Nordstrom (JWN) 10-Q 9 Sep 09 2010 Q2 Quarterly report Financial data

Condensed Consolidated Statemen

Condensed Consolidated Statements of Earnings (USD $)
In Millions, except Per Share data	3 Months Ended Aug. 01, 2009	3 Months Ended Aug. 02, 2008	6 Months Ended Aug. 01, 2009	6 Months Ended Aug. 02, 2008
Net sales	$2,145	$2,287	$3,851	$4,166
Credit card revenues	87	72	173	142
Total revenues	2,232	2,359	4,024	4,308
Cost of sales and related buying and occupancy costs	(1,418)	(1,488)	(2,525)	(2,667)
Selling, general and administrative expenses:
Retail stores, direct and other segments	(531)	(545)	(978)	(1,038)
Credit segment	(77)	(57)	(169)	(107)
Earnings before interest and income taxes	206	269	352	496
Interest expense, net	(36)	(34)	(67)	(65)
Earnings before income taxes	170	235	285	431
Income tax expense	(65)	(92)	(99)	(169)
Net earnings	$105	$143	$186	$262
Earnings per basic share	0.49	0.66	0.86	1.21
Earnings per diluted share	0.48	0.65	0.86	1.19
Basic shares	216.5	216.5	216.2	217.6
Diluted shares	218.8	219.5	217.9	220.6

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Millions	Aug. 01, 2009	Jan. 31, 2009	Aug. 02, 2008
Current assets:
Cash and cash equivalents	$519	$72	$92
Accounts receivable, net	2,102	1,942	2,045
Merchandise inventories	929	900	1,000
Current deferred tax assets, net	234	210	196
Prepaid expenses and other	67	93	65
Total current assets	3,851	3,217	3,398
Land, buildings and equipment, net	2,241	2,221	2,139
Goodwill	53	53	53
Other assets	195	170	219
Total assets	6,340	5,661	5,809
Current liabilities:
Commercial paper	0	275	79
Accounts payable	884	563	724
Accrued salaries, wages and related benefits	232	214	226
Other current liabilities	541	525	514
Current portion of long-term debt	375	24	260
Total current liabilities	2,032	1,601	1,803
Long-term debt, net	2,260	2,214	2,234
Deferred property incentives, net	465	435	399
Other liabilities	226	201	244
Shareholders' equity:
Common stock, no par value: 1,000 shares authorized; 216.4, 215.4 and 215.6 shares issued and outstanding	1,026	997	969
Retained earnings	340	223	181
Accumulated other comprehensive loss	(9)	(10)	(21)
Total shareholders' equity	1,357	1,210	1,129
Total liabilities and shareholders' equity	$6,340	$5,661	$5,809

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parentheticals) (USD $)
Share data in Millions	Aug. 01, 2009	Jan. 31, 2009	Aug. 02, 2008
Statement of Financial Position [Abstract]
Common Stock, Shares Authorized	1,000	1,000	1,000
Common Stock, Shares Issued	216.4	215.4	215.6
Common Stock, Shares Outstanding	216.4	215.4	215.6

