Nordstrom Reports First Quarter 2010 Earnings

SEATTLE, May 13, 2010 (BUSINESS WIRE) --Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $116 million, or $0.52 per diluted share, for the first quarter ended May 1, 2010. This represented an increase of 43.8 percent compared with net earnings of $81 million, or $0.37 per diluted share, for the same quarter last year.

First quarter same-store sales increased 12.0 percent compared with the same period in fiscal 2009. Net sales in the first quarter were $1.99 billion, an increase of 16.7 percent compared with net sales of $1.71 billion during the same period in fiscal 2009.

FIRST QUARTER SUMMARY

Nordstrom's first quarter performance continued the sales momentum experienced throughout the latter half of 2009. The company's ongoing progress in serving its customers with a compelling blend of fashion, newness, and quality, led to same-store sales increases in each month of the quarter.

• Multi-channel same-store sales increased 13.7 percent compared with the same period in fiscal 2009. Full-line same-store sales in the first quarter increased 11.7 percent and Direct sales increased 38.7 percent compared to the same period in 2009. Top-performing merchandise categories for multi-channel included Jewelry, Dresses and Women's Shoes. The Midwest, Northeast, and South regions were the top-performing geographic areas for full-line stores relative to the first quarter of 2009. During the first quarter, the company opened two Nordstrom full-line stores.
• Nordstrom Rack continued to experience positive performance with a same-store sales increase of 1.9 percent in the first quarter compared with the same period in fiscal 2009. During the first quarter, the company opened six Nordstrom Rack stores.
• Gross profit, as a percentage of net sales, increased approximately 245 basis points compared with last year's first quarter. The improvement was mainly driven by merchandise margin, as a percentage of net sales, but also from reduced buying and occupancy costs as a percentage of net sales. The company ended the quarter with sales per square foot up 13.0 percent and inventory per square foot up 1.9 percent compared with the first quarter of 2009.
• Retail selling, general and administrative expenses, as a percentage of net sales, increased approximately 60 basis points primarily due to the timing of performance-related expenses, and to a lesser extent, due to planned expenses related to new stores and technology. This increase in performance-related expense in the quarter is reflective of the improvement in the company's sales and earnings performance over its plan, and better visibility into operating trends relative to the first quarter of 2009.
• Credit selling, general, and administrative expenses were flat compared with last year's first quarter. Bad debt expense decreased $4 million compared with the first quarter of 2009. The decrease in bad debt expense reflects recent improvements in our credit trends. Delinquencies as a percentage of ending accounts receivable during the first quarter were 4.2 percent, which is a sequential improvement of 110 basis points compared with the fourth quarter of 2009 and reflects delinquency rates comparable to those experienced during the first half of 2009.
• Earnings before interest and taxes increased to $219 million, or 10.5 percent of total revenues, from $146 million, or 8.1 percent of total revenues, in last year's first quarter.

EXPANSION UPDATE

On May 7, 2010, Nordstrom relocated a full-line store in Los Cerritos Center in Cerritos, California which replaced a store built in 1981. On May 11, 2010, Nordstrom opened a Nordstrom Rack store at One Union Square South in Manhattan, New York.

FISCAL YEAR 2010 OUTLOOK

Based on first quarter performance, Nordstrom is revising its outlook for the 2010 year. For the 2010 fiscal year, Nordstrom expects earnings per diluted share in the range of $2.50 to $2.65, increased from the previous range of $2.35 to $2.55.

CONFERENCE CALL INFORMATION

The company's senior management will host a conference call to discuss first quarter results at 4:45 p.m. Eastern Daylight Time today. To listen, please dial 517-308-9140 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 203-369-3965 (passcode: 6673) until the close of business on May 20, 2010. Interested parties may also listen to the live call over the Internet by visiting the Investor Relations section of the company's corporate Web site at http://investor.nordstrom.com. An archived webcast will be available in the Webcasts section through August 13, 2010.

ABOUT NORDSTROM

Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 193 stores located in 28 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 114 full-line stores, 76 Nordstrom Racks, two Jeffrey boutiques and one clearance store. Nordstrom also serves customers through its online presence at www.nordstrom.com and through its catalogs. Nordstrom, Inc's common stock is publicly traded on the NYSE under the symbol JWN.

Certain statements in this news release contain "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the fiscal year ending January 29, 2011, anticipated annual same-store sales rate, anticipated store openings and trends in company operations. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual future results and trends may differ materially from historical results or current expectations depending upon factors including, but not limited to the impact of deteriorating economic and market conditions and the resultant impact on consumer spending patterns, the company's ability to respond to the business environment and fashion trends, the company's ability to safeguard its brand and reputation, effective inventory management, efficient and proper allocation of the company's capital resources, successful execution of the company's 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, the company's compliance with applicable banking and related laws and regulations impacting the company's ability to extend credit to its customers, trends in personal bankruptcies and bad debt write-offs, availability of consumer credit, impact of the current regulatory environment and financial system reforms, changes in interest rates, disruptions in the company's supply chain, the company's ability to maintain its relationship with vendors who may be experiencing economic difficulties, the geographic locations of the company's stores, the company's ability to maintain its relationships with its employees and to effectively train and develop its future leaders, the company's 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 the company's information technology strategy, successful execution of the company's multi-channel strategy, risks related to fluctuations in world currencies, public health concerns and the resulting impact on consumer spending patterns, supply chain, and employee health, weather conditions and hazards of nature that affect consumer traffic and consumers' purchasing patterns, the effectiveness of planned advertising, marketing, and promotional campaigns, and the company's ability to control costs. Our SEC reports, including our Form 10-K for the fiscal year ended January 30, 2010, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

NORDSTROM, INC.

ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings, and other forums which may be considered non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. The following disclosure provides additional information regarding our Adjusted Debt to EBITDAR as of May 1, 2010:

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 current goal is to manage debt levels to 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 1, 2010 our Adjusted Debt to EBITDAR was 2.5 compared with 2.7 as of May 2, 2009.

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 not exact, but rather our best estimate of the total company debt we would incur if we had purchased the property and issued debt associated with our operating leases;
• EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, including leases, or the cash requirements necessary to service interest or principal payments on our debt; and
• Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a comparative measure.

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 5.8 and 6.9 for the first quarter of 2010 and 2009. The following is a comparison of debt to net earnings and Adjusted Debt to EBITDAR:

NORDSTROM, INC.

FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)

(unaudited; amounts in millions)

We use various financial measures in our conference calls, investor meetings, and other forums which may be considered non-GAAP financial measures within the meaning of Regulation G of the Securities and Exchange Commission. The following disclosure provides additional information regarding our free cash flow for the quarter ended May 1, 2010 and May 2, 2009:

Free cash flow is one of our key liquidity measures and in conjunction with GAAP measures, provides us with a meaningful analysis of our cash levels. Free cash flow is not a measure of liquidity under GAAP and should not be considered a substitute for operating cash flows as determined in accordance with GAAP. In addition, free cash flow does have limitations:

• Free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs; and
• Other companies in our industry may calculate free cash flow differently than we do, limiting its usefulness as a comparative measure.

To compensate for these limitations, we analyze free cash flow in conjunction with other GAAP financial and performance measures impacting liquidity, including operating cash flows. The closest GAAP measure is net cash provided by operating activities, which was $204 and $205 for the quarters ended May 1, 2010 and May 2, 2009. The following is a reconciliation of our net cash provided by operating activities and free cash flow:

SOURCE: Nordstrom, Inc.

Nordstrom, Inc.
INVESTOR:
Rob Campbell, 206-303-3290
or
MEDIA:
Colin Johnson, 206-373-3036