Annual Reports

 
Quarterly Reports

  • 10-Q (Jun 3, 2014)
  • 10-Q (Dec 2, 2013)
  • 10-Q (Sep 3, 2013)
  • 10-Q (Jun 4, 2013)
  • 10-Q (Dec 3, 2012)
  • 10-Q (Aug 27, 2012)

 
8-K

 
Other

Nordstrom 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-10.6
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.1
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0000950123-09-012544.txt : 20090609
0000950123-09-012544.hdr.sgml : 20090609
20090609150904
ACCESSION NUMBER: 0000950123-09-012544
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20090502
FILED AS OF DATE: 20090609
DATE AS OF CHANGE: 20090609

FILER:

COMPANY DATA:
COMPANY CONFORMED NAME: NORDSTROM INC
CENTRAL INDEX KEY: 0000072333
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651]
IRS NUMBER: 910515058
STATE OF INCORPORATION: WA
FISCAL YEAR END: 0202

FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-15059
FILM NUMBER: 09881934

BUSINESS ADDRESS:
STREET 1: 1700 SEVENTH AVENUE
STREET 2: SUITE 1300
CITY: SEATTLE
STATE: WA
ZIP: 98101-4407
BUSINESS PHONE: 2066282111

MAIL ADDRESS:
STREET 1: PO BOX 1770
CITY: SEATTLE
STATE: WA
ZIP: 98111

FORMER COMPANY:
FORMER CONFORMED NAME: NORDSTROM BEST INC
DATE OF NAME CHANGE: 19730611


10-Q
1
v52663e10vq.htm
FORM 10-Q



e10vq



Table of Contents





 

 







UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549


FORM 10-Q


(Mark One)














     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934



For the quarterly period ended May 2, 2009


OR














     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



For the transition period from ____________ to ____________


Commission file number 001-15059


NORDSTROM, INC.


(Exact name of Registrant as specified in its charter)







































     
Washington
  91-0515058
(State or other jurisdiction of

incorporation or organization)
  (IRS employer

Identification No.)
     
1617 Sixth Avenue, Seattle, Washington
  98101
(Address of principal executive offices)
  (Zip code)



206-628-2111

(Registrant’s telephone number, including area code)


Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

YES þ NO o


Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

YES o NO o


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,”
“accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):























     
Large accelerated filer þ
  Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
  Smaller reporting company o



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

YES o NO þ


Common
stock outstanding as of June 5, 2009: 216,360,015 shares of common stock



 

 

















 












NORDSTROM, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

















































































































































































































         
        Page
PART I – FINANCIAL INFORMATION    
       Item 1.      
   
 
   
      3
   
 
   
      4
   
 
   
      5
   
 
   
      6
   
 
   
      7
   
 
   
       Item 2.     13
   
 
   
       Item 3.     24
   
 
   
       Item 4.     25
   
 
   
PART II – OTHER INFORMATION    
       Item 1A.     26
       Item 2.     26
       Item 6.     26
   
 
   
SIGNATURES   27
   
 
   
INDEX TO EXHIBITS   28
 EX-10.6
 EX-31.1
 EX-31.2
 EX-32.1








2 of 28






Table of Contents









PART I — FINANCIAL INFORMATION






Item 1. Financial Statements (Unaudited)






NORDSTROM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS



(Amounts in millions except per share amounts)

(Unaudited)
































































































































































































































































































                 
    Quarter Ended  
    May 2,     May 3,  
    2009     2008  
Net sales
    $ 1,706       $ 1,879  
Credit card revenues
    86       70  
 
           
Total revenues
    1,792       1,949  
Cost of sales and related buying and
occupancy costs
    (1,107 )     (1,179 )
Selling, general and administrative expenses:
               
Retail stores, direct and other segments
    (447 )     (493 )
Credit segment
    (92 )     (50 )
 
           
Earnings before interest and income taxes
    146       227  
Interest expense, net
    (31 )     (31 )
 
           
Earnings before income taxes
    115       196  
Income tax expense
    (34 )     (77 )
 
           
Net earnings
    $ 81       $ 119  
 
           
 
               
Earnings per basic share
    $ 0.38       $ 0.54  
Earnings per diluted share
    $ 0.37       $ 0.54  
 
               
Basic shares
    215.9       218.6  
Diluted shares
    217.4       221.7  



The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral
part of these financial statements.




3 of 28








Table of Contents








NORDSTROM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(Amounts in millions)

(Unaudited)





































































































































































































































































































































































































































































































































































































































































                         
    May 2, 2009     January 31, 2009     May 3, 2008  
Assets
                       
Current assets:
                       
Cash and cash equivalents
    $ 78       $ 72       $ 119  
Accounts receivable, net
    1,921       1,942       1,806  
Merchandise inventories
    1,004       900       1,079  
Current deferred tax assets, net
    220       210       181  
Prepaid expenses and other
    70       93       75  
 
                 
Total current assets
    3,293       3,217       3,260  
 
                       
Land, buildings and equipment, net
    2,231       2,221       2,061  
Goodwill
    53       53       53  
Other assets
    183       170       212  
 
                 
Total assets
    $ 5,760       $ 5,661       $ 5,586  
 
                 
 
                       
Liabilities and Shareholders’ Equity
                       
Current liabilities:
                       
Commercial paper
    $ 125       $ 275       $  
Accounts payable
    594       563       638  
Accrued salaries, wages and related benefits
    182       214       197  
Other current liabilities
    539       525       568  
Current portion of long-term debt
    375       24       260  
 
                 
Total current liabilities
    1,815       1,601       1,663  
 
                       
Long-term debt, net
    2,002       2,214       2,235  
Deferred property incentives, net
    459       435       381  
Other liabilities
    210       201       249  
 
                       
Commitments and contingencies
                       
 
                       
Shareholders’ equity:
                       
Common stock, no par value: 1,000 shares
authorized; 216.2, 215.4 and 216.9
shares issued and outstanding
    1,014       997       957  
Retained earnings
    269       223       123  
Accumulated other comprehensive loss
    (9 )     (10 )     (22 )
 
                 
Total shareholders’ equity
    1,274       1,210       1,058  
 
                 
Total liabilities and shareholders’ equity
    $ 5,760       $ 5,661       $ 5,586  
 
                 



The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral
part of these financial statements.



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NORDSTROM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


(Amounts in millions except per share amounts)

(Unaudited)










































































































































































































































































































































































































                                         
                            Accumulated        
                            Other        
    Common Stock     Retained     Comprehensive        
    Shares     Amount     Earnings     Loss     Total  
 
Balance at January 31, 2009
    215.4       $ 997       $ 223     $ (10 )     $ 1,210  
 
Net earnings
                81             81  
Other comprehensive earnings:
                                       
Postretirement plan adjustments
                      1       1  
 
                                     
Comprehensive net earnings
                                    82  
Cash dividends paid ($0.16 per share)
                (35 )           (35 )
Issuance of common stock for:
                                       
Stock option plans
    0.3       4                   4  
Employee stock purchase plan
    0.5       7                   7  
Stock-based compensation
          6                   6  
 
Balance at May 2, 2009
    216.2       $ 1,014       $ 269     $ (9 )     $ 1,274  
 







































































































































































































































































































































                                         
                            Accumulated        
                            Other        
    Common Stock     Retained     Comprehensive        
    Shares     Amount     Earnings     Loss     Total  
 
Balance at February 2, 2008
    220.9       $ 936       $ 201     $ (22 )     $ 1,115  
 
Net earnings
                119             119  
Cash dividends paid ($0.16 per share)
                (35 )           (35 )
Issuance of common stock for:
                                       
Stock option plans
    0.3       6                   6  
Employee stock purchase plan
    0.3       9                   9  
Stock-based compensation
          6                   6  
Repurchase of common stock
    (4.6 )           (162 )           (162 )
 
Balance at May 3, 2008
    216.9       $ 957       $ 123     $ (22 )     $ 1,058  
 



The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral
part of these financial statements.



