Nordstrom (JWN) 10-Q 8 Dec 09 2010 Q3 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
	9 Months Ended Oct. 31, 2009	Nov. 27, 2009
Document and Company Information [Abstract]
Entity Registrant Name	NORDSTROM INC
Entity Central Index Key	0000072333
Document Type	10-Q
Document Period End Date	2009-10-31
Amendment Flag	false
Current Fiscal Year End Date	--01-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		217,493,438

Condensed Consolidated Statemen

Condensed Consolidated Statements of Earnings (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Oct. 31, 2009	3 Months Ended Nov. 01, 2008	9 Months Ended Oct. 31, 2009	9 Months Ended Nov. 01, 2008
Net sales	$1,868	$1,805	$5,719	$5,971
Credit card revenues	95	74	268	216
Total revenues	1,963	1,879	5,987	6,187
Cost of sales and related buying and occupancy costs	(1,210)	(1,185)	(3,735)	(3,852)
Selling, general and administrative expenses:
Retail stores, direct and other segments	(500)	(490)	(1,478)	(1,528)
Credit segment	(81)	(77)	(250)	(184)
Earnings before interest and income taxes	172	127	524	623
Interest expense, net	(38)	(33)	(105)	(98)
Earnings before income taxes	134	94	419	525
Income tax expense	(51)	(23)	(150)	(192)
Net earnings	$83	$71	$269	$333
Earnings per basic share	0.38	0.33	1.24	1.54
Earnings per diluted share	0.38	0.33	1.23	1.52
Basic shares	217.1	215.6	216.5	216.9
Diluted shares	220.7	218.1	219	219.8

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Oct. 31, 2009	Jan. 31, 2009	Nov. 01, 2008
Current assets:
Cash and cash equivalents	$484	$72	$68
Accounts receivable, net	2,016	1,942	1,918
Merchandise inventories	1,193	900	1,278
Current deferred tax assets, net	230	210	196
Prepaid expenses and other	84	93	100
Total current assets	4,007	3,217	3,560
Land, buildings and equipment, net	2,239	2,221	2,215
Goodwill	53	53	53
Other assets	217	170	236
Total assets	6,516	5,661	6,064
Current liabilities:
Commercial paper	0	275	102
Accounts payable	980	563	805
Accrued salaries, wages and related benefits	255	214	202
Other current liabilities	520	525	503
Current portion of long-term debt	356	24	425
Total current liabilities	2,111	1,601	2,037
Long-term debt, net	2,259	2,214	2,215
Deferred property incentives, net	470	435	417
Other liabilities	246	201	233
Shareholders' equity:
Common stock, no par value: 1,000 shares authorized; 217.3, 215.4 and 215.4 shares issued and outstanding	1,051	997	990
Retained earnings	388	223	192
Accumulated other comprehensive loss	(9)	(10)	(20)
Total shareholders' equity	1,430	1,210	1,162
Total liabilities and shareholders' equity	$6,516	$5,661	$6,064

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
Share data in Millions	Oct. 31, 2009	Jan. 31, 2009	Nov. 01, 2008
Shareholders' equity:
Common stock, par value	0	0	0
Common stock, shares authorized	1,000	1,000	1,000
Common stock, shares issued	217.3	215.4	215.4
Common stock, shares outstanding	217.3	215.4	215.4

