Nordstrom Reports Fourth Quarter Earnings Per Share Increase of 29 Percent
SEATTLE, Feb. 26 /PRNewswire-FirstCall/ -- Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $232.3 million, or $0.89 per diluted share, for the fourth quarter ended February 3, 2007. For the same period last year, net earnings and earnings per diluted share were $190.4 million and $0.69, respectively.
(Logo: http://www.newscom.com/cgi-bin/prnh/20001011/NORDLOGO )
Total sales for the fourth quarter of 2006 increased 14.6 percent, to $2.6 billion, compared to sales of $2.3 billion in the same period last year. Same-store sales increased 8.3 percent. Similar to many other retailers, Nordstrom follows the retail 4-5-4 reporting calendar, which included an extra week in the fourth quarter of fiscal 2006 (the 53rd week). In the 53rd week, the company had sales of $117.7 million. Sales for the 53rd week represented 5.1 percentage points of the total sales percent increase versus the prior year. The 53rd week is not included in same-store sales calculations.
Fourth Quarter Highlights
Earnings per diluted share in the fourth quarter increased 29 percent compared to the same quarter last year, reflecting strong sales momentum primarily due to the company's improved execution of its merchandising strategy. This growth in earnings per diluted share occurred on top of last year's 38 percent increase in the fourth quarter. The company continues to focus on providing customers with compelling merchandise and service in its full-line, Rack and online stores.
-- Same-store sales increased 8.3 percent for the quarter, exceeding the
company's one to three percent same-store sales plan. Strong regular
price sales across all major merchandise categories throughout the
quarter and a successful holiday season drove the sales increase.
-- Gross profit, as a percent of sales, increased 81 basis points over the
fourth quarter fiscal 2005 result. Merchandise margin improved versus
the prior year, driven mainly by lower markdowns and higher sell-
through of inventory, especially in women's apparel.
-- Selling, general and administrative expenses as a percent to sales
decreased 20 basis points versus the prior year. Overall, expenses
during the fourth quarter trended in line with the improved performance
in sales and gross profit compared to last year. In the fourth
quarter, performance-based incentive compensation costs driven by goals
for total year results and share price appreciation accelerated above
plan, as fiscal 2006 sales, gross profit, and earnings before tax
results exceeded expectations.
-- As a result of the adoption of SFAS No. 123(R), "Share-Based Payment,"
the company recorded $8.4 million in share-based compensation expense
for the quarter, which resulted in a $0.02 impact on diluted earnings
per share. Of the total expense, $3.6 million was recorded in buying
and occupancy and $4.8 million was recorded in selling, general and
administrative expenses.
-- Sales of $117.7 million in the 53rd week period resulted in earnings of
$0.02 per diluted share for the quarter.
Full Year Results
For the fiscal year ended February 3, 2007, net earnings increased 23 percent to $678.0 million compared to net earnings of $551.3 million last year. Earnings per diluted share for the same periods were $2.55 and $1.98, respectively.
Total sales for the year increased 10.8 percent to $8.6 billion compared to prior year sales of $7.7 billion, with sales for the 53rd week representing 1.5 percentage points of the total increase versus last year. As noted previously, same-store sales calculations do not include the 53rd week. For the year, same-store sales increased 7.5 percent.
Expansion Update
Nordstrom opened a new 35,000-square-foot Nordstrom Rack store at Grand Plaza in San Marcos, Calif., on November 16, 2006. In 2007, Nordstrom plans to open three new full-line stores:
-- On September 7, 2007, a 144,000-square-foot store at the Natick Mall in
Natick, Mass.;
-- On September 28, 2007, a 165,000-square-foot store at the Twelve Oaks
Mall in Novi, Mich.;
-- On October 19, 2007, a 140,000-square foot-store in the Cherry Creek
Mall in Denver, Colo.
In the fall of 2007, Nordstrom plans to open a new Rack store at Southcenter Square in Tukwila, Wash.