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NORDSTROM, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts in millions)

(Unaudited)










































































































































































































































































































































































































































































































































































































































                 
    Quarter Ended  
    May 2, 2009     May 3, 2008  
Operating Activities
               
Net earnings
    $ 81       $ 119  
Adjustments to reconcile net earnings to net cash provided by
operating activities:
               
Depreciation and amortization of buildings and equipment, net
    77       72  
Amortization of deferred property incentives and other, net
    (10 )     (10 )
Stock-based compensation expense
    7       6  
Deferred income taxes, net
    (20 )     (10 )
Tax benefit from stock-based payments
    1       2  
Excess tax benefit from stock-based payments
    (1 )     (2 )
Provision for bad debt expense
    67       26  
Change in operating assets and liabilities:
               
Accounts receivable
    (16 )     (1 )
Merchandise inventories
    (114 )     (139 )
Prepaid expenses and other assets
    (1 )     1  
Accounts payable
    84       110  
Accrued salaries, wages and related benefits
    (32 )     (71 )
Other current liabilities
    (16 )     (5 )
Income taxes
    47       23  
Deferred property incentives
    42       28  
Other liabilities
    9       4  
 
           
Net cash provided by operating activities
    205       153  
 
           
 
               
Investing Activities
               
Capital expenditures
    (102 )     (142 )
Change in accounts receivable originated at third parties
    (30 )     (42 )
Other, net
          (1 )
 
           
Net cash used in investing activities
    (132 )     (185 )
 
           
 
               
Financing Activities
               
Payments on commercial paper
    (10 )      
Principal payments on long-term borrowings
    (1 )     (2 )
(Decrease) increase in cash book overdrafts
    (32 )     2  
Proceeds from exercise of stock options
    3       5  
Proceeds from employee stock purchase plan
    7       9  
Excess tax benefit from stock-based payments
    1       2  
Cash dividends paid
    (35 )     (35 )
Repurchase of common stock
          (188 )
 
           
Net cash used in financing activities
    (67 )     (207 )
 
           
     
Net increase (decrease) in cash and cash equivalents
    6       (239 )
Cash and cash equivalents at beginning of period
    72       358  
 
           
Cash and cash equivalents at end of period
    $ 78       $ 119  
 
           
 
               
Supplementary Cash Flow Information
               
Cash paid during the quarter for:
               
Interest (net of capitalized interest)
    $ 19       $ 19  
Income taxes
    $ 5       $ 49  



The accompanying Notes to Unaudited Condensed Consolidated Financial Statements are an integral
part of these financial statements.




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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




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 first quarter of 2008
to conform to our 2009 presentation. Credit card revenues were previously included in finance
charges and other, net in our consolidated statement 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 first quarter of 2008.


Recent Accounting Pronouncements



In December 2007, 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 company’s
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 Nordstrom as of the beginning of fiscal year 2009 and did not have a material impact
on our consolidated financial statements.


In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures
About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133

(“SFAS 161”). SFAS 161 expands the disclosure requirements in SFAS 133 about an entity’s derivative
instruments and hedging activities. The new disclosure requirements for this statement became
effective for Nordstrom as of the beginning of fiscal year 2009. As of May 2, 2009, we did not have
any material derivative instruments or hedging activities that would require additional disclosures
in our consolidated financial statements.


In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Disclosures about Fair
Value of Financial Instruments
(“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1, which
requires disclosure about the fair value of financial instruments in interim financial statements
as well as in annual financial statements, is effective for interim periods ending after June 15,
2009, but early adoption is permitted for interim periods ending after March 15, 2009. This FSP
will not impact our consolidated financial position or results of operations, as its requirements
are disclosure-only in nature. We will provide the required disclosures beginning with our Form
10-Q for the quarter ended August 1, 2009.


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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)



In May 2009, the FASB issued Statement of Accounting Standards No. 165, Subsequent Events (“SFAS
165”), which establishes general standards of accounting and disclosure for events that occur after
the balance sheet date but before financial statements are issued. This standard will be effective
for reporting periods ending after June 15, 2009. SFAS 165 will not impact our consolidated
financial position or results of operations, as its requirements are disclosure-only in nature.


NOTE 2: ACCOUNTS RECEIVABLE



The components of accounts receivable are as follows:
















































































































































































                         
    May 2, 2009     January 31, 2009     May 3, 2008  
Trade receivables:
                       
Restricted
    $ 1,977       $ 2,005       $ 1,762  
Unrestricted
    29       14       28  
Allowance for doubtful accounts
    (161 )     (138 )     (76 )
 
                 
Trade receivables, net
    1,845       1,881       1,714  
Other
    76       61       92  
 
                 
Accounts receivable, net
    $ 1,921       $ 1,942       $ 1,806  
 
                 




The following table summarizes the restricted trade receivables:








































































































                         
    May 2, 2009     January 31, 2009     May 3, 2008  
Nordstrom VISA credit card receivables
    $ 1,367       $ 1,369       $ 1,164  
Private label card receivables
    610       636       598  
 
                 
Restricted trade receivables
    $ 1,977       $ 2,005       $ 1,762  
 
                 




The restricted trade receivables secure our Series 2007-1 Notes, the Series 2007-2 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 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.


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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




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:































































































































































































































































































































































































                         
    May 2, 2009     January 31, 2009     May 3, 2008  
Secured
                       
Series 2007-1 Class A Notes, 4.92%, due April 2010
    $ 326       $ 326     $   326  
Series 2007-1 Class B Notes, 5.02%, due April 2010
    24       24       24  
Series 2007-2 Class A Notes, one-month LIBOR plus
0.06% per year, due April 2012
    454       454       454  
Series 2007-2 Class B Notes, one-month LIBOR plus
0.18% per year, due April 2012
    46       46       46  
Mortgage payable, 7.68%, due April 2020
    62       63       66  
Other
    16       17       19  
 
                 
 
    928       930       935  
Unsecured
                       
Commercial paper
    140              
Senior notes, 5.625%, due January 2009
                250  
Senior notes, 6.25%, due January 2018, net of
unamortized discount
    647       646       646  
Senior debentures, 6.95%, due March 2028
    300       300       300  
Senior notes, 7.00%, due January 2038, net of
unamortized discount
    343       343       342  
Other
    19       19       22  
 
                 
 
    1,449       1,308       1,560  
 
                       
Total long-term debt
    2,377       2,238       2,495  
Less: current portion
    (375 )     (24 )     (260 )
 
                 
Total due beyond one year
    $ 2,002       $ 2,214       $ 2,235  
 
                 




As of May 2, 2009 and May 3, 2008, we had $375 and $260 classified as current portion of long-term
debt in our condensed consolidated balance sheets. As of May 2, 2009, this balance was primarily
composed of $350 related to our series 2007-1 notes due in April 2010. As of May 3, 2008, the
current portion of long-term debt consisted primarily of $250 related to our senior notes due in
January 2009.


Under our $650 commercial paper program, we had $265 in outstanding issuances as of May 2, 2009.
The issuance of commercial paper has the effect, while it is outstanding, of reducing borrowing
capacity under our $650 line of credit by an amount equal to the principal amount of commercial
paper. We paid a weighted average interest rate of approximately 0.8% for these issuances, which
had terms of three to seven days. As of May 2, 2009, we had no outstanding borrowings under our
line of credit. On May 26, 2009, we issued $400 senior unsecured notes at 6.75%, due June 2014. Of
our $265 in outstanding issuances of commercial paper, $125 was repaid subsequent to May 2, 2009
using operating cash flows. The remaining $140 which was outstanding on May 26, 2009 was repaid
with a portion of the proceeds from the issuance of our $400 notes. Because this portion was
refinanced with long-term borrowings, we have classified $140 of the commercial paper facility as
long-term debt in our condensed consolidated balance sheet as of May 2, 2009. The remaining $125 of
commercial paper which was repaid using operating cash flows is classified as a current liability
in our condensed consolidated balance sheet as of May 2, 2009. See further discussion of our $400
senior unsecured notes in Note 8: Subsequent Event.


Additionally, we had $300 in short-term capacity as of May 2, 2009 available under a Variable
Funding Note facility (“2007-A VFN”). As of May 2, 2009 we had no outstanding issuances against
this facility. The 2007-A VFN matures in November 2009 and can be cancelled if our debt ratings
fall below Standard & Poor’s BB+ rating or Moody’s Ba1 rating. As of June 9, 2009, our rating by
Standard & Poor’s was BBB+, four grades above the threshold, and by Moody’s was Baa2, three grades
above the threshold.


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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




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  
    May 2, 2009     May 3, 2008  
 
               
Cost of sales and related buying and occupancy costs
    $ 2       $ 2  
Selling, general and administrative expenses
    5       4  
 
           
Total stock-based compensation expense before income
tax benefit
    $ 7       $ 6  
 
           




Stock Options



During the quarter ended May 2, 2009, 4.9 options were granted, 0.3 options were exercised, 0.1
options expired and 0.2 options were cancelled. During the quarter ended May 3, 2008, 2.2 options
were granted, 0.3 options were exercised, and 0.1 options were cancelled. The weighted average fair
value per option at the date of grant was $7 and $15 in the first quarter of 2009 and 2008. We used
the following assumptions to estimate the fair value of stock options at the date of grant:


























































































































                 
    Quarter Ended  
    May 2, 2009   May 3, 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 May 2, 2009, our liabilities included less than $1 for performance share units. As of both
January 31, 2009 and May 3, 2008, we had no liabilities related to performance share units. For
both the quarter ended May 2, 2009 and May 3, 2008, stock-based compensation expense related to
performance share units was less than $1. As of May 2, 2009, the remaining unrecognized stock-based
compensation expense related to unvested performance share units was $4, which is expected to be
recognized over a weighted average period of 33 months. At January 31, 2009, 117,389 units were
unvested. During the quarter ended May 2, 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 May 2, 2009.