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Shareholders' Equity (USD $)
In Millions	Accumulated Other Comprehensive (Loss) Earnings		Common Stock	Retained Earnings	Total
Shareholders' equity, beginning balance at Feb. 02, 2008	($22)		$936	$201	$1,115
Shares, Issued, Beginning Balance at Feb. 02, 2008			220.9
Shareholders' Equity Rollforward
Net earnings				262	262
Other comprehensive earnings:
-- Amounts amortized into net periodic benefit cost, net of tax	1	[1]			1	[1]
Cash dividends paid ($0.32 per share)				(70)	(70)
Issuance of common stock for:
-- Stock option plans			10		10
-- Stock option plans (shares)			0.5
-- Employee stock purchase plan			9		9
-- Employee stock purchase plan (shares)			0.3
Stock-based compensation			14		14
Repurchase of common stock				(212)	(212)
Repurchase of common stock (shares)			-6.1
Shareholders' equity, ending balance at Aug. 02, 2008	(21)		969	181	1,129
Shares, Issued, Ending Balance at Aug. 02, 2008			215.6
Issuance of common stock for:
Shareholders' equity, beginning balance at Jan. 31, 2009	(10)		997	223	1,210
Shares, Issued, Beginning Balance at Jan. 31, 2009			215.4
Shareholders' Equity Rollforward
Net earnings				186	186
Other comprehensive earnings:
-- Amounts amortized into net periodic benefit cost, net of tax	1	[2]			1	[2]
Cash dividends paid ($0.32 per share)				(69)	(69)
Issuance of common stock for:
-- Stock option plans			7		7
-- Stock option plans (shares)			0.5
-- Employee stock purchase plan			7		7
-- Employee stock purchase plan (shares)			0.5
Stock-based compensation			15		15
Shareholders' equity, ending balance at Aug. 01, 2009	($9)		$1,026	$340	$1,357
Shares, Issued, Ending Balance at Aug. 01, 2009			216.4
[1]net of tax of ($1)
[2]net of tax of less than $1

3_Condensed Consolidated Statem

Condensed Consolidated Statements of Shareholders' Equity (Parentheticals) (USD $)
	6 Months Ended Aug. 01, 2009	6 Months Ended Aug. 02, 2008
Statement of Stockholders' Equity [Abstract]
Common Stock, Dividends, Per Share, Cash Paid	0.32	0.32

4_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Aug. 01, 2009	6 Months Ended Aug. 02, 2008
Operating Activities
Net earnings	$186	$262
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization of buildings and equipment, net	155	146
Amortization of deferred property incentives and other, net	(21)	(20)
Stock-based compensation expense	17	15
Deferred income taxes, net	(32)	(30)
Tax benefit from stock-based payments	1	2
Excess tax benefit from stock-based payments	(2)	(2)
Provision for bad debt expense	119	56
Change in operating assets and liabilities:
Change in accounts receivable	(143)	(138)
Change in merchandise inventories	(38)	(67)
Change in prepaid expenses and other assets	(13)	8
Change in accounts payable	324	161
Change in accrued salaries, wages and related benefits	18	(42)
Change in other current liabilities	39	(35)
Change in deferred property incentives	62	57
Change in other liabilities	25	(2)
Net cash provided by operating activities	697	371
Investing Activities
Capital expenditures	(196)	(295)
Change in accounts receivable originated at third parties	(133)	(174)
Other investing activities, net	0	1
Net cash used in investing activities	(329)	(468)
Financing Activities
(Repayments of) proceeds from commercial paper borrowings, net	(135)	79
Repayment of commercial paper classified as long-term	(140)	0
Proceeds from long-term borrowings, net	399	0
Principal payments on long-term borrowings	(3)	(3)
Increase in cash book overdrafts	15	44
Proceeds from exercise of stock options	6	7
Proceeds from employee stock purchase plan	7	9
Excess tax benefit from stock-based payments	2	2
Cash dividends paid	(69)	(70)
Repurchase of common stock	0	(238)
Other financing activities, net	(3)	1
Net cash provided by (used in) financing activities	79	(169)
Net increase (decrease) in cash and cash equivalents	447	(266)
Cash and cash equivalents at beginning of period	72	358
Cash and cash equivalents at end of period	519	92
Supplementary Cash Flow Information
Cash paid during the period for interest (net of capitalized interest)	61	74
Cash paid during the period for income taxes	$95	$216