Share Repurchase
Nordstrom repurchased approximately 0.5 million shares of its common stock during the fourth quarter for $26.0 million. This reduction in weighted average shares outstanding had no material effect on diluted earnings per share for the quarter.
2007 outlook
The company is providing the following 2007 forecast:
Full-Year 2007
Full-Year 2007 Adjusted for comparability
Same-store Sales 3% to 4% 3% to 4%
Gross Profit (%) 30 to 40 basis point 30 to 40 basis point
increase increase
Selling, General 5 to 15 basis point 35 to 45 basis point
and Admin. increase decrease
Expense (%)
Interest Expense Flat $20 to $25 million
decrease
Other Income $25 to $35 million Flat
including increase
Finance Charges
Effective Tax Rate 38.5% 38.5%
Earnings per $2.78 to $2.84 $2.86 to $2.92
Diluted Share
Diluted Shares 261 million 261 million
Outstanding
Prior Year Earnings $2.55 $2.55
per Diluted Share
Notes on comparability of fiscal year 2007 to 2006:
-- The 53rd week in fiscal 2006 creates a timing shift in the 4-5-4
calendar for fiscal 2007. The months of fiscal 2007 begin and end one
week later than in fiscal 2006. Our same-store sales reporting basis
compares weeks 1 through 52 for both years, excluding the 53rd week of
2006. This timing shift is anticipated to impact the cadence of
monthly same-store sales results throughout the year, as many normal
sales trends, events and holiday periods are aligned differently than
last year.
-- The company expects to complete an $800 to $900 million securitization
transaction backed by the company's co-branded Visa receivables in the
first quarter of fiscal 2007. With that securitization transaction, we
begin a new accounting treatment for the co-branded Visa receivables
and debt secured by those receivables. The co-branded Visa receivables
will be recorded on the balance sheet initially at fair value with no
allowance for credit losses. Normal write-offs for uncollectible Visa
receivables, estimated at $19 million along with other costs net at
$4 million, will be recorded in Other Income and Expenses over the
eight month period following the transaction. This period is equal to
the average repayment life of the acquired receivables. This activity
will impact annual earnings per diluted share by $0.05.
-- Also as a result of the securitization transaction, income and expenses
from our co-branded Visa receivables that were previously reported net
in Other Income and Expenses (under securitization accounting guidance)
will be reclassified in our earnings statement. Bad debt and write-off
expense is expected to increase approximately $25 to $35 million and
impact the SG&A rate by 30 to 40 basis points. Interest expense,
partially offset by interest income, will increase approximately $20 to
$25 million. Other income including finance charges will increase $45
to $55 million. The offsetting combination of these expenses and
income is not anticipated to impact annual earnings per diluted share.
-- Pre-opening costs for new stores in fiscal 2007 and 2008 will
incrementally increase general and administrative costs by
approximately $12 million in fiscal 2007. These expenses are projected
to impact the SG&A rate by approximately 15 basis points and earnings
per diluted share by $0.03.
For the first quarter of 2007, the company expects mid-single digit same-store sales growth. Due to the one week timing shift in 2007 caused by the 53rd week of 2006, same-store sales are expected to vary monthly versus the planned quarterly rate as follows: in line in February, above in March, and below in April. Earnings per diluted share for the first quarter are expected in the range of $0.51 to $0.54, including a $0.02 impact from the first quarter portion of incremental expenses associated with the securitization transaction described in the notes above.
Conference Call Information:
Company management will be hosting a conference call and webcast to discuss fourth quarter and annual results at 4:30 p.m. (ET) today. Access to the conference call is open to the press and general public in a listen-only mode. To participate, please dial 212-547-0138 ten minutes prior to the call (passcode: NORD). A telephone replay will be available for 48 hours beginning approximately one hour after the conclusion of the call by dialing 866-448- 4802. Interested parties may also access the call over the Internet by visiting the Investor Relations section of the company's corporate Web site at http://about.nordstrom.com/aboutus/investor/webcasts.asp. An archived version of the webcast will be available at this location for 30 days.