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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




NOTE 5: EARNINGS PER SHARE



The computation of earnings per share is as follows:






















































































































































































                 
    Quarter Ended  
    May 2, 2009     May 3, 2008  
 
               
Net earnings
    $ 81       $ 119  
 
           
 
               
Basic shares
    215.9       218.6  
Dilutive effect of stock options and performance share units
    1.5       3.1  
 
           
Diluted shares
    217.4       221.7  
 
           
 
               
Earnings per basic share
    $ 0.38       $ 0.54  
Earnings per diluted share
    $ 0.37       $ 0.54  
 
               
Antidilutive stock options and other
    12.7       5.3  




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                          
May 2, 2009   Stores     Direct     Credit     Other     Total  
 
Net sales
    $ 1,583       $ 149             $ (26 )     $ 1,706  
Net sales decrease
    (9.6% )     (0.2% )     N/A       N/A       (9.2% )
Credit card revenue
                86             86  
Earnings before interest and
income taxes
    184       47       (18 )     (67 )     146  
Interest expense, net
                (10 )     (21 )     (31 )
Earnings before income taxes
    184       47       (28 )     (88 )     115  
Earnings before income taxes
as a percentage of net sales
    11.6%     31.5%     N/A       N/A       6.7%
Total assets
    $ 2,867       $ 132       $ 1,937       $ 824       $ 5,760  
































































































































































































































































                                         
Quarter ended   Retail                          
May 3, 2008   Stores     Direct     Credit     Other     Total  
 
Net sales
    $ 1,752       $ 149             $ (22 )     $ 1,879  
Net sales (decrease) increase
    (2.3% )     6.5%     N/A       N/A       (3.8% )
Credit card revenue
                70             70  
Earnings before interest and
income taxes
    246       40       11       (70 )     227  
Interest expense, net
                (13 )     (18 )     (31 )
Earnings before income taxes
    246       40       (2 )     (88 )     196  
Earnings before income taxes
as a percentage of net sales
    14.0%     26.7%     N/A       N/A       10.4%
Total assets
    $ 2,743       $ 140       $ 1,821       $ 882       $ 5,586  




NOTE 7: CONTINGENT LIABILITIES


We are involved in routine claims, proceedings and litigation arising from the normal course of our
business. 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.


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NORDSTROM, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(Dollar and share amounts in millions except per share, per option and unit amounts)

(Unaudited)




NOTE 8: SUBSEQUENT EVENT



On May 26, 2009, we issued $400 senior unsecured notes at 6.75%, due June 2014. After deducting the
original issue discount, underwriting fees and other expenses of $4, net proceeds from the offering
were $396. A portion of these net proceeds were used to repay $140 in commercial paper borrowings
outstanding at the date of issuance. The remaining proceeds will be used for general corporate
purposes.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations



(Amounts in millions except per share and per square foot amounts)




The following discussion should be read in conjunction with the Management’s Discussion and
Analysis section of our 2008 Annual Report on Form 10-K filed with the Commission on March 23,
2009.


FORWARD-LOOKING INFORMATION CAUTIONARY STATEMENT

Certain statements in this Quarterly Report on Form 10-Q contain “forward-looking” statements (as
defined in the Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties, including anticipated financial results, use of cash and liquidity, growth, store
openings and trends in our operations. Actual future results and trends may differ materially from
historical results or current expectations depending upon various factors including, but not
limited to:





























































































































































    the impact of deteriorating economic and market conditions and the resulting impact on
consumer spending patterns
    our ability to respond to the business environment and fashion trends
    our ability to safeguard our brand and reputation
    our ability to effectively manage inventory
    efficient and proper allocation of our capital resources
    successful execution of our store growth strategy including the timely completion of
construction associated with newly planned stores, relocations and remodels, all of which may
be impacted by the financial health of third parties
    our compliance with applicable banking and related laws and regulations impacting our
ability to extend credit to our customers
    trends in personal bankruptcies and bad debt write-offs
    availability and cost of credit
    changes in interest rates
    disruptions in our supply chain
    our ability to maintain our relationships with vendors and developers who may be
experiencing economic difficulties
    the geographic location of our stores
    our ability to maintain our relationships with our employees and to effectively train and
develop our future leaders
    our compliance with information security and privacy laws and regulations, employment laws
and regulations and other laws and regulations applicable to the company
    successful execution of our technology strategy
    successful execution of our multi-channel strategy
    risks related to fluctuations in world currencies
    weather conditions and hazards of nature that affect consumer traffic and consumers’
purchasing patterns
    the effectiveness of planned advertising, marketing and promotional campaigns
    our ability to control costs
    timing and amounts of any share repurchases by the company



These and other factors, including those factors described in Part I, “Item 1A. Risk Factors” in
our Form 10-K for the fiscal year ended January 31, 2009 and in Part II, “Item 1A. Risk Factors” on
page 26 of this report, could affect our financial results and trends and cause actual results and
trends to differ materially from those contained in any forward-looking statements we may provide.
As a result, while we believe there is a reasonable basis for the forward-looking statements, you
should not place undue reliance on those statements. We undertake no obligation to update or revise
any forward-looking statements to reflect subsequent events, new information or future
circumstances. This discussion and analysis should be read in conjunction with the Condensed
Consolidated Financial Statements.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued)
(Amounts in millions except per share and per square foot amounts)


RESULTS OF OPERATIONS



Overview

































































                 
    First Quarter
    2009   2008
Net earnings
  $ 81     $ 119  
Net earnings as a percentage of total revenues
    4.5%     6.1%
Earnings per diluted share
  $ 0.37     $ 0.54  




For the quarter ended May 2, 2009, earnings were $81, or $0.37 per diluted share, compared with
earnings of $119, or $0.54 per diluted share for the quarter ended May 3, 2008. Included in the
2009 first quarter results was a benefit of approximately $12, or $0.06 per diluted share, related
to the closure of our 2007 federal tax return audit. For the first quarter of 2009, overall
business trends were consistent with our plan and we maintained our discipline with respect to
inventory and expenses. As a result, our performance was in line with our planned sales and better
than our planned earnings. While the retail portion of our business is less volatile, recent trends
have shown deterioration in our credit business as delinquency rates continue to increase. Key
highlights of the first quarter include:
















































    Total net sales for the quarter ended May 2, 2009 decreased 9.2% due to same-store sales
decreases, partially offset by the addition of stores. For the quarter, total company
same-store sales decreased 13.2%, compared with a 6.5% same-store sales decline last year.
Although full-line same-store sales decreased, Rack delivered an increase in same-store sales
of 1.2%.
 
    Gross profit, as a percentage of net sales, decreased 215 basis points compared with last
year’s first quarter. Approximately half of the decline was due to the impact of fixed buying
and occupancy costs as a percentage of reduced sales, with the remaining decline due to
reduced merchandise margins as a percentage of net sales. During the first quarter of 2009, we
continued to maintain inventory levels that were consistent with current sales trends.
 
    Retail selling, general and administrative expenses decreased $46 compared to the prior
year, inclusive of $17 in expenses in 2009 from stores opened since the first quarter of 2008.
We opened six full-line stores and ten Nordstrom Rack stores since the first quarter of 2008,
increasing our retail square footage by 5.7%.
 
    Credit selling, general and administrative expenses increased $42 compared with last
year’s first quarter due to higher levels of bad debt.
 
    For the 2009 fiscal year, we currently expect earnings per diluted share in the range of
$1.25 to $1.50, increased from the previous range of $1.10 to $1.40.



Retail Stores, Direct and Other Segments



Summary



Our Retail Stores segment includes our full-line and Rack stores; our Direct segment includes our
online store; and our Other segment includes our product development group and corporate center
operations. The following table summarizes the combined results of our Retail Stores, Direct and
Other segments for the quarter ended May 2, 2009 compared with the quarter ended May 3, 2008:










































































































































































































                                 
    First Quarter
    2009   2008
    Amount   % of net sales2   Amount   % of net sales2
Net sales
  $ 1,706       100.0 %   $ 1,879       100.0 %
Cost of sales and related buying and occupancy costs
    (1,095 )     (64.2 %)     (1,170 )     (62.2 %)
 
                               
Gross profit1
    611       35.8 %     709       37.8 %
Selling, general and administrative expenses
    (447 )     (26.2 %)     (493 )     (26.2 %)
 
                               
Earnings before interest and income taxes
    164       9.6 %     216       11.5 %
 
                               
























1 Gross profit is calculated as net sales less Retail Stores, Direct and Other segments
cost of sales and related buying and occupancy costs.
 
2 Subtotals and totals may not foot due to rounding.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



Net Sales

































































                 
    First Quarter
    2009   2008
Net sales
       $ 1,706       $ 1,879  
Net sales decrease
    (9.2% )     (3.8% )
Total company same-store sales decrease
    (13.2% )     (6.5% )




Total net sales for the first quarter decreased 9.2% over the same period in the prior year as the
consumer environment continued to be challenging, with decreases at our full-line stores offset by
increases for our Rack stores.


Same-store sales for our full-line stores decreased 16.5%. The largest decreases came in men’s
wear, designer apparel and men’s shoes, which were below the full-line same-store sales average. We
have seen the decline in men’s apparel and shoes correspond with the economic downturn. In 2009,
consumers continue to be conservative with their spending, which impacted the results of our
designer category. Merchandise categories with results above the same-store sales average included
junior women’s apparel and cosmetics. Our merchants continue to work with our vendors to provide a
balanced and compelling merchandise offering to our customers.


Regionally, the Northwest, California and the Northeast experienced same-store sales below the
full-line store average.


Our Rack channel delivered a 1.2% same-store sales increase for the quarter ended May 2, 2009.
These results were driven by growth in shoes and women’s apparel categories. Shoes benefited from
the sales of junior women’s footwear, while women’s apparel was led by trend tops.