Note 1: Summary of Significant

Note 1: Summary of Significant Accounting Policies
	6 Months Ended Aug. 01, 2009 USD / shares
Summary of Significant Accounting Policies [Abstract]
Note 1: Summary of Significant Accounting Policies [Text Block]	NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements should be read in conjunction with the Notes to Consolidated Financial Statements contained in our 2008 Annual Report on Form 10-K. The same accounting policies are followed for preparing quarterly and annual financial information. All adjustments necessary for the fair presentation of the results of operations, financial position and cash flows have been included and are of a normal, recurring nature. Our business, like that of other retailers, is subject to seasonal fluctuations. Our Anniversary Sale in July, the holidays in December, and our Half-yearly sales events typically result in higher sales in the second and fourth quarters of our fiscal years. Accordingly, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year. Accounting Policies The preparation of our financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. Our accounting policies in 2009 are consistent with those discussed in our 2008 Annual Report on Form 10-K. Reclassification In order to improve the transparency related to our Credit segment, we have reclassified credit card revenues and expenses in our consolidated statements of earnings for the quarter and six months ended August2, 2008 to conform to our 2009 presentation. Credit card revenues were previously included in finance charges and other, net in our consolidated statements of earnings and selling, general and administrative expenses for our credit segment were previously included in total selling, general and administrative expenses in our consolidated statements of earnings. These reclassifications, which were made beginning with our 2008 Annual Report on Form 10-K, did not impact our reported net earnings, earnings per share or cash flows for the quarter and six months ended August2, 2008. Recent Accounting Pronouncements In December2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No.51 (SFAS 160). SFAS 160 establishes new accounting and reporting standards for a noncontrolling interest (minority interest) in a subsidiary, provides guidance on the accounting for and reporting of the deconsolidation of a subsidiary, and increases transparency through expanded disclosures. Specifically, SFAS 160 requires the recognition of a minority interest as equity in the consolidated financial statements and separate from the parent companys equity. It also requires consolidated net earnings in the consolidated statement of earnings to include the amount of net earnings attributable to minority interest. This statement became effective for Nord

Note 2: Accounts Receivable

Note 2: Accounts Receivable
	6 Months Ended Aug. 01, 2009 USD / shares
Accounts Receivable [Abstract]
Note 2: Accounts Receivable [Text Block]	NOTE 2: ACCOUNTS RECEIVABLE The components of accounts receivable are as follows: August 1, 2009 January 31, 2009 August 2, 2008 Trade receivables: Restricted $ 2,148 $ 2,005 $ 1,994 Unrestricted 39 14 30 Allowance for doubtful accounts (164 ) (138 ) (83 ) Trade receivables, net 2,023 1,881 1,941 Other 79 61 104 Accounts receivable, net $ 2,102 $ 1,942 $ 2,045 The following table summarizes the restricted trade receivables: August 1, 2009 January 31, 2009 August 2, 2008 Nordstrom VISA credit card receivables $ 1,463 $ 1,369 $ 1,324 Private label card receivables 685 636 670 Restricted trade receivables $ 2,148 $ 2,005 $ 1,994 The restricted trade receivables secure our Series2007-1 Notes, the Series2007-2 Notes and our two variable funding notes. The restricted trade receivables relate to substantially all of our Nordstrom private label card receivables and Nordstrom VISA credit card receivables. The unrestricted trade receivables consist primarily of the remaining portion of our Nordstrom private label and Nordstrom VISA credit card receivables and accrued finance charges not yet allocated to customer accounts. Other accounts receivable consist primarily of credit card receivables due from third-party financial institutions and vendor claims. Our Nordstrom private label cards can be used only in Nordstrom stores, while the Nordstrom VISA cards allow our customers the option of using the cards for purchases of Nordstrom merchandise and services, as well as for purchases outside of Nordstrom. We record the Nordstrom private label and VISA credit card receivables as trade receivables on our consolidated balance sheets at outstanding principal, net of an allowance for doubtful accounts. Cash flows from the use of both the private label cards and Nordstrom VISA cards for sales originating at our Nordstrom stores are treated as an operating activity in the condensed consolidated statements of cash flows as they relate to sales at Nordstrom. Cash flows arising from the use of Nordstrom VISA cards outside of Nordstrom stores are treated as an investing activity within the condensed consolidated statements of cash flows, as they represent loans made to our customers for purchases at third parties.

