in sales per square foot is primarily due to our accelerated online merchandise offering to better serve our online customers as well as the timing of a seasonal buildup in our store inventory. Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 670 $ 569 $ 1,989 $ 1,715 28.1% 27.3% 27.1% 26.4% $ 28 $ 24 $ 82 $ 74 Quarter Ended April 28, 2012 April 30, 2011 Selling, general and administrative expenses $ 721 $ 611 Selling, general and administrative expense rate 28.4 % 27.4 % (“("Retail SG&A”&A") increased $101$110, or 18.0%, for the quarter and $274 for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in 2010.2011. The increase was driven byprimarily due to a continuation of various initiatives, which began in the second half of 2011, to improve the customer experience across all channels and specifically to grow our e-commerce business. These include planned increases in technology and marketing spending, as well as fulfillment expenses. The increase also reflected higher sales volume and the opening of 2318 stores since the thirdfirst quarter of 2010. It also reflects investments to improve2011. As a result, our Retail SG&A rate increased 103 basis points for the shopping experience across channels and specifically to grow our e-commerce business, and includes HauteLook operating and purchase accounting expenses as well as planned increasesquarter ended April 28, 2012, compared with the same period in marketing and technology spend.18the prior year.31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)Our Retail SG&A rate increased 87 basis points for the quarter, compared with the same period in the prior year, driven primarily by the investments to grow our e-commerce business discussed above. Our Retail SG&A rate increased 74 basis points for the nine months ended October 29, 2011, compared with the same period last year, primarily due to HauteLook expenses. Quarter Ended
October 29, 2011 Quarter Ended
October 30, 2010 Amount Annualized %
of average credit
card receivables Amount Annualized %
of average credit
card receivables $ 95 18.7% $ 95 18.4% (2) (0.6%) (4) (0.9%) 93 18.1% 91 17.5% (16) (3.2%) (13) (2.7%) (57) (11.1%) (61) (11.5%) (73) (14.2%) (74) (14.2%) 20 3.9% 17 3.3% 14 2.9% 12 2.3% $ 34 6.7% $ 29 5.6% $ 1,015 $ 947 735 607 $ 1,750 $ 1,554 $ 2,036 $ 2,085 $ 407 $ 417 20.5% 17.0% 19 Quarter Ended Quarter Ended April 28, 2012 April 30, 2011 Amount Annualized % of average credit card receivables Amount Annualized % of average credit card receivables Credit card revenues $ 94 18.9 % $ 94 19.0 % Interest expense (6 ) (1.3 %) (4 ) (0.6 %) Net credit card income 88 17.6 % 90 18.4 % Cost of sales and related buying and occupancy costs – loyalty program (23 ) (4.5 %) (14 ) (3.0 %) Selling, general and administrative expenses (44 ) (8.9 %) (55 ) (11.1 %) Total expense (67 ) (13.4 %) (69 ) (14.1 %) Credit segment earnings before income taxes, as presented in segment disclosure 21 4.2 % 21 4.3 % Intercompany merchant fees 17 3.6 % 14 2.8 % Credit segment contribution, before income taxes $ 38 7.7 % $ 35 7.1 % Credit and debit card volume: Outside $ 1,015 $ 982 Inside 892 705 Total volume $ 1,907 $ 1,687 Average credit card receivables $ 1,985 $ 1,990 $ 397 $ 398 24.0 % 21.7 % 31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts) Nine Months Ended
October 29, 2011 Nine Months Ended
October 30, 2010 Amount Annualized %
of average credit
card receivables Amount Annualized %
of average credit
card receivables $ 283 18.7% $ 290 18.0% (9) (0.6%) (16) (1.0%) 274 18.1% 274 17.0% (52) (3.5%) (47) (3.0%) (171) (11.3%) (218) (13.5%) (223) (14.7%) (265) (16.5%) 51 3.4% 9 0.5% 50 3.3% 41 2.5% $ 101 6.7% $ 50 3.1% $ 3,035 $ 2,828 2,512 2,069 $ 5,547 $ 4,897 $ 2,019 $ 2,146 $ 404 $ 412 20.1% 9.8% Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 63 $ 66 $ 188 $ 198 20 19 60 56 12 10 35 36 $ 95 $ 95 $ 283 $ 290 Quarter Ended April 28, 2012 April 30, 2011 Finance charge revenue $ 62 $ 64 Interchange – third party 20 19 Late fees and other revenue 12 11 Total credit card revenues $ 94 $ 94 revenues.revenue. Finance charges represent interest earned on unpaid balances while late fees are assessed when cardholders pay less than their minimum balance by the payment due date. Interchange fees are earned from the use of Nordstrom VISA credit cards at merchants outside of Nordstrom.Although total volume increased fornine months ended October 29, 2011,first quarter of 2012, compared with the same period in the prior year, theyear. Finance charge revenue decreased due to continued improvementimprovements in customer payment rates led to lower revolving balances and reduced delinquencies. These factors resultedwhich more than offset the increase in a decrease intotal volume. Interchange fees were higher from increased use of our Nordstrom VISA credit card revenues for the nine months ended October 29, 2011.decreasedincreased to $2$6 for the quarter and $9endedApril 28, 2012, from $4 for the nine monthsquarter ended October 29,April 30, 2011 from $4 for the quarter and $16 for the nine months ended October 30, 2010,, due to lowerhigher average interest rates applicable to the Credit segment.