Sales for our Direct channel were approximately flat for the quarter ended May 2, 2009 compared
with the same period last year.


We expect full year 2009 same-store sales to decrease in the range of 10% to 15%.


Gross Profit






















































                 
    First Quarter
    2009   2008
Gross profit
      $ 611         $ 709  
Gross profit rate1
    35.8%       37.8%  

















1 Gross profit rate is calculated as gross profit divided by net sales.























































                 
    First Quarter
    2009   2008
Average inventory per square foot
    $ 48.62       $ 53.00  
Inventory turnover rate1
    5.08       5.05  

















1 Inventory turnover rate is calculated as the trailing 12 months cost of sales and
related buying and occupancy costs (for all segments) divided by 5-quarter average inventory.




Retail gross profit decreased $98 for the first quarter of 2009 compared with the first quarter of
2008 while our retail gross profit rate deteriorated 200 basis points for the quarter. Our gross
profit rate is made up of both merchandise margin and buying and occupancy costs. The impact of our
fixed buying and occupancy costs as a percentage of reduced sales drove approximately half of the
decrease in our gross profit rate. Our merchandise margin drove the remaining decrease, as lower
initial markups and an unfavorable merchandise mix were partially offset by lower markdowns.


Our inventory turnover rate was consistent with last year, while our average inventory per square
foot decreased 8.3% compared with the quarter ended May 3, 2008. Continued efforts to align
inventory levels with lower demand resulted in lower average inventory per square foot.


Based on our performance for the first quarter of 2009, we currently expect our retail gross profit
rate for the full year 2009 to decrease 130 to 200 basis points from 2008 levels.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



Selling, General and Administrative Expenses






















































                 
    First Quarter
    2009   2008
Selling, general and administrative expenses
  $ 447     $ 493  
Selling, general and administrative rate1
    26.2%     26.2%

















1 Selling, general and administrative rate is calculated as selling, general and
administrative expenses for our Retail Stores, Direct and Other segments as a percentage of net
sales.




Selling, general and administrative expenses for our Retail Stores, Direct and Other segments
decreased 9%, or $46 compared to last year’s first quarter. Lower variable expenses as well as
fixed cost savings drove a decrease of approximately $63, which was partially offset by $17 in
expenses for the six full-line and ten Rack stores opened since the first quarter of 2008. Retail
square footage increased 1.2, or 5.7% since the first quarter of 2008. Variable expenses decreased
consistent with the decrease in sales. Fixed cost reductions were primarily in services purchased,
advertising and labor.


We currently anticipate our retail selling, general and administrative expenses to decrease $100 to
$200 for 2009.


Credit Segment



The Nordstrom credit card products are designed to grow retail sales and customer relationships by
providing superior payment products, services and loyalty benefits. We believe that owning our
credit card business allows us to fully integrate our rewards program with our retail stores and
provide superior service to our customers, thus deepening our relationship with them and driving
higher levels of customer loyalty. Each card enables participation in the Nordstrom Fashion
Rewards® program, through which customers accumulate points based on their level of spending (two
points per dollar spent at Nordstrom and one point per dollar spent outside of Nordstrom stores).
Upon reaching two thousand points, customers receive twenty dollars in Nordstrom Notes®, which can
be redeemed for goods or services in our stores. As customers increase their level of spending they
receive additional benefits, including rewards such as complimentary shipping and alterations in
our retail stores. We believe the Fashion Rewards program, including these additional rewards,
helps drive sales in our Retail Stores and Direct segments.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued)
(Amounts in millions except per share and per square foot amounts)


The table below illustrates a detailed view of the operational results of our Credit segment,
consistent with the segment disclosure provided in the notes to the condensed consolidated
financial statements. In order to view the total economic contribution of our credit card program,
intercompany merchant fees are also included in the table below. Intercompany merchant fees
represent the estimated intercompany income of our credit business from the usage of our cards in
the Retail Stores and Direct segments. To encourage the use of Nordstrom cards in our stores, the
Credit segment does not charge the Retail Stores and Direct segments an intercompany interchange
merchant fee. On a consolidated basis, we avoid these costs which would be incurred if our
customers used third-party cards.

















































































































































































































































































                 
    First Quarter
    2009   2008
Finance charge revenue
  $ 64     $ 51  
Interchange
    16       16  
Late fees and other revenue
    6       3  
 
               
Total credit card revenues
    86       70  
Interest expense
    (10 )     (13 )
 
               
Net credit card income
    76       57  
Cost of sales — loyalty program
    (12 )     (9 )
Selling, general and administrative expenses
    (92 )     (50 )
 
               
Total expense
    (104 )     (59 )
 
               
Credit card charge to earnings before income
taxes, as presented in segment disclosure
    (28 )     (2 )
 
               
Intercompany merchant fees
    10       10  
 
               
Total credit card (charge) contribution
  $ (18 )   $ 8  
 
               
 
               
Average accounts receivable investment
(assuming 80% of accounts receivable is
funded with debt)
  $ 402     $ 357  
Credit card (charge) contribution, net of
tax, as a percentage of average accounts
receivable investment1
    (10.8% )     5.6%

















1 Based on annualized first quarter credit card (charge) contribution, net of tax




Net Credit Card Income



Credit card revenues include finance charges, interchange fees, late and other fees. The majority
of our credit accounts have finance charge rates that vary with changes in the prime rate.
Interchange fees are earned from the use of Nordstrom VISA credit cards at merchants outside of
Nordstrom.


Credit card revenues increased from $70 in the first quarter of 2008 to $86 in the first quarter of
2009 due to the change in our credit card terms that were implemented in the fourth quarter of 2008
and growth in our accounts receivable balance.


Based on results for the first quarter of 2009 as well as the previously implemented increases in
annual percentage rate terms, we expect our credit card revenues for 2009 to increase $75 to $80.


Interest expense is assigned to the Credit segment proportionate to the amount of debt estimated to
fund our credit card receivables, which assumes a mix of 80% debt and 20% equity. The average
accounts receivable investment metric included in the table above represents our best estimate of
the amount of capital for our credit card program that is financed by equity. As a means of
assigning comparable cost of capital for our credit card business, we believe it is important to
maintain a capital structure similar to other financial institutions. Based on our research, we
have found that debt as a percentage of credit card receivables for other credit card companies
ranges from 70% to 90%. We believe that debt equal to 80% of our credit card receivables is
appropriate given our overall capital structure goals.


Interest expense decreased to $10 in the first quarter of 2009 from $13 in the first quarter of
2008 due to declining variable interest rates, partially offset by higher average borrowings.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)


Cost of Sales



Cost of sales includes the estimated cost of Nordstrom Notes that will be issued and redeemed under
our Fashion Rewards program. The increase in cost of sales expense to $12 in the first quarter of
2009 compared with $9 in the first quarter in 2008 was primarily due to a Nordstrom Fashion Rewards
triple point event held for Nordstrom cardholders in the first quarter of 2009. This event replaced
a Nordstrom Fashion Rewards event in 2008 that began in late April and extended into May last year.


Credit Selling, General and Administrative Expenses



Selling, general and administrative expenses for our credit segment are made up of operational and
marketing expenses and bad debt. These expenses are summarized in the following table:






















































































                 
    First Quarter
    2009   2008
Operational and marketing expense
  $    25     $    24  
Bad debt expense
    67       26  
 
               
Total credit selling, general and administrative expense
  $ 92     $ 50  
 
               




Operational and marketing expenses, which are incurred to support and service our credit card
products, remained relatively constant at $25 for the first quarter of 2009 compared with $24 for
the first quarter of 2008. This reflects expenses that are relatively fixed when compared to
portfolio growth and our continued focus on controlling expenses.


Bad debt expense increased to $67 in the first quarter of 2009 from $26 in the first quarter of
2008 due to increased delinquencies and write-offs reflecting current consumer credit trends, as
well as reserves for higher projected losses inherent in the receivables portfolio as of May 2,
2009.


The following table illustrates the activity in the allowance for doubtful accounts for the first
quarter of 2009 and 2008:













































































































































                 
    First Quarter
    2009   2008
Allowance at beginning of period
  $ 138     $ 73  
Bad debt provision
    67       26  
Net write-offs
    (44 )     (23 )
 
               
Allowance at end of period
  $ 161     $ 76  
 
               
 
               
Allowance as a percentage of accounts receivable
    8.0%     4.3%
Bad debt provision as a percentage of average accounts receivable1
    13.3%     5.8%
Net write-offs as a percentage of average accounts receivable2
    8.7%     4.9%
























   
1 Based upon annualized first quarter bad debt provision.
 
2 Based upon annualized first quarter net write-offs.




We increased our allowance for doubtful accounts by $23 during the first quarter of 2009 due to our
expectations around future write-offs. We experienced an increase in delinquencies in the first quarter and
believe they are a key indicator that write-offs will continue to be elevated through the remainder of 2009.
We currently expect our credit selling, general and administrative expenses to increase $35 to $45
for 2009, due to rising unemployment rates, which we believe leads to higher delinquencies and
ultimately higher write-offs. We continue to take actions to reduce our risk exposure by tightening underwriting and account
management standards. However, additional deterioration in the overall economic environment, including
continued deterioration in the labor market, could cause delinquencies to increase beyond our current
expectations, resulting in additional bad debt expense.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued)
(Amounts in millions except per share and per square foot amounts)


Total Company Results



Income Tax Expense






















































                 
    First Quarter
    2009   2008
Income tax expense
  $ 34     $ 77  
Effective tax rate
    29.4%       39.3%  




Our effective tax rate decreased to 29.4% for the first quarter of 2009, from 39.3% for the same
period in 2008. The decrease was due to a benefit of approximately $12, or $0.06 per diluted share,
included in the 2009 first quarter results related to the closure of our 2007 federal tax return
audit.