Note 3: Debt and Credit Facilit

Note 3: Debt and Credit Facilities
	6 Months Ended Aug. 01, 2009 USD / shares
Debt and Credit Facilities [Abstract]
Note 3: Debt and Credit Facilities [Text Block]	NOTE 3: DEBT AND CREDIT FACILITIES We hold both secured and unsecured debt. The primary collateral for our secured debt is our Nordstrom private label card and Nordstrom VISA credit card receivables. A summary of long-term debt is as follows: August 1, 2009 January 31, 2009 August 2, 2008 Secured Series2007-1 ClassA Notes, 4.92%, due April2010 $ 326 $ 326 $ 326 Series2007-1 ClassB Notes, 5.02%, due April2010 24 24 24 Series2007-2 ClassA Notes, one-month LIBOR plus 0.06% per year, due April2012 454 454 454 Series2007-2 ClassB Notes, one-month LIBOR plus 0.18% per year, due April2012 46 46 46 Mortgage payable, 7.68%, due April2020 61 63 65 Other 16 17 18 927 930 933 Unsecured Senior notes, 5.625%, due January2009 250 Senior notes, 6.75%, due June2014, net of unamortized discount 399 Senior notes, 6.25%, due January2018, net of unamortized discount 647 646 646 Senior debentures, 6.95%, due March2028 300 300 300 Senior notes, 7.00%, due January2038, net of unamortized discount 343 343 343 Other 19 19 22 1,708 1,308 1,561 Total longterm debt 2,635 2,238 2,494 Less: current portion (375 ) (24 ) (260 ) Total due beyond one year $ 2,260 $ 2,214 $ 2,234 As of August1, 2009 and August2, 2008, we had $375 and $260 classified as current portion of long-term debt in our condensed consolidated balance sheets. As of August1, 2009, this balance was primarily composed of $350 related to our series 2007-1 notes due in April2010. As of August2, 2008, the current portion of long-term debt consisted primarily of $250 related to our senior notes due in January2009. During the second quarter of 2009, we issued $400 senior unsecured notes at 6.75%, due June2014. After deducting the original issue discount of $1 and other fees and expenses of $3, net proceeds from the offering were $396. We used a portion of the proceeds from the issuance to repay the $140 in outstanding issuances of commercial paper as of May26, 2009, the date the senior notes were issued. We had no outstanding issuances under our $650 commercial paper program as of August1, 2009. The issuance of commercial paper has the effect, while it is outstanding, of reducing borrowing capacity under our unsecured revolving credit facility by an amount equal to the principal amount of commercial paper. As of August1, 2009, we had no outstanding borrowings under our credit facility. On August14, 2009, we entered into a new unsecured revolving credit facility with a capacity of $650. This new credit facility replaced our existing $650 unsecured line of credit, which was scheduled to expire in November2010. See further discussion of our $650 revolving credit facility in Note 8: Subsequent Event. Additionally, we had $300 in short-term capa