$3$9 for the quarter and $5 for the nine months ended October 29, 2011,April 28, 2012, compared with the same periodsperiod in the prior year. The increases wereincrease was due to additional expenses relatedenhancements made to theour Fashion Rewards program asand a result of increased use of13.0% increase in volume on Nordstrom credit cards and higher new account volume.debit cards. We provide these benefits to our customerscardholders as participation in the Fashion Rewards program generates enhanced customer loyalty and incremental sales in our stores.20 Quarter Ended April 28, 2012 April 30, 2011 Operational and marketing expenses $ 31 $ 30 Bad debt provision 13 25 Total Credit selling, general and administrative expenses $ 44 $ 55 31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)Credit Segment Selling, General and Administrative ExpensesSelling, general and administrative expenses for our Credit segment (“Credit SG&A”) are summarized in the following table: Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 26 $ 33 $ 89 $ 93 31 28 82 125 $ 57 $ 61 $ 171 $ 218 Total Credit SG&A expenses decreased $4 for the quarter ended October 29, 2011, compared with the same period in the prior year, due to changes in our Fashion Rewards program. Total Credit SG&A expenses decreased $47 for the nine months ended October 29, 2011, compared with the same period in the prior year, due primarily to lower bad debt expense, which reflects continued improvements in our credit trends.$20$10 during the nine monthsquarter ended October 29, 2011.April 28, 2012. The following table summarizes activity in the allowance for credit losses: Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 125 $ 175 $ 145 $ 190 31 28 82 125 (37) (48) (119) (168) 6 5 17 13 $ 125 $ 160 $ 125 $ 160 5.8% 8.2% 6.6% 10.0% October 29, 2011 October 30, 2010 2.8% 3.5% 6.2% 7.6% Quarter Ended April 28, 2012 April 30, 2011 Allowance at beginning of period $ 115 $ 145 Bad debt provision 13 25 Write-offs (30 ) (40 ) Recoveries 7 5 Allowance at end of period $ 105 $ 135 Annualized net write-offs as a percentage of average credit card receivables 4.7 % 7.0 % 30+ days delinquent as a percentage of ending credit card receivables 2.3 % 3.3 % Allowance as a percentage of ending credit card receivables 5.2 % 6.7 % and nine months ended October 29, 2011April 28, 2012 was relatively flat,$40, compared with $31 for the same periods in the prior year,quarter ended April 30, 2011, due to lower average interest rates, partially offset by increasedhigher debt balances. Quarter Ended Nine Months Ended October 29, 2011 October 30, 2010 October 29, 2011 October 30, 2010 $ 82 $ 71 $ 293 $ 237 39.1% 37.6% 39.6% 38.3% Quarter Ended April 28, 2012 April 30, 2011 Income tax expense $ 91 $ 96 Effective tax rate 38.0 % 40.0 % and nine months ended October 29, 2011, increasedApril 28, 2012, decreased compared with the same periodsperiod in 2011. The higher rate in the prior year, primarily due tofirst quarter of 2011 reflects the accrual of tax and interest to settle a state tax liability.21liability and the impact of 31Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.non-taxable acquisition-related expenses.(Continued)(Dollar and share amounts in millions except per share and per square foot amounts)20112012 Outlook20112012 are as follows:Same-store sales 1 Approximately4 to 6% increaseCredit card revenues $ 50 to $10 decreaseincrease21 455 to 5535 basis point increasedecreaseSelling, general and administrative expenses: Retail 3 $ 360275 to $370$340 increase Credit $ 350 to $40 decrease$10 increaseInterest expense, net $ 025 to $5$30 increaseEffective tax rate 39.4%39.0%Earnings per diluted share $ 3.053.30 to $3.10$3.45Diluted shares outstanding 218.1212.6HauteLook sales are not included in same-store sales.2Includes both our Retail gross profit and the cost of our loyalty program, which is recorded in our Credit segment, as a percentage of net sales.3Expected Retail SG&A expenses include approximately $11020 of operating expenses and purchase accounting charges associated with the HauteLook acquisition.2922(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)(“ROIC”("ROIC") (Non-GAAP financial measure)ROIC = ROIC = Average Invested Capital shareholders’shareholders' return over the long term. For the 12 fiscal months ended October 29, 2011,April 28, 2012, our ROIC increaseddecreased to 