Including the impact of this settlement, we expect our effective tax rate to be between 36.5% and
37.0% for 2009.


Seasonality



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.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


(Continued)
(Amounts in millions except per share and per square foot amounts)


Return on Invested Capital (ROIC) (Non-GAAP financial measure)



We define Return on Invested Capital as follows:









































             
 
  ROIC =
  Net Operating Profit after Taxes (NOPAT)
   
 
         
 
    Average Invested Capital    




































































































     
Numerator = NOPAT   Denominator = Average Invested Capital
 
   
Net Earnings
  Average total assets
+ Income tax expense
  - Average non-interest-bearing current liabilities
+ Interest expense, net
  - Average deferred property incentives
   
 
= EBIT
  + Average estimated asset base of capitalized operating
leases
 
   
+ Rent expense
  = Average invested capital
 
   
- Estimated depreciation on capitalized operating leases
   
 
 
 
= Net operating profit
   
- Estimated income tax expense
   
 
 
 
= NOPAT
   
 
 
 




We believe that ROIC is a useful financial measure for investors in evaluating our operating
performance for the periods presented. When read in conjunction with our net earnings and total
assets and compared to return on assets, it provides investors with a useful tool to evaluate our
ongoing operations and our management of assets from period to period. Over the past several years,
we have incorporated ROIC into our key financial metrics, and since 2005 have used it as an
executive incentive measure. Our research has shown historically that overall performance as
measured by ROIC correlates directly to shareholders’ return over the long term. For the 12 fiscal
months ended May 2, 2009, our ROIC decreased to 10.8% compared to 18.1% for the 12 fiscal months
ended May 3, 2008. ROIC is not a measure of financial performance under United States GAAP and
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 to similarly titled measures reported
by other companies. See our ROIC reconciliation to GAAP below. The closest GAAP measure is return
on assets, which decreased to 6.3% from 12.1% for the 12 fiscal months ended May 2, 2009 compared
to the 12 fiscal months ended May 3, 2008. The following is a reconciliation of return on assets
and ROIC:





























































































































































































































































































































                 
    12 months ended
    May 2, 2009   May 3, 2008
Net earnings
  $ 363     $ 677  
Add: income tax expense
    204       438  
Add: interest expense, net
    131       98  
 
               
Earnings before interest and income taxes
    698       1,213  
 
               
Add: rent expense
    37       43  
Less: estimated depreciation on capitalized operating leases1
    (19 )     (23 )
 
               
Net operating profit
    716       1,233  
 
               
Estimated income tax expense
    (257 )     (485 )
 
               
Net operating profit after tax
  $ 459     $ 748  
 
               
 
               
Average total assets2
  $ 5,794     $ 5,606  
Less: average non-interest-bearing current liabilities3
    (1,429 )     (1,495 )
Less: average deferred property incentives2
    (417 )     (364 )
Add: average estimated asset base of capitalized operating leases4
    306       389  
 
               
Average invested capital
  $ 4,254     $ 4,136  
 
               
 
               
Return on Assets
    6.3%       12.1%  
ROIC
    10.8%       18.1%  






































1 Depreciation based upon estimated asset base of capitalized operating leases as
described in footnote 4 below.
 
2 Based upon the trailing 12-month average.
 
3 Based upon the trailing 12-month average for accounts payable, accrued salaries, wages
and related benefits, and other current liabilities.
 
4 Based upon the trailing 12-month average of the monthly asset base, which is calculated
as the trailing 12 months rent expense multiplied by 8.




Our ROIC declined primarily due to a decrease in our earnings before interest and income taxes
compared to the prior year.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



LIQUIDITY AND CAPITAL RESOURCES



We maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to
maintain appropriate levels of short-term borrowings. We believe that our operating cash flows and
available credit facilities are sufficient to finance our cash requirements for the next 12 months.


Over the long term, we manage our cash and capital structure to maximize shareholder return,
strengthen our financial position and maintain flexibility for future strategic initiatives. We
continuously assess our debt and leverage levels, capital expenditure requirements, principal debt
payments, dividend payouts, potential share repurchases and future investments or acquisitions. We
believe our operating cash flows, available credit facilities and potential future borrowings will
be sufficient to fund these scheduled future payments and potential long-term initiatives.


For the first quarter of 2009, cash and cash equivalents increased by $6 to $78 as of May 2, 2009.
Activity for the first quarter of 2009 included cash provided by operations of $205, partially
offset by capital expenditures of $102, cash dividends paid of $35, a decrease in our cash book
overdrafts of $32 and purchases, net of repayments, made by our customers for third-party
merchandise and services using Nordstrom VISA credit cards of $30.


Operating Activities



The majority of our operating cash inflows are related to sales to our customers, including the
collection of accounts receivable. We also receive cash payments for property incentives from
developers. Our operating cash outflows generally consist of payments to our inventory vendors (net
of vendor allowances), payments to our employees for wages, salaries and other employee benefits,
and payments to our landlords for rent. Operating cash outflows also include payments for income
taxes and interest payments on our short and long-term borrowings.


Net cash provided by operating activities increased by $52 to $205 for the first quarter of 2009
compared to $153 for the same period in 2008. Although net earnings for the first quarter of 2009
declined compared to the same period in 2008, lower cash outflows for merchandise inventories and
overall lower expenses resulted in higher cash provided by operating activities. The reduced cash
outflows for merchandise inventories reflected our efforts to continue to align merchandise
inventories with lower demand. Additionally, lower incentives tied to company performance and
continued expense discipline also led to a reduction in operating cash outflows.


Investing Activities



Our investing cash flows typically consist of capital expenditures and customer purchases (net of
payments) for goods and services outside of Nordstrom using the Nordstrom VISA credit cards.


Net cash used in investing activities decreased from $185 for the first quarter of 2008 to $132 for
the first quarter of 2009, due to a decrease in capital expenditures for new stores and remodels,
as well as a decrease in third-party purchases using the Nordstrom VISA credit cards. We opened two
full-line stores, relocated one full-line store, and opened four Rack stores in the first quarter
of 2009, compared to opening four full-line stores for the same period last year. Although we plan
to grow our Rack business by opening nine stores during the remainder of the year, capital
expenditures incurred for Rack stores are significantly less compared to our full-line stores.


Activity related to customers using their Nordstrom VISA credit cards for merchandise and services
outside of Nordstrom stores decreased to $30 in the first quarter of 2009 compared with $42 for the
same period in 2008. The decrease was a result of a general reduction in consumer spending.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



Financing Activities



Net cash used in financing activities was $67 in the first quarter of 2009 compared with $207 in
the first quarter of 2008. In 2009, our financing activities consisted of dividend payments of $35,
a decrease in cash book overdrafts of $32 and payments on commercial paper of $10. In 2008, cash
used in financing activity included share repurchases of $188 and dividends paid of $35.


Credit Capacity and Commitments



Under our $650 commercial paper program, we had $265 in outstanding issuances as of May 2, 2009.
The issuance of commercial paper has the effect, while it is outstanding, of reducing borrowing
capacity under our $650 line of credit by an amount equal to the principal amount of commercial
paper. We utilized the borrowings to repay our $250 senior notes in January 2009, and to fund our
operations and seasonal cash needs.


Subsequent to the end of our first quarter, on May 26, 2009 we completed the issuance of $400,
6.75% notes due 2014. After deducting the original issue discount, underwriting fees and other
expenses of $4, net proceeds from the offering were $396. A portion of these net proceeds were used
to repay $140 in commercial paper borrowings outstanding at the date of issuance. The remaining
proceeds will be used for general corporate purposes.


Our next debt maturity is a $350 securitized note due in April 2010. We will continue to monitor
the credit markets and our potential financing needs in order to ensure we have adequate cash on
hand to pay this debt when it becomes due.


Debt Covenants



Our 2007-A VFN, which matures in November 2009, can be cancelled if our debt ratings fall below
Standard and Poor’s BB+ rating or Moody’s Ba1 rating. Our other debt is not subject to termination
based on changes in our credit ratings. We are currently four ratings above the threshold for our
Standard & Poor’s covenant requirements, and three ratings above the threshold for our Moody’s
covenant requirements.