Consolidated Statements of Shar

Consolidated Statements of Shareholders Equity (Unaudited) (USD $)
In Millions	Common Stock	Retained Earnings	Accumulated Other Comprehensive (Loss) Earnings		Total
Beginning balance, Shares at Feb. 02, 2008	220.9
Beginning balance at Feb. 02, 2008	$936	$201	($22)		$1,115
Shareholders' Equity Rollforward
Net earnings		333			333
Other comprehensive earnings:
Amounts amortized into net periodic benefit cost, net of tax			2	[1]	2	[1]
Cash dividends paid ($0.48 per share)		(104)			(104)
Issuance of common stock for:
Stock option plans	17				17
Stock option plans, Shares	0.8
Employee stock purchase plan	16				16
Employee stock purchase plan, Shares	0.6
Stock-based compensation	21				21
Repurchase of common stock		(238)			(238)
Repurchase of common stock, Shares	-6.9
Ending balance at Nov. 01, 2008	990	192	(20)		1,162
Ending balance, Shares at Nov. 01, 2008	215.4
Issuance of common stock for:
Beginning balance, Shares at Jan. 31, 2009	215.4
Beginning balance at Jan. 31, 2009	997	223	(10)		1,210
Shareholders' Equity Rollforward
Net earnings		269			269
Other comprehensive earnings:
Amounts amortized into net periodic benefit cost, net of tax			1	[2]	1	[2]
Cash dividends paid ($0.48 per share)		(104)			(104)
Issuance of common stock for:
Stock option plans	18				18
Stock option plans, Shares	1.1
Employee stock purchase plan	13				13
Employee stock purchase plan, Shares	0.7
Other	1				1
Other, Shares	0.1
Stock-based compensation	22				22
Ending balance at Oct. 31, 2009	$1,051	$388	($9)		$1,430
Ending balance, Shares at Oct. 31, 2009	217.3
[1]net of tax of ($1)
[2]net of tax of less than $1

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Shareholders Equity (Parenthetical) (Unaudited) (USD $)
In Millions, except Per Share data	Retained Earnings	Accumulated Other Comprehensive (Loss) Earnings		Total
Other comprehensive earnings:
Tax effect of amounts amortized into net periodic benefit cost		($1)		($1)
Dividends paid (per share)	0.48			0.48
Other comprehensive earnings:
Tax effect of amounts amortized into net periodic benefit cost		$0	[1]	$0	[1]
Dividends paid (per share)	0.48			0.48
[1]less than $1

3_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Oct. 31, 2009	9 Months Ended Nov. 01, 2008
Operating Activities
Net earnings	$269	$333
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization of buildings and equipment, net	234	222
Amortization of deferred property incentives and other, net	(31)	(30)
Stock-based compensation expense	24	21
Deferred income taxes, net	(45)	(59)
Tax benefit from stock-based payments	4	4
Excess tax benefit from stock-based payments	(5)	(4)
Provision for bad debt expense	175	106
Change in operating assets and liabilities:
Accounts receivable	(119)	(62)
Merchandise inventories	(264)	(301)
Prepaid expenses and other assets	(13)	18
Accounts payable	401	280
Accrued salaries, wages and related benefits	41	(66)
Other current liabilities	(1)	(83)
Deferred property incentives	86	87
Other liabilities	45	(12)
Net cash provided by operating activities	801	454
Investing Activities
Capital expenditures	(281)	(439)
Change in credit card receivables originated at third parties	(129)	(171)
Other, net	1	2
Net cash used in investing activities	(409)	(608)
Financing Activities
(Repayments of) proceeds from commercial paper borrowings, net	(135)	102
Repayment of commercial paper classified as long-term	(140)	0
Proceeds from long-term borrowings, net	399	150
Principal payments on long-term borrowings	(24)	(8)
Decrease in cash book overdrafts	0	(45)
Proceeds from exercise of stock options	15	13
Proceeds from employee stock purchase plan	13	16
Excess tax benefit from stock-based payments	5	4
Cash dividends paid	(104)	(104)
Repurchase of common stock	0	(264)
Other, net	(9)	0
Net cash provided by (used in) financing activities	20	(136)
Net increase (decrease) in cash and cash equivalents	412	(290)
Cash and cash equivalents at beginning of period	72	358
Cash and cash equivalents at end of period	484	68
Cash paid during the period for:
Interest (net of capitalized interest)	81	91
Income taxes	$175	$319

Summary of Significant Accounti

Summary of Significant Accounting Policies
	9 Months Ended Oct. 31, 2009 USD / shares
Summary of Significant Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	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 nine months ended November1, 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 nine months ended November1, 2008. Recent Accounting Pronouncements In June2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.2009-01, Generally Accepted Accounting Principles (ASC 105, Generally Accepted Accounting Principles), which establishes the FASB Accounting Standards Codification (the Codification or ASC) as the official single source of authoritative U.S. generally accepted accounting principles (GAAP). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (SEC) guidance organized using the same topical structure in separate sections within the Codification. Following the Codification, the FASB will no longer issue new standards in the form of Statements, FASB Staff Positions or Emerging Issu