13.7%13.1% compared with 12.9%13.6% for the 12 fiscal months ended OctoberApril 30, 2010.2011. ROIC is not a measure of financial performance under GAAP, should not be considered a substitute for return on assets, net earnings or total assets as determined in accordance with GAAP, and may not be comparable with similarly titled measures reported by other companies. The closest measure calculated using GAAP amounts is return on assets, which increaseddecreased to 8.9%8.5% from 8.0%8.8% for the 12 fiscal months ended October 29, 2011,April 28, 2012, compared with the 12 fiscal months ended OctoberApril 30, 2010.2011. The following is a comparison of return on assets to ROIC: 12 Fiscal Months Ended October 29, 2011 October 30, 2010 $ 679 $ 553 434 342 127 128 1,240 1,023 73 58 (39) (31) 1,274 1,050 (497) (401) $ 777 $ 649 $ 7,624 $ 6,894 (1,982) (1,770) (503) (480) 525 386 $ 5,664 $ 5,030 8.9% 8.0% 13.7% 12.9% 12 Fiscal Months Ended April 28, 2012 April 30, 2011 Net earnings $ 687 $ 641 Add: income tax expense 431 403 Add: interest expense 141 129 Earnings before interest and income tax expense 1,259 1,173 Add: rent expense 83 66 (44 ) (35 ) Net operating profit 1,298 1,204 (500 ) (465 ) Net operating profit after tax $ 798 $ 739 $ 8,119 $ 7,322 (2,104 ) (1,845 ) (506 ) (494 ) 589 463 Average invested capital $ 6,098 $ 5,446 Return on assets 8.5 % 8.8 % ROIC 13.1 % 13.6 % leases as if wethey had classified them asmet the criteria for a capital lease, or we purchased the property.October 29,April 28, 2012 and April 30, 2011 and October 30, 2010.average.average, including cash and cash equivalents.8.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.increaseddecreased compared with the prior year primarily due to an increase in our earnings before interest and income tax expense. This was partly offset by an increase in our average invested capital, attributable primarily to growth in cash and cash equivalents.23 This was partly offset by an increase in our earnings before interest and income tax expense.31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)nine monthsquarter ended October 29, 2011,April 28, 2012, cash and cash equivalents decreased by $49$230 to $1,457,$1,647, primarily due to principal payments for repurchaseson long-term borrowings of common stock of $693, capital expenditures of $398 and cash dividends paid of $149. These decreases were$502, partially offset by an increase in cash provided by operations of $628 and net proceeds from long-term borrowings of $499.$159.increased $67decreased$50 for the nine monthsquarter ended October 29, 2011,April 28, 2012, compared with the same period in 2010,2011, due primarily to earnings growth.used inprovided by investing activities increased to $391was $119 for the nine monthsquarter ended October 29, 2011, from $350April 28, 2012, compared with net cash used of $88 for the nine monthsquarter ended OctoberApril 30, 2010.Capital expenditures increased from $295 for2011nine months ended October 30, 2010application of restricted cash to $398 forretire the nine months ended October 29,securitized Series 2007-2 Class A & B Notes ("the Notes").The increaseAs of January 28, 2012, we had accumulated $200, which was primarily dueincluded in our condensed consolidated balance sheet in prepaid expenses and other. During the first quarter of 2012, we accumulated an additional $300 prior to increased e-commerce and technology investments, as well as the timingNotes' April maturity date. We retired the Notes, upon the maturity date of store openings. For example, these investments included in-store improvements such as Wi-Fi availability for our customers in allApril 16, 2012, using the accumulated restricted cash of our Nordstrom full-line stores and mobile point-of-sale devices for our salespeople.Net cash from customers using their Nordstrom VISA credit cards for merchandise and services outside of Nordstrom stores increased to a $10 cash inflow for the nine months ended October 29, 2011, compared with a $59 outflow for the nine months ended October 30, 2010. The increase in cash inflows from credit card receivables originated at third parties was primarily a result of improved customer payment rates and a decrease in write-offs.$286$508 for the nine monthsquarter ended October 29, 2011,April 28, 2012, compared with net cash provided of $40$194 for the nine monthsquarter ended OctoberApril 30, 2010.The difference was primarily due to $6932011nine monthsquarter ended October 29, 2011,April 28, 2012, compared with $31$171 for the nine monthsquarter ended OctoberApril 30, 2010. The increase in cash used was partially offset by an increase in net proceeds from long-term borrowings.During the first nine months20112011, we issued $50029(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)(–) –(–)– Change in Cash Book Overdrafts—Free Cash Flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs; and—Other companies in our industry may calculate Free Cash Flow differently than we do, limiting its usefulness as a comparative measure.