Our $650 combined commercial paper/unsecured line of credit facility requires that we maintain a
leverage ratio of not greater than approximately four times Adjusted Debt to EBITDAR, which we were
in compliance with as of May 2, 2009. See additional disclosure of Adjusted Debt to EBITDAR on the
following page.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



Adjusted Debt to EBITDAR (Non-GAAP financial measure)



We define Adjusted Debt to Earnings before Interest, Income Taxes, Depreciation, Amortization and
Rent (“EBITDAR”) as follows:





























































































       
Adjusted Debt to

EBITDAR =

Adjusted Debt


Earnings before Interest, Income Taxes, Depreciation,

Amortization and Rent (EBITDAR)
       
Numerator = Adjusted Debt
    Denominator = EBITDAR
Debt
    Net Earnings
+ Rent expense x 8
    + Income tax expense
       
= Adjusted Debt
    + Interest expense, net
       
      + Depreciation and amortization of buildings and
equipment
      + Rent expense
       
      = EBITDAR
       




Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe that our debt levels
are best analyzed using this measure. Our goal today is to manage debt levels at a point which we
believe will help us maintain an investment grade credit rating as well as operate with an
efficient capital structure for our size, growth plans and industry. Investment grade credit
ratings are important to maintaining access to a variety of short-term and long-term sources of
funding, and we rely on these funding sources to continue to grow our business. We believe a higher
ratio, among other factors, could result in rating agency downgrades. In contrast, we believe a
lower ratio would result in a higher cost of capital and could negatively impact shareholder
returns. As of May 2, 2009, our Adjusted Debt to EBITDAR was 2.7 compared to 1.9 as of May 3, 2008.
The increase was primarily the result of a decrease in earnings before interest and income taxes
for the 12 months ended May 2, 2009 compared with the 12 months ended May 3, 2008.


Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should not be
considered a substitute for debt to net earnings, net earnings or debt as determined in accordance
with GAAP. In addition, Adjusted Debt to EBITDAR does have limitations:






























    Adjusted Debt is our best estimate of the total company debt we would incur if we had
purchased the property 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.



To compensate for these limitations, we analyze Adjusted Debt to EBITDAR in conjunction with other
GAAP financial and performance measures impacting liquidity, including operating cash flows,
capital spending and net earnings. The closest GAAP measure is debt to net earnings, which was 6.9
and 3.7 for the first quarter of 2009 and 2008, respectively. The following is a reconciliation of
debt to net earnings and Adjusted Debt to EBITDAR:























































































































































































































































                 
    20091     20081  
Debt2
    $ 2,502       $ 2,495  
Add: rent expense x 83
    296       344  
 
           
Adjusted Debt
    $ 2,798       $ 2,839  
 
           
 
               
Net earnings
    363       677  
Add: income tax expense
    204       438  
Add: interest expense, net
    131       98  
 
           
Earnings before interest and income taxes
    698       1,213  
 
               
Add: depreciation and amortization of buildings and equipment
    307       272  
Add: rent expense
    37       43  
 
           
EBITDAR
    $ 1,042       $ 1,528  
 
           
 
               
Debt to Net Earnings
    6.9       3.7  
Adjusted Debt to EBITDAR
    2.7       1.9  
 
           






























   
1 The components of adjusted debt are as of May 2, 2009 and May 3, 2008, while the
components of EBITDAR are for the 12 months ended May 2, 2009 and May 3, 2008.
 
2 Debt includes $265 of outstanding commercial paper borrowings as of May 2, 2009. There
were no commercial paper borrowings outstanding as of May 3, 2008.
 
3 The multiple of eight times rent expense used to calculate adjusted debt is our best
estimate of the debt we would record for our leases which are classified as operating if we
had purchased the property.



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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Continued) (Amounts in millions except per share and per square foot amounts)



Contractual Obligations



There have been no material changes in our contractual obligations, other than those which occur in
the normal course of business, as specified in Item 303(a)(5) of Regulation S-K during the quarter
ended May 2, 2009. For additional information regarding our contractual obligations as of January
31, 2009, see Management’s Discussion and Analysis section of the 2008 Form 10-K.


Subsequent to the end of our first quarter, our contractual obligations increased by our required
principal payment on the $400 senior unsecured notes due in June 2014.


CRITICAL ACCOUNTING ESTIMATES



The preparation of our financial statements requires that we make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of
contingent assets and liabilities. We base our estimates on historical experience and other
assumptions that we believe to be reasonable under the circumstances. Actual results may differ
from these estimates. Our critical accounting estimates and methodologies in 2009 are consistent
with those discussed in our 2008 Annual Report on Form 10-K.


RECENT ACCOUNTING PRONOUNCEMENTS



In December 2007, 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 company’s
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 Nordstrom as of the beginning of fiscal year 2009 and did not have a material impact
on our consolidated financial statements.


In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures
About Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133

(“SFAS 161”). SFAS 161 expands the disclosure requirements in SFAS 133 about an entity’s derivative
instruments and hedging activities. The new disclosure requirements for this statement became
effective for Nordstrom as of the beginning of fiscal year 2009. As of May 2, 2009, we did not have
any material derivative instruments or hedging activities that would require additional disclosures
in our consolidated financial statements.


In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Disclosures about Fair
Value of Financial Instruments
(“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1, which
requires disclosure about the fair value of financial instruments in interim financial statements
as well as in annual financial statements, is effective for interim periods ending after June 15,
2009, but early adoption is permitted for interim periods ending after March 15, 2009. This FSP
will not impact our consolidated financial position or results of operations, as its requirements
are disclosure-only in nature. We will provide the required disclosures beginning with our Form
10-Q for the quarter ended August 1, 2009.


In May 2009, the FASB issued Statement of Accounting Standards No. 165, Subsequent Events (“SFAS
165”), which establishes general standards of accounting and disclosure for events that occur after
the balance sheet date but before financial statements are issued. This standard will be effective
for reporting periods ending after June 15, 2009. SFAS 165 will not impact our consolidated
financial position or results of operations, as its requirements are disclosure-only in nature.





Item 3. Quantitative and Qualitative Disclosures About Market Risk



We discussed our interest rate risk and our foreign currency exchange risk in Part II, “Item 7A.
Quantitative and Qualitative Disclosures About Market Risk” in our 2008 Annual Report on Form 10-K.
There have been no material changes to these risks since that time.


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Item 4. Controls and Procedures



As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company performed an
evaluation under the supervision and with the participation of management, including our President
and Chief Financial Officer, of the design and effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities and Exchange Act of
1934 (the “Exchange Act”)). Based upon that evaluation, our President and Chief Financial Officer
concluded that, as of the end of the period covered by this 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’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.


There has been no change in our internal control over financial reporting (as defined in Rules
13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.


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PART II - OTHER INFORMATION






Item 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 2008 Annual
Report on Form 10-K. There have been no material changes in our risk factors since that time.





Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



(c) Repurchases


(Dollar and share amounts in millions, except per share amounts)




















































































































































































































































                                 
                    Total Number of     Maximum Number (or  
    Total Number     Average     Shares (or Units)     Approximate Dollar Value)  
    of Shares     Price Paid     Purchased as Part of     of Shares (or Units) that May  
    (or Units     Per Share     Publicly Announced     Yet Be Purchased Under  
    Purchased)     (or Unit)     Plans or Programs     the Plans or Programs1  
     
February 2009

(February 1, 2009
to
February 28,
2009)
          $             $ 1,126  
     
 
                               
March 2009

(March 1, 2009 to

April 4, 2009)
          $             $ 1,126  
     
 
                               
April 2009

(April 5, 2009 to

May 2, 2009)
          $             $ 1,126  
     
Total
          $                
     





 














1 In August 2007, our Board of Directors authorized a $1,500 share repurchase program and
in November 2007 authorized an additional $1,000 for share repurchases bringing the total
authorization under the program to $2,500. Although the program will expire in August 2009, we
suspended the program in September 2008 in light of market conditions. The actual amount and
timing of future share repurchases, if any, will be subject to market conditions and
applicable Securities and Exchange Commission rules.







Item 6. Exhibits



Exhibits are incorporated herein by reference or are filed with this report as set forth in the
Index to Exhibits on page 28 hereof.


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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.








































         
  NORDSTROM, INC.

(Registrant)

 
 
  /s/ Michael G. Koppel
 
 
  Michael G. Koppel   
  Executive Vice President and Chief
Financial Officer

(Principal Financial Officer) 
 
   
  Date: June 9, 2009  


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NORDSTROM,
INC. AND SUBSIDIARIES

Exhibit Index












































































































































































         
Exhibit   Method of Filing
 
1.1
  Underwriting Agreement dated May 20, 2009, by and among the
Company and Banc of America Securities LLC and J.P. Morgan
Securities, Inc., as representatives of the several underwriters
of the Notes
  Incorporated by reference from the
Registrant’s Form 8-K filed on May 26,
2009, Exhibit 1.1
 
       
4.1
  Form of 6.75% Note due June 2014
  Incorporated by reference from the
Registrant’s Form 8-K filed on May 26,
2009, Exhibit 4.1
 
       
10.1
  Form of Independent Director Indemnification Agreement
  Incorporated by reference from the
Registrant’s Form 8-K filed on March 3,
2009, Exhibit 10.1
 
       
10.2
  2009 Nonqualified Stock Option Grant Agreement and Form of Notice
  Incorporated by reference from the
Registrant’s Form 8-K filed on March 3,
2009, Exhibit 10.2
 
       
10.3
  2009 Performance Share Unit Award Agreement and Form of Notice
  Incorporated by reference from the
Registrant’s Form 8-K filed on March 3,
2009, Exhibit 10.3
 
       
10.4
  Amendment 2009-1 to the Nordstrom Supplemental Executive
Retirement Plan
  Incorporated by reference from the
Registrant’s Form 8-K filed on March 3,
2009, Exhibit 10.4
 
       
10.5
  Amendment 2009-1 to the Nordstrom 401(k) Plan & Profit Sharing
  Incorporated by reference from the
Registrant’s Form 8-K filed on March 3,
2009, Exhibit 10.5
 
       
10.6
  Nordstrom, Inc. Executive Management Bonus Plan
  Filed herewith electronically
 
       
31.1
  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





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EX-10.6



exv10w6





Exhibit 10.6




NORDSTROM, INC.