Note 4: Stock Compensation Plan

Note 4: Stock Compensation Plans
	6 Months Ended Aug. 01, 2009 USD / shares
Stock Compensation Plans [Abstract]
Note 4: Stock Compensation Plans [Text Block]	NOTE 4: STOCK COMPENSATION PLANS Stock-based compensation expense before income tax benefit was recorded in our condensed consolidated statements of earnings as follows: Quarter Ended Six Months Ended August 1, 2009 August 2, 2008 August 1, 2009 August 2, 2008 Cost of sales and related buying and occupancy costs $ 4 $ 3 $ 6 $ 5 Selling, general and administrative expenses 6 6 11 10 Total stock-based compensation expense before income tax benefit $ 10 $ 9 $ 17 $ 15 Stock Options During the six months ended August1, 2009, 4.9 options were granted, 0.5 options were exercised, 0.1 options expired and 0.3 options were cancelled. During the six months ended August2, 2008, 2.2 options were granted, 0.5 options were exercised, and 0.1 options were cancelled. The weighted average fair values per option at the date of grant was $7 and $15 in 2009 and 2008. We used the following assumptions to estimate the fair value of stock options at the date of grant: 2009 2008 Risk-free interest rate: Represents the yield on U.S. Treasury zero-coupon securities that mature over the 10-year life of the stock options. 0.7% - 3.3 % 2.0% - 4.3 % Weighted average expected volatility: Based on a combination of the historical volatility of our common stock and the implied volatility of exchange traded options for our common stock. 61.0 % 45.0 % Weighted average expected dividend yield: Our forecasted dividend yield for the next ten years. 1.3 % 1.3 % Weighted average expected life in years: Represents the estimated period of time until option exercise. The expected term of options granted was derived from the output of the Binomial Lattice option valuation model and was based on our historical exercise behavior, taking into consideration the contractual term of the option and our employees expected exercise and post-vesting employment termination behavior. 5.3 5.5 Performance Share Units As of August1, 2009, our liabilities included $1 for performance share units. As of both January 31, 2009 and August2, 2008, we had no liabilities related to performance share units. For both the six months ended August1, 2009 and August2, 2008, stock-based compensation expense related to performance share units was approximately $1. As of August1, 2009, the remaining unrecognized stock-based compensation expense related to unvested performance share units was $3, which is expected to be recognized over a weighted average period of 30months. At January31, 2009, 117,389 units were unvested. During the six months ended August1, 2009, 144,891 units were granted, no units vested and no units cancelled, resulting in an ending balance of 262,280 unvested units as of August1, 2009.

Note 5: Earnings Per Share

Note 5: Earnings Per Share
	6 Months Ended Aug. 01, 2009 USD / shares
Earnings Per Share Note [Abstract]
Note 5: Earnings Per Share [Text Block]	NOTE 5: EARNINGS PER SHARE The computation of earnings per share is as follows: Quarter Ended Six Months Ended August 1, 2009 August 2, 2008 August 1, 2009 August 2, 2008 Net earnings $ 105 $ 143 $ 186 $ 262 Basic shares 216.5 216.5 216.2 217.6 Dilutive effect of stock options and performance share units 2.3 3.0 1.7 3.0 Diluted shares 218.8 219.5 217.9 220.6 Earnings per basic share $ 0.49 $ 0.66 $ 0.86 $ 1.21 Earnings per diluted share $ 0.48 $ 0.65 $ 0.86 $ 1.19 Antidilutive stock options and other 6.6 5.1 11.7 5.1

Note 6: Segment Reporting

Note 6: Segment Reporting
	6 Months Ended Aug. 01, 2009 USD / shares
Segment Reporting [Abstract]
Note 6: Segment Reporting [Text Block]	NOTE 6: SEGMENT REPORTING We aggregate our full-line, Rack and Jeffrey stores into the Retail Stores segment and report Direct as a separate segment. The Credit segment earns finance charges, interchange and late fee income through operation of the Nordstrom private label and Nordstrom VISA credit cards. The Other segment includes our product development group, which coordinates the design and production of private label merchandise sold in our retail stores, and our distribution network. This segment also includes our corporate center operations. The following tables set forth the information for our reportable segments: Quarter ended Retail August 1, 2009 Stores Direct Credit Other Total Net sales $ 2,040 $ 179 $ (74 ) $ 2,145 Net sales (decrease)increase (6.4% ) 3.5% N/A N/A (6.2% ) Credit card revenues 87 87 Earnings before interest and income taxes 255 52 (3 ) (98 ) 206 Interest expense, net (10 ) (26 ) (36 ) Earnings before income taxes 255 52 (13 ) (124 ) 170 Earnings before income taxes as a percentage of net sales 12.5% 28.9% N/A N/A 7.9% Quarter ended Retail August 2, 2008 Stores Direct Credit Other Total Net sales $ 2,179 $ 174 $ (66 ) $ 2,287 Net sales (decrease)increase (3.3% ) 13.1% N/A N/A (4.3% ) Credit card revenues 73 (1 ) 72 Earnings before interest and income taxes 294 43 1 (69 ) 269 Interest expense, net (13 ) (21 ) (34 ) Earnings before income taxes 294 43 (12 ) (90 ) 235 Earnings before income taxes as a percentage of net sales 13.5% 25.0% N/A N/A 10.3% Six Months ended Retail August 1, 2009 Stores Direct Credit Other Total Net sales $ 3,623 $ 328 $ (100 ) $ 3,851 Net sales (decrease)increase (7.8% ) 1.8% N/A N/A (7.6% ) Credit card revenues 173 173 Earnings before interest and income taxes 439 99 (21 ) (165 ) 352 Interest expense, net (20 ) (47 ) (67 ) Earnings before income taxes 439 99 (41 ) (212 ) 285 Earnings before income taxes as a percentage of net sales 12.1% 30.1% N/A N/A 7.4% Total assets $ 2,822 $ 132 $ 2,120 $ 1,266 $ 6,340 Six Months ended Retail August 2, 2008 Stores Direct Credit Other Total Net sales $ 3,931 $ 323 $ (88 ) $ 4,166 Net sales (decrease)increase (2.8% ) 8.5% N/A N/A (4.1% )