$628$159 and $561$209 for the nine monthsquarters ended October 29,April 28, 2012 and April 30, 2011 and October 30, 2010.. The following is a reconciliation of our net cash provided by operating activities and Free Cash Flow: Nine Months Ended October 29, 2011 October 30, 2010 $ 628 $ 561 (398) (295) (149) (123) 10 (59) (20) 2 $ 71 $ 86 $ (391) $ (350) $ (286) $ 40 25 Quarter Ended April 28, 2012 April 30, 2011 Net cash provided by operating activities $ 159 $ 209 Less: capital expenditures (98 ) (116 ) Less: cash dividends paid (56 ) (50 ) Add: change in credit card receivables originated at third parties 17 30 Add (Less): change in cash book overdrafts 48 (9 ) Free Cash Flow $ 70 $ 64 Net cash provided by (used in) investing activities $ 119 $ (88 ) Net cash used in financing activities $ (508 ) $ (194 ) 31(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)On June 23, 2011, we entered into a new unsecured revolving credit facility (“revolver”) with a capacity of $600, which expires in June 2016. This revolver replaced our previous $650 unsecured line of credit which was scheduled to expire in August 2012. Under the terms of the revolver, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is available for working capital, capital expenditures and general corporate purposes, including liquidity support for our commercial paper program. We have the option to increase the revolving commitment by up to $100, to a total of $700, provided that we obtain written consent from the lenders.October 29, 2011,April 28, 2012, we had total short-term borrowing capacity available for general corporate purposes of $900.$800. Of the total capacity, we had $600$600 under our commercial paper program, which is backed by our revolver expiring June 2016, and $300 under our Variable Funding Noteunsecured revolving credit facility (“2007-A VFN”("revolver") that expires in June 2016, and $200 under our 2007-A Variable Funding Note ("2007-A VFN") that expires in January 2012.2013. During the nine monthsquarter ended October 29, 2011,April 28, 2012, we had no issuances under our commercial paper program and no borrowings under our revolver or our 2007-A VFN.$600$600 revolver, any borrowings we may enter into will accrue interest at a floating base rate tied to LIBOR in the case of Euro-Dollar Rate Loans and to 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 in the case of Base Rate Loans. Outlook Moody’sMoody's Baa1 Stable Poor’sPoor's A- Stable LIBOR 1.125% various 0.125% CovenantsEBITDAR,Earnings before Interest, Income Taxes, Depreciation, Amortization and Rent ("EBITDAR"), of less than four times (see the following additional discussion of Adjusted Debt to EBITDAR below)EBITDAR).October 29, 2011,April 28, 2012, we were in compliance with this covenant. We will continue to monitor this covenant to ensure that we make any necessary adjustments to our plans, and we believe that we will remain in compliance with this covenant during 2011.2631(Dollar (Dollar and share amounts in millions except per share and per square foot amounts)October 29,April 28, 2012 and April 30, 2011 and October 30, 2010,, our Adjusted Debt to EBITDAR was 2.3.2.1.—Adjusted Debt is not exact, but rather our best estimate of the total company debt we would hold if we had purchased the property and issued debt associated with our operating leases;—EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, including leases, or the cash requirements necessary to service interest or principal payments on our debt; and—Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a comparative measure.4.94.6 for the thirdfirst quarter of 20112012 and 5.14.3 for the thirdfirst quarter of 2010.2011. The following is a comparison of debt to net earnings and Adjusted Debt to EBITDAR: 20111 20101 $ 3,316 $ 2,812 585 467 (64) (55) $ 3,837 $ 3,224 679 553 434 342 124 128 1,237 1,023 356 322 73 58 7 — $ 1,673 $ 1,403 4.9 5.1 2.3 2.3 Debt $ 3,143 $ 2,782 667 525 Less: fair value hedge adjustment included in long-term debt (69 ) (27 ) Adjusted Debt $ 3,741 $ 3,280 Net earnings $ 687 $ 641 Add: income tax expense 431 403 Add: interest expense, net 139 127 Earnings before interest and income taxes 1,257 1,171 Add: depreciation and amortization expenses 386 333 Add: rent expense 83 66 Add: non-cash acquisition-related charges 22 — EBITDAR $ 1,748 $ 1,570 Debt to Net Earnings 4.6 4.3 Adjusted Debt to EBITDAR 2.1 2.1 October 29,April 28, 2012 and April 30, 2011 and October 30, 2010,, while the components of EBITDAR are for the 12 months ended October 29,April 28, 2012 and April 30, 2011 and October 30, 2010.2731“Item"Item 7A. Quantitative and Qualitative Disclosures About Market Risk”Risk" in our 20102011 Annual Report on Form 10-K filed with the Commission on March 18, 2011.16, 2012. There have been no material changes to these risks since that time.