EXECUTIVE MANAGEMENT BONUS PLAN




Effective February 1, 2009



ARTICLE I



Purpose


The purpose of the Plan is to promote the interests of the Company and its shareholders by
providing incentives to the Company’s leadership employees for positively influencing the Company’s
business results. The mechanism for providing incentives under this Plan is Performance Bonus
Awards. The specific group of employees eligible for these awards are those individuals designated
by the Company’s Board of Directors as being executive officers of the Company for purposes of
Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The
Performance Bonus Awards are designed to create alignment between the Company’s business strategy
and operating performance while preserving for the benefit of the Company the federal income tax
deduction for performance-based compensation under Section 162(m) of the Internal Revenue Code of
1986, as amended.



ARTICLE II



Definitions



     2.1 “Base Salary” means, in relation to a Performance Period, the Participant’s base salary
established for the Performance Period, as reflected in the payroll records of the Company and its
subsidiaries.


     2.2 “Compensation Committee” means the Compensation Committee of the Board of Directors of the
Company. For purposes of administration of the Plan, the Compensation Committee will consist
solely of two or more outside directors. A director is an outside director if he or she:



     (a) is not a current employee of the Company (or related entities);



     (b) is not a former employee of the Company (or related entities) who is receiving
compensation for prior services (other than benefits under a tax-qualified pension plan);



     (c) was not an officer of the Company (or related entities) at any time; and



     (d) is not currently receiving compensation for personal services in any capacity
(e.g., for services as a consultant) other than as a director.


 






 





     2.3 “Cause” means misconduct by the Participant, including without limitation any of the
following, as determined by the Compensation Committee in the exercise of its discretion:



     (a) the Participant’s breach of a duty to the Company in the course of his or her
employment involving fraud, dishonesty, or disloyalty;



     (b) conduct by the Participant that is detrimental, monetarily or otherwise, to the
Company or any of its subsidiaries, or reflects unfavorably on the Company or any of its
subsidiaries or on the Participant;



     (c) the Participant’s failure to comply with or to enforce the Company’s or any of its
subsidiaries’ employment policies;



     (d) the Participant’s repeated insubordination;



     (e) the Participant’s failure to devote his or her full working time and best efforts
to performance of his or her duties to the Company or its subsidiaries; or



     (f) the Participant’s conviction of, or entry into a plea agreement or similar
arrangement with respect to, a felony, other serious criminal offense, or violation of state
or federal securities laws.


     2.4 “Participant” means an individual who, with respect to any fiscal year of the Company, has
been: (i) designated by the Company’s Board of Directors as being an executive officer of the
Company for purposes of Section 16 of the Exchange Act for all or some portion of such fiscal year;
and (ii) designated by the Compensation Committee to participate in the Plan for all or a portion
of such fiscal year.


     2.5 “Performance Bonus Award” means an incentive compensation award under the Plan.


     2.6 “Performance Measure” refers to the performance measures discussed in Section 4.1 of the
Plan.


     2.7 “Performance Milestone” means an objective level of performance with respect to a
Performance Measure, the achievement of which may determine the degree of payout of a Performance
Bonus Award.


     2.8 “Performance Period” means the fiscal year of the Company, or a shorter period within the
fiscal year of the Company that the Compensation Committee may prescribe for a Participant or group
of Participants.


     2.9 “Plan” means this Nordstrom, Inc. Executive Bonus Plan.


     2.10 “Superior Bonus Opportunity” means the percentage of a Participant’s Base Salary, or
predetermined dollar amount, that may be awarded to the Participant upon


2






 







achievement of the requisite level of performance with respect to a Performance Measure specified
for Superior Performance during a Performance Period.


     2.11 “Superior Performance” means the level of performance with respect to a Performance
Measure, achievement of which will result in the Participant achieving the Superior Bonus
Opportunity.


     2.12 “Target Bonus Opportunity” means the percentage of a Participant’s Base Salary, or
predetermined dollar amount, that may be awarded to a Participant upon attainment of the requisite
level of performance with respect to a Performance Measure specified for Target Performance during
a Performance Period.


     2.13 “Target Performance” means the level of performance with respect to a Performance
Measure, achievement of which will result in the Participant achieving the Target Bonus
Opportunity.


     2.14 “Threshold Bonus Opportunity” means the percentage of a Participant’s Base Salary, or
predetermined dollar amount, that may be awarded to a Participant upon achievement of the requisite
level of performance with respect to a Performance Measure specified for Threshold Performance
during a Performance Period.


     2.15 “Threshold Performance” means the level of performance with respect to a Performance
Measure, achievement of which will result in the Participant achieving the Threshold Bonus
Opportunity. For purposes of the Plan, Threshold Performance is the minimum level of performance
which must be achieved by a Participant in order to receive payment of a Performance Bonus Award.


ARTICLE III



Eligibility



     3.1 Eligible Employees. Eligibility for the Plan is limited to individuals meeting
the definition of Participant hereunder. The Compensation Committee may further limit eligibility
for this Plan.


     3.2 Employment Requirement. Except as otherwise provided by the Compensation
Committee, Participants are required to be an employee of the Company on the last day of the
Performance Period in order to remain eligible for a Performance Bonus Award. Notwithstanding
anything to the contrary, a Participant whose employment is terminated for Cause after the last day
of the Performance Period but before payment of a Performance Bonus Award shall forfeit any
Performance Bonus Award that otherwise would have been payable.


3






 





ARTICLE IV



Grant and Evaluation of Performance Bonus Awards



     4.1 Selection of Performance Bonus Opportunities. Within the first 90 days of the
designated Performance Period (or if the Performance Period is less than 12 months, the number of
days that is equal to 25 percent of the Performance Period), the Compensation Committee will select
for each Participant the Threshold Bonus Opportunity, Target Bonus Opportunity, and Superior Bonus
Opportunity.


     4.2 Selection of Performance Milestones and Measures. Concurrent with the selection
of performance bonus opportunities referenced in Section 4.1, the Compensation Committee will
select the Performance Measures and Milestones which will be used in connection with each
Participant’s performance bonus opportunity. Performance Milestones will be objectively measurable
and will be based upon the achievement of a specified percentage or quantitative level in one or
more of the following Performance Measures:



     (a) the Company’s shareholder return as compared to any designated industry or other
comparator group;



     (b) the trading price of the Company’s common stock;



     (c) the results of operations, such as sales, earnings, cash flow, return on assets,
same-store sales, economic profit, or return on investment (including return on equity,
return on capital employed, or return on assets);



     (d) other financial results, such as profit margins, expense reduction or asset
management goals; or



     (e) the internal or external market share of a product or line of products.

The Performance Measures may be based on the performance of the Company generally, in the absolute
or in relation to its peers, or the performance of a particular Participant, department, business
unit, subsidiary, or other segment to which a particular Participant is assigned. The Compensation
Committee may establish different Performance Measures and Milestones for individual Participants
or groups of Participants. For each Participant, each Performance Measure will be weighted to
reflect its relative significance to the Company for the Performance Period.



     4.3 Evaluation of Performance. After the end of each Performance Period, the
Compensation Committee will evaluate the performance of each Participant by comparing each
Participant’s actual performance to the Threshold Performance, Target Performance, and Superior
Performance. The Compensation Committee will certify in writing the degree of achievement of each
Performance Milestone by each Participant. Approved minutes of the


4






 







Compensation Committee meeting in which the certification is made will be treated as adequate
written certification.


     4.4 Calculation of Performance Bonus Award. After the end of each Performance Period,
the Compensation Committee will approve the amount of a Participant’s Performance Bonus Award for
the Performance Period, applying the actual performance certified under Section 4.3 to the
Performance Bonus Awards established under Section 4.2. The Compensation Committee may, in its
absolute discretion, reduce or eliminate (but may not increase) the Performance Bonus Award based
upon factors that the Compensation Committee deems relevant. A Participant has no legal
entitlement or expectation to receive a Performance Bonus Award unless and until the Compensation
Committee has certified the Performance Bonus Award. Except in the case of death or disability, no
Participant whose employment is terminated before the end of a Performance Period will receive a
Performance Bonus Award relating to that Performance Period unless he or she has achieved a level
of performance during the Performance Period that otherwise would have resulted in the payment of a
Performance Bonus Award for such Performance Period. The Compensation Committee has the sole and
exclusive discretion for determining whether and when, and in what amounts, Participants will
remain eligible for the payment of their Performance Bonus Award in the event, for example, of such
employee’s death, or disability. Where the Compensation Committee exercises its discretion to pay
a Performance Bonus Award to a Participant who has terminated employment due to death or
disability, such Performance Bonus Award will be paid at the same time such bonuses are paid to
Participants who remain employed by the Company and, in no event, will such amounts be paid later
than the end of the calendar year in which such amounts first became payable.