Note 7: Contingent Liabilities

Note 7: Contingent Liabilities
	6 Months Ended Aug. 01, 2009 USD / shares
Contingent Liabilities [Abstract]
Note 7: Contingent Liabilities [Text Block]	NOTE 7: CONTINGENT LIABILITIES We are subject from time to time to various claims, proceedings and litigation arising from the normal course of our business including lawsuits alleging violations of state and/or federal wage and hour laws. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. The results of these claims, proceedings and litigation cannot be predicted with certainty. However, we do not believe any such claim, proceeding or litigation, either alone or in aggregate, will have a material impact on our results of operations, financial position or cash flows.

Note 8: Subsequent Event

Note 8: Subsequent Event
	6 Months Ended Aug. 01, 2009 USD / shares
Subsequent Event [Abstract]
Note 8: Subsequent Event [Text Block]	NOTE 8: SUBSEQUENT EVENT On August14, 2009, we entered into a new unsecured revolving credit facility with a capacity of $650, which expires in August2012. The new credit facility replaced our existing $650 unsecured line of credit, which was scheduled to expire in November2010. The new facility is available for working capital, capital expenditures and other general corporate purposes, including as liquidity support for our commercial paper program. Under the terms of the agreement, we pay a variable rate of interest and a commitment fee based on our debt rating. Consistent with our previous unsecured revolving credit facility, the new revolving credit facility requires that we maintain a leverage ratio of not greater than four times Adjusted Debt to EBITDAR. The new facility also requires that we maintain a fixed charge coverage ratio of at least two times, defined as: EBITDAR less gross capital expenditures Interest expense, net rent expense Under the new credit facility we have the option to increase the revolving commitment by up to $100, to a total of $750, provided that we obtain written consent from the lenders who choose to increase their commitment. We have no borrowings under the new credit facility as of September9, 2009. We evaluated subsequent events through September9, 2009, which is the date the financial statements were issued. We are not aware of any significant events, other than those identified above, which occurred subsequent to the balance sheet date but prior to September9, 2009, that would have a material impact on our financial statements.

Document Information

Document Information
	6 Months Ended Aug. 01, 2009 USD / shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period Start Date	2009-05-03
Document Period End Date	2009-08-01

Entity Information

Entity Information (USD $)
In Billions, except Share data	6 Months Ended Aug. 01, 2009	Aug. 28, 2009	Aug. 01, 2008
Entity Information [Line Items]
Entity Registrant Name	Nordstrom, Inc.
Trading Symbol	JWN
Entity Central Index Key	0000072333
Current Fiscal Year End Date	--01-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			5.2
Entity Common Stock, Shares Outstanding		216,755,725