Accounts Receivable

Accounts Receivable
	9 Months Ended Oct. 31, 2009 USD / shares
Accounts Receivable [Abstract]
ACCOUNTS RECEIVABLE	NOTE 2: ACCOUNTS RECEIVABLE The components of accounts receivable are as follows: October 31, 2009 January 31, 2009 November 1, 2008 Trade receivables: Restricted $ 2,103 $ 2,005 $ 1,919 Unrestricted 17 14 26 Allowance for doubtful accounts (170 ) (138 ) (105 ) Trade receivables, net 1,950 1,881 1,840 Other 66 61 78 Accounts receivable, net $ 2,016 $ 1,942 $ 1,918 The following table summarizes the restricted trade receivables: October 31, 2009 January 31, 2009 November 1, 2008 Nordstrom VISA credit card receivables $ 1,448 $ 1,369 $ 1,304 Private label card receivables 655 636 615 Restricted trade receivables $ 2,103 $ 2,005 $ 1,919 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 Nordstrom 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 credit 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.

Debt and Credit Facilities

Debt and Credit Facilities
	9 Months Ended Oct. 31, 2009 USD / shares
Debt and Credit Facilities [Abstract]
DEBT AND CREDIT FACILITIES	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: October 31, 2009 January 31, 2009 November 1, 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 2007-A Variable Funding Note 150 Mortgage payable, 7.68%, due April2020 60 63 64 Other 16 17 17 926 930 1,081 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 20 1,689 1,308 1,559 Total long-term debt 2,615 2,238 2,640 Less: current portion (356 ) (24 ) (425 ) Total due beyond one year $ 2,259 $ 2,214 $ 2,215 As of October31, 2009 and November1, 2008, we had $356 and $425 classified as the current portion of long-term debt in our condensed consolidated balance sheets. As of October31, 2009, this balance was primarily composed of $350 related to our series 2007-1 notes due in April2010. As of November1, 2008, the current portion of long-term debt consisted primarily of $250 related to our senior notes paid in January2009, as well as $150 in outstanding issuances against our Variable Funding Note facility (2007-A VFN). During the third quarter of 2009, we entered into a new unsecured revolving credit facility with a capacity of $650. This credit facility replaced our previously existing $650 unsecured line of credit, which was scheduled to expire in November2010. The new facility is available for working capital, capital expenditure and general corporate purposes, including liquidity support for our commercial paper program. Under the terms of the agreement, we pay a variable rate of interest and a facility 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 opti

Stock Compensation Plans

Stock Compensation Plans
	9 Months Ended Oct. 31, 2009 USD / shares
Stock Compensation Plans [Abstract]
STOCK COMPENSATION PLANS	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 Nine Months Ended October 31, 2009 November 1, 2008 October 31, 2009 November 1, 2008 Cost of sales and related buying and occupancy costs $ 2 $ 2 $ 8 $ 7 Selling, general and administrative expenses 5 4 16 14 Total stock-based compensation expense before income tax benefit $ 7 $ 6 $ 24 $ 21 Stock Options During the nine months ended October31, 2009, 4.9 options were granted, 1.1 options were exercised, 0.1 options expired and 0.5 options were cancelled. During the nine months ended November1, 2008, 2.2 options were granted, 0.8 options were exercised, and 0.5 options were cancelled. The weighted average fair values per option at the dates of grant were $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 October31, 2009, our liabilities included $1 for performance share units. As of both January 31, 2009 and November1, 2008, we had no liabilities related to performance share units. For both the nine months ended October31, 2009 and November1, 2008, stock-based compensation expense related to performance share units was approximately $1. As of October31, 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 27months. At January31, 2009, 117,389 units were unvested. During the nine months ended October31, 2009, 144,891 units were granted, no units vested and 8,007 units cancelled, resulting in an ending balance of 254,273 unvested units as of October31, 2009.