     4.5 Absolute Limit on Amount of Award. Notwithstanding any other provision of the
Plan, the maximum Award payable to any Participant for a Performance Period that is a full fiscal
year will be $5,000,000. For Performance Periods of less than 12 months, the maximum Performance
Bonus Award payable for the shorter Performance Period shall be proportionately reduced.


     4.6 Clawback Policy. All Awards pursuant to the Plan are subject to the Clawback
Policy adopted by the Company’s Board of Directors, which provides as follows:

To the extent permitted by law, if the Board of Directors, with the recommendation of the
Compensation Committee, determines that any bonus, equity award, equity equivalent award or other
incentive compensation has been awarded or received by a Section 16 executive officer of the
Company, and that:




(i) such compensation was based on the achievement of certain financial results
that were subsequently the subject of a material restatement of the Company’s
financial statements filed with the Securities and Exchange Commission,



(ii) the Section 16 executive officer engaged in grossly negligent or intentional
misconduct that caused or substantially caused the need for the material
restatement, and


5






 






(iii) the amount or vesting of the bonus, equity award, equity equivalent or other
incentive compensation would have been less had the financial statements been
correct,

then the Board shall recover from the Section 16 executive officer such compensation (in whole or
in part) as it deems appropriate under the circumstances.



ARTICLE V



Form and Timing of Payment



     5.1 Normal Form. The normal form of payment of Awards will be cash, paid as soon as
practicable following the Compensation Committee’s certification of the Awards. All Award payments
are subject to federal, state, and local laws regarding taxes and other deductions in effect on the
date of payment.


     5.2 Election to Receive Company Stock. The Committee has the sole and exclusive
discretion to determine whether and when the Company may either (a) pay, or (b) allow a Participant
to elect to receive, all or a portion of an Award in the form of long-term incentive awards based
on the Common Stock of the Company (“Incentive Grants”). The number of shares of Incentive Grants
to be received by the participant shall be based on the fair market value of the Common Stock as of
the last day of the applicable Performance Period. Incentive Grants (including shares of Common
Stock) will be issued under the 2004 Equity Incentive Plan (“Incentive Plan”).


ARTICLE VI



Administrative Provisions



     6.1 Authority of Compensation Committee. Subject to 6.2, the Compensation Committee
has the right and authority, in its sole and absolute discretion, to:



     (a) adopt, amend, or rescind administrative and interpretive rules, policies, and
procedures relating to the Plan;



     (b) construe and interpret the terms of the Plan;



     (c) make all other determinations necessary or advisable for administering the Plan;



     (d) exercise the powers conferred on the Compensation Committee under the Plan;



     (e) correct any defect or supply any omission or reconcile any inconsistency in the
Plan in the manner and to the extent it deems appropriate to effectuate the purpose of the
Plan; and


6






 






     (f) amend, modify, suspend, or terminate the Plan at any time.


     6.2 Limits on Authority. The Compensation Committee has no discretionary authority to
increase the amount of a Performance Bonus Award or to accelerate the payment of an Award under
this Plan. In addition, the scope of the Compensation Committee’s amendment authority under 6.1(f)
shall be limited to those amendments which can be adopted without shareholder approval under
applicable laws, regulations or rules (such as the then-current rules of the New York Stock
Exchange (“NYSE”), the Securities and Exchange Commission (“SEC”), or as required by Code Section
162(m)); provided, however, that any such amendment that is later ratified by the Company’s
shareholders shall be retroactively effective to the extent allowed by such rules.


     6.3 Compliance with Code Section 409A. Awards under the Plan are intended to comply
with Code Section 409A and all Awards shall be interpreted in a manner that results in compliance
with Section 409A, Department of Treasury regulations, and other interpretive guidance under
Section 409A. Notwithstanding any provision of the Plan or an Award to the contrary, if the
Committee determines that any Award does not comply with Code Section 409A, the Company may adopt
such amendments to the Plan and the affected Award (without consent of the Participant) or adopt
other policies or procedures (including amendments, policies and procedures with retroactive
effect), or take any other actions, that the Committee determines are necessary and appropriate to
(a) exempt the Plan and the Award from application of Code Section 409A and/or preserve the
intended tax treatment of amounts payable with respect to the Award, or (b) comply with the
requirements of Code Section 409A.


ARTICLE VII



Limitation of Rights



     7.1 Not Employment Contract. Nothing in the Plan, including an employee’s eligibility
to participate in the Plan, will confer on such employee the right to continued employment with the
Company or any subsidiary thereof or any limitation on the right of the Company or any subsidiary
to terminate the employment of any employee. The loss of any existing or potential value of
Performance Bonus Awards will not constitute an element of damages, or otherwise be recoverable, in
any cause of action related to the termination of a Participant’s employment, regardless of the
reason for such termination.


     7.2 Assignment and Alienation. No Participant shall have the right to alienate,
assign, sell, transfer, pledge, or encumber his or her actual or anticipated right to receive a
Performance Bonus Award under the Plan.


     7.3 Unfunded Plan. The Plan constitutes an unfunded, unsecured commitment of the
Company. No Participant shall have any lien on any assets of the Company or any subsidiary thereof
by reason of any actual or anticipated right to receive a Performance Bonus Award.


7






 





     7.4 Indemnification. No member of the Compensation Committee shall be liable for any
act, omission, or determination taken or made in good faith with respect to the Plan or any
Performance Bonus Awards paid under the Plan. The Company will indemnify, defend, and reimburse
members of the Compensation Committee in relation to any claim, loss, damage, or expenses
(including attorney fees and costs) arising from the Compensation Committee’s good faith
performance of duties under the Plan to the full extent permitted by law and under any directors’
and officers’ liability or similar insurance policy or indemnification agreement. The Company
reserves the right to select counsel to defend any litigation covered by this Section 7.4.


     7.5 Future of the Plan. The adoption, modification, or amendment of the Plan does not
imply or impose an obligation on the Company to continue or adopt the same plan, or any
modification of the Plan, or any other incentive compensation plan, for any future period.


     7.6 Governing Law. The laws of the state of Washington shall govern the Plan.


     7.7 Successors. The Plan shall be binding on any successors of the Company.


     7.8 Effective Date. The Plan has been adopted by the Compensation Committee as of
February 25, 2009. The effective date of the Plan is February 1, 2009, provided that it is
approved by the holders of a majority of the shares of Company common stock present, or
represented, and entitled to vote at the next annual meeting of shareholders of the Company held
subsequent to February 1, 2009. If the Plan is not approved as described in this Section 7.8, the
Plan shall immediately terminate and all actions taken under the Plan shall be null and void.



8










EX-31.1
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EX-31.1



exv31w1






Exhibit 31.1



Certification required by Section 302(a) of the Sarbanes-Oxley Act of 2002


I, Blake W. Nordstrom, certify that:


1. I have reviewed this Quarterly Report on Form 10-Q of Nordstrom, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;


3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;


4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:




a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;



b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;



c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and



d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the equivalent functions):




a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and



b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.





























         
     
 /s/ Blake W. Nordstrom
 
 
  Blake W. Nordstrom   
  President of Nordstrom, Inc.


Date: June 9, 2009
 


 








EX-31.2
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v52663exv31w2.htm
EX-31.2



exv31w2
















         


Exhibit 31.2



Certification required by Section 302(a) of the Sarbanes-Oxley Act of 2002


I, Michael G. Koppel, certify that:


1. I have reviewed this Quarterly Report on Form 10-Q of Nordstrom, Inc.;


2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;


3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;


4. The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:





a) Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;



b) Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;



c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and



d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of registrant’s board of directors (or persons performing the equivalent functions):


a) All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and


b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.





























         
     
  /s/ Michael G. Koppel
 
 
  Michael G. Koppel   
  Executive Vice President and
Chief

Financial Officer of Nordstrom,
Inc.


Date: June 9, 2009
 


 








EX-32.1
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EX-32.1



exv32w1
















         


Exhibit 32.1



NORDSTROM, INC.



1617 SIXTH AVENUE



SEATTLE, WASHINGTON 98101



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Nordstrom, Inc (the “Company”) on Form 10-Q for the
period ended May 2, 2009, as filed with the Securities and Exchange Commission on the date hereof
(the “Report”), we, Blake W. Nordstrom, President (Principal Executive Officer), and Michael G.
Koppel, Executive Vice President and Chief Financial Officer (Principal Financial Officer), of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:





















    The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
    The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
























































         
 
 
 
  June 9, 2009
 
 
  /s/ Blake W. Nordstrom  
  Blake W. Nordstrom   
  President   
 
  /s/ Michael G. Koppel
 
 
  Michael G. Koppel   
  Executive Vice President and

Chief Financial Officer 
 
 

A signed original of this written statement required by Section 906 has been provided to Nordstrom,
Inc. and will be retained by Nordstrom, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.




 







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