Nordstrom, Inc. is one of the nation's leading fashion specialty retailers, with 155 US stores located in 27 states. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 98 full-line stores, 50 Nordstrom Racks, four Faconnable boutiques in the United States, one free-standing shoe store, and two clearance stores. Nordstrom also operates 36 Faconnable boutiques in Europe. In addition, Nordstrom serves customers through its online presence at http://www.nordstrom.com and through its catalogs. Nordstrom, Inc. 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 involves risks and uncertainties, including anticipated results for the fiscal year ending February 2, 2008, and its first quarter, store openings and trends in company operations. 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 economic and competitive market forces, the impact of terrorist activity or the impact of a war on the company, its customers and the retail industry, the company's ability to predict fashion trends, consumer apparel buying patterns, trends in personal bankruptcies and bad debt write-offs, changes in interest rates, employee relations, the company's ability to continue its expansion plans, the timely completion of construction associated with newly planned stores, changes in government or regulatory requirements, the company's ability to control costs, weather conditions and hazards of nature. Our SEC reports, including our Form 10-K for the fiscal year ended January 28, 2006, and our Form 10-K for the fiscal year ended February 3, 2007, to be filed with the SEC on or about March 23, 2007, 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.
Investor Contact: Media Contact:
RJ Jones, 206-303-3007 Deniz Anders, 206-373-3038
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - 4th Quarter
(unaudited; amounts in thousands, except per share data and percentages)
Quarter % of sales(1) Quarter % of sales(1)
ended (except as ended (except as
2/3/07 indicated) 1/28/06 indicated)
Net sales $2,630,904 100.0% $2,295,818 100.0%
Cost of sales and
related buying &
occupancy costs (1,624,190) (61.7%) (1,435,891) (62.5%)
Gross profit 1,006,714 38.3% 859,927 37.5%
Selling, general
and administrative
expenses (684,881) (26.0%) (602,280) (26.2%)
Operating income 321,833 12.2% 257,647 11.2%
Interest expense,
net (7,805) (0.3%) (11,509) (0.5%)
Other income including
finance charges, net 65,017 2.5% 61,302 2.7%
Earnings before
income tax expense 379,045 14.4% 307,440 13.4%
Income tax expense (146,704) (38.7%)(2) (117,010) (38.1%)(2)
Net earnings $ 232,341 8.8% $190,430 8.3%
Earnings per share
Basic $0.90 $0.71
Diluted $0.89 $0.69
ADDITIONAL DATA
Weighted average shares outstanding
Basic 257,259 269,783
Diluted 262,230 275,662
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income tax expense.
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - Year to Date
(unaudited; amounts in thousands, except per share data and percentages)
Year % of sales(1) Year % of sales(1)
ended (except as ended (except as
2/3/07 indicated) 1/28/06 indicated)
Net sales $ 8,560,698 100.0% $7,722,860 100.0%
Cost of sales
and related
buying &
occupancy costs (5,353,949) (62.5%) (4,888,023) (63.3%)
Gross profit 3,206,749 37.5% 2,834,837 36.7%
Selling, general
and administrative
expenses (2,296,863) (26.8%) (2,100,666) (27.2%)
Operating income 909,886 10.6% 734,171 9.5%
Interest expense,
net (42,758) (0.5%) (45,300) (0.6%)
Other income
including finance
charges, net 238,525 2.8% 196,354 2.5%
Earnings before
income tax expense 1,105,653 12.9% 885,225 11.5%
Income tax expense (427,654) (38.7%)(2) (333,886) (37.7%)(2)
Net earnings $ 677,999 7.9% $551,339 7.1%
Earnings per share
Basic $2.60 $2.03
Diluted $2.55 $1.98
ADDITIONAL DATA
Weighted average shares outstanding
Basic 260,689 271,958
Diluted 265,712 277,776
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income tax expense.