Earnings Per Share

Earnings Per Share
	9 Months Ended Oct. 31, 2009 USD / shares
Earnings Per Share [Abstract]
EARNINGS PER SHARE	NOTE 5: EARNINGS PER SHARE The computation of earnings per share is as follows: Quarter Ended Nine Months Ended October 31, 2009 November 1, 2008 October 31, 2009 November 1, 2008 Net earnings $ 83 $ 71 $ 269 $ 333 Basic shares 217.1 215.6 216.5 216.9 Dilutive effect of stock options and performance share units 3.6 2.5 2.5 2.9 Diluted shares 220.7 218.1 219.0 219.8 Earnings per basic share $ 0.38 $ 0.33 $ 1.24 $ 1.54 Earnings per diluted share $ 0.38 $ 0.33 $ 1.23 $ 1.52 Antidilutive stock options and other 4.7 5.1 8.0 5.1

Segment Reporting

Segment Reporting
	9 Months Ended Oct. 31, 2009 USD / shares
Segment Reporting [Abstract]
SEGMENT REPORTING	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. In addition, our sales return reserve and other corporate adjustments are recorded in the Other segment. The following tables set forth the information for our reportable segments: Quarter ended Retail October 31, 2009 Stores Direct Credit Other Total Net sales $ 1,661 $ 185 $ 22 $ 1,868 Net sales increase 1.8% 16.4% N/A N/A 3.5% Credit card revenues 96 (1 ) 95 Earnings (loss)before interest and income taxes 175 58 3 (64 ) 172 Interest expense, net (11 ) (27 ) (38 ) Earnings (loss)before income taxes 175 58 (8 ) (91 ) 134 Earnings (loss)before income taxes as a percentage of net sales 10.5% 31.8% N/A N/A 7.2% Quarter ended Retail November 1, 2008 Stores Direct Credit Other Total Net sales $ 1,632 $ 158 $ 15 $ 1,805 Net sales (decrease)increase (8.6% ) 6.5% N/A N/A (8.4% ) Credit card revenues 74 74 Earnings (loss)before interest and income taxes 162 41 (14 ) (62 ) 127 Interest expense, net (13 ) (20 ) (33 ) Earnings (loss)before income taxes 162 41 (27 ) (82 ) 94 Earnings (loss)before income taxes as a percentage of net sales 9.9% 25.9% N/A N/A 5.2% Nine Months ended Retail October 31, 2009 Stores Direct Credit Other Total Net sales $ 5,284 $ 513 $ (78 ) $ 5,719 Net sales (decrease)increase (5.0% ) 6.6% N/A N/A (4.2% ) Credit card revenues 269 (1 ) 268 Earnings (loss)before interest and income taxes 614 157 (18 ) (229 ) 524 Interest expense, net (31 ) (74 ) (105 ) Earnings (loss)before income taxes 614 157 (49 ) (303 ) 419 Earnings (loss)before income taxes as a percentage of net sales 11.6% 30.7% N/A N/A 7.3% Total assets $ 3,020 $ 152 $ 2,053 $ 1,291 $ 6,516 Nine Months ended Retail November 1, 2008 Stores Direct Credit Other Total Net sales $ 5,563 $ 481 $ (73 ) $ 5,971 Net sales (decrease)increase

Contingent Liabilities

Contingent Liabilities
	9 Months Ended Oct. 31, 2009 USD / shares
Contingent Liabilities [Abstract]
CONTINGENT LIABILITIES	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.

Subsequent Event

Subsequent Event
	9 Months Ended Oct. 31, 2009 USD / shares
Subsequent Event [Abstract]
SUBSEQUENT EVENT	NOTE 8: SUBSEQUENT EVENT On November13, 2009, we renewed our Variable Funding Note facility (2007-A VFN) which was scheduled to mature in November2009. The 2007-A VFN continues to have a capacity of $300 and will now mature in November2010. The 2007-A VFN is backed by substantially all of the Nordstrom private label card receivables and a 90% interest in the co-branded Nordstrom VISA credit card receivables. Borrowings under the 2007-A VFN incur interest based upon the cost of commercial paper issued by a third-party bank conduit plus specified fees. We pay a commitment fee for the notes based on the size of the commitment. Under the renewed 2007-A VFN, we have the option to reduce the total capacity and provided that written consent is obtained from each of the parties to the Note Purchase Agreement, the facility contains the option to increase the total capacity. We evaluated subsequent events through December8, 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 December8, 2009, that would have a material impact on our financial statements.