“Exchange Act”"Exchange Act")). Based upon that evaluation, our President and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing and reporting of material financial and non-financial information within the time periods specified within the Commission’sCommission's rules and forms. Our President and Chief Financial Officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our President and Chief Financial Officer, to allow timely decisions regarding required disclosure.2831Item 1A. Risk Factors.In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2010 Annual Report on Form 10-K. We are updating our risk factors as follows:CybersecurityIn light of the increased dependence on digital technologies by public companies and the increasing frequency and severity of cyber incidents, the Securities and Exchange Commission’s Division of Corporation Finance issued “CF Disclosure Guidance: Topic No. 2” on October 13, 2011, providing its views regarding disclosure obligations relating to cybersecurity risks and cyber incidents. As we operate in multiple retail channels and maintain our own credit operations, we are subject to cybersecurity risks and incidents. Our business involves the storage and transmission of customers’ personal information, consumer preferences and credit card information. We also use mobile devices, social networking and other online activities to connect with our customers. While we have implemented measures to prevent security breaches and cyber incidents, our measures may not be effective and any security breaches and cyber incidents could adversely affect our business.thirdfirst quarter share repurchases: 0.8 $ 44.37 0.8 $ 653 3.1 $ 45.45 3.1 $ 512 0.9 $ 48.74 0.9 $ 468 4.8 $ 45.89 4.8 1In August 2010, our Board of Directors authorized a program (the “2010 Program”) to repurchase up to $500 of our outstanding common stock, through January 28, 2012. In May 2011, our Board of Directors authorized a new program (the “2011 Program”) to repurchase up to $750 of our outstanding common stock, through February 2, 2013, in addition to the remaining amount available for repurchase under the 2010 Program. For the nine months ended October 29, 2011, we repurchased 15.2 shares of our common stock for an aggregate purchase price of $693, and had $468 in remaining share repurchase capacity. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions. 0.7 $ 50.22 0.7 $ 1,077 0.1 $ 53.51 0.1 $ 1,071 — $ 53.85 — $ 1,070 Total 0.8 0.8 Fiscal year 2011 2010 2009 Net earnings $ 683 $ 613 $ 441 Other comprehensive loss: Postretirement plan adjustments, net of tax of $10, $7 and $6 (16 ) (10 ) (9 ) Other comprehensive loss (16 ) (10 ) (9 ) Comprehensive net earnings $ 667 $ 603 $ 432 3129 hereof.2931NORDSTROM, INC. (Registrant) /s/ Michael G. Koppel Michael G. Koppel Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: December 7, 2011May 29, 2012 3031Exhibit Method of Filing 10.1 Underwriting AgreementOctober 5, 2011, by and among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as representativesFebruary 17, 2012 announcing that its Board of the several underwriters of the NotesDirectors authorized an $800 million share repurchase program Incorporated by reference from the Registrant’s Form 8-K filed on October 11, 2011,February 21, 2012, Exhibit 1.199.110.2 Form of 4.00% Note due 2021 10.2* Registrant’sRegistrant's Form 8-KDEF 14A filed on October 11, 2011, Exhibit 4.1March 30, 201210.3* Amendment 2011-12012-1 to the Nordstrom Leadership Separation401(k) Plan & Profit Sharing Incorporated by reference from the Registrant’s Form 8-K filed on August 25, 2011, Exhibit 10.1Filed herewith electronically31.1 Certification of President required by Section 302(a) of the Sarbanes-Oxley Act of 2002 Filed herewith electronically 31.2 Certification of Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002 Filed herewith electronically 32.1 Certification of President and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Furnished herewith electronically 101.INS XBRL Instance Document Filed herewith electronically 101.SCH XBRL Taxonomy Extension Schema Document Filed herewith electronically 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith electronically 101.LAB XBRL Taxonomy Extension Labels Linkbase Document Filed herewith electronically 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith electronically 101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith electronically 313129