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in thousands)
2/3/07 1/28/06
Assets
Current assets:
Cash and cash equivalents $402,559 $462,656
Short-term investments - 54,000
Accounts receivable, net 684,376 639,558
Investment in asset backed securities 428,175 561,136
Merchandise inventories 997,289 955,978
Current deferred tax assets, net 169,320 145,470
Prepaid expenses and other 60,474 55,359
Total current assets 2,742,193 2,874,157
Land, buildings and equipment, net 1,757,215 1,773,871
Goodwill 51,714 51,714
Acquired tradename 84,000 84,000
Other assets 186,456 137,607
Total assets $ 4,821,578 $4,921,349
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $576,796 $540,019
Accrued salaries, wages and related benefits 339,965 285,982
Other current liabilities 433,487 409,076
Income taxes payable 76,095 81,617
Current portion of long-term debt 6,800 306,618
Total current liabilities 1,433,143 1,623,312
Long-term debt, net 623,652 627,776
Deferred property incentives, net 356,062 364,382
Other liabilities 240,200 213,198
Shareholders' equity:
Common stock, no par value: 1,000,000 shares
authorized; 257,313 and 269,549 shares
issued and outstanding 826,421 685,934
Unearned stock compensation - (327)
Retained earnings 1,350,680 1,404,366
Accumulated other comprehensive (loss)
earnings (8,580) 2,708
Total shareholders' equity 2,168,521 2,092,681
Total liabilities and shareholders' equity $4,821,578 $4,921,349
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in thousands)
Year Year
ended ended
Operating Activities 2/3/07 1/28/06
Net earnings $677,999 $551,339
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization of buildings
and equipment 284,520 276,328
Amortization of deferred property
incentives and other, net (36,293) (33,350)
Stock-based compensation expense 37,362 13,285
Deferred income taxes, net (58,274) (11,238)
Tax benefit of stock-based payments 43,552 41,092
Excess tax benefit from stock-based payments (38,293) -
Provision for bad debt expense 17,064 20,918
Change in operating assets and liabilities:
Accounts receivable (61,301) (15,140)
Investment in asset backed securities 127,984 (135,790)
Merchandise inventories (38,649) (20,804)
Prepaid expenses (4,723) (1,035)
Other assets (7,661) (3,473)
Accounts payable 84,291 31,721
Accrued salaries, wages and related
benefits 48,719 (11,284)
Other current liabilities 23,533 38,755
Income taxes payable (5,522) (33,877)
Deferred property incentives 30,723 49,480
Other liabilities 17,334 19,305
Net cash provided by operating activities 1,142,365 776,232
Investing Activities
Capital expenditures (264,437) (271,659)
Proceeds from sale of assets 224 107
Purchases of short-term investments (109,550) (542,925)
Sales of short-term investments 163,550 530,750
Other, net (8,067) (8,366)
Net cash used in investing activities (218,280) (292,093)
Financing Activities
Principal payments on long-term debt (307,559) (101,047)
(Decrease) increase in cash book overdrafts (50,853) 4,946
Proceeds from exercise of stock options 50,900 73,023
Proceeds from employee stock purchase plan 16,300 15,600
Excess tax benefit from stock-based payments 38,293 -
Cash dividends paid (110,158) (87,196)
Repurchase of common stock (621,527) (287,080)
Other, net 422 (352)
Net cash used in financing activities (984,182) (382,106)
Net (decrease) increase in cash and cash
equivalents (60,097) 102,033
Cash and cash equivalents at beginning of year 462,656 360,623
Cash and cash equivalents at end of year $ 402,559 $ 462,656
SOURCE Nordstrom, Inc.
02/26/2007
CONTACT: investors, RJ Jones, +1-206-303-3007, or media, Deniz Anders,
+1-206-373-3038, both of Nordstrom, Inc.
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