Nordstrom Reports Second Quarter Earnings Per Share of 71 Cents
SEATTLE, Aug 16, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Nordstrom, Inc. (NYSE: JWN)
today reported net earnings of $180.4 million, or $0.71 per diluted share, for
the second quarter ended August 4, 2007. For the same period last year, net
earnings and earnings per diluted share were $178.8 million and $0.67,
respectively. Earnings per diluted share in the second quarter increased
6.0 percent compared to the same quarter last year.
(Logo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20001011/NORDLOGO)
Total sales in the second quarter were $2.39 billion, an increase of 5.2 percent compared to sales of $2.27 billion during the same period in fiscal 2006. Second quarter same-store sales increased 5.9 percent.
The 53rd week in fiscal 2006 created a timing shift in the 4-5-4 calendar for fiscal 2007, which has 52 weeks. The second quarter in fiscal 2007 began and ended one week later than fiscal 2006. With the first week in May having higher sales than the first week in August, this timing shift negatively impacted sales results for the second quarter of 2007.
SECOND QUARTER HIGHLIGHTS
Sales growth and gross profit rate expansion resulted from continued improvement in the company's execution of its merchandising strategy. More than offsetting our enhanced sales and gross profit during the quarter were on-plan increases in operating expenses on a percent to sales basis versus the prior year.
-- Same-store sales increased 5.9 percent for the quarter, exceeding the
company's low-single digit same-store sales plan. In July, the
company's annual Anniversary sale event that brings in new fall season
merchandise before the season begins posted a same-store sales increase
of 7.9 percent in our full-line stores, the seventh consecutive year of
positive same-store sales for the event, and the highest result over
that time span. Half-yearly clearance events for women's, men's and
kids' merchandise in June delivered on-plan low-single-digit same-store
sales results. Merchandise categories with performance above the
full-line store average for the quarter were designer apparel,
accessories, and men's apparel. Same-store sales results in our online
store exceeded our mid-teen planned growth rate.
-- Gross profit, as a percent of sales, increased 36 basis points compared
to last year's second quarter. Improved sales and merchandise margin
in women's, kids' and designer apparel contributed to gross profit rate
expansion.
-- Selling, general and administrative expenses as a percent to sales
increased 110 basis points versus the same period of the prior year.
Fixed expenses during the second quarter generally performed as
intended. Planned cross-company projects supporting our multi-channel
integration effort resulted in higher expenses on a percent to sales
basis than our more typical historical rates. In our credit business,
provisions for bad debt increased approximately $22 million versus last
year. Approximately $14 million of the bad debt reserve is
non-comparable due to the new accounting treatment for co-branded Visa
receivables. The remaining $8 million of the incremental provision
resulted from growth in both the Visa and proprietary card receivables
ahead of plan, and from changes to assumed repayment rates versus last
year.
-- In other income, the company recorded a gain on sale of approximately
$5.0 million for the disposal of an asset, which had a positive impact
on earnings per diluted share of $0.01.
EXPANSION UPDATE
In the third quarter of 2007, Nordstrom plans to open three new full-line stores:
-- On September 7, 2007, a 144,000-square-foot store at the Natick
Collection 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 138,000-square foot-store in the Cherry Creek
Shopping Center in Denver, Colo.
SHARE REPURCHASE
Nordstrom repurchased approximately 11.4 million shares of its common stock during the second quarter for $590 million. This reduction in weighted-average shares outstanding had a $0.01 positive impact on earnings per diluted share for the quarter.
2007 OUTLOOK
For the fiscal year ending February 2, 2008, the company anticipates earnings per diluted share in the range of $2.91 to $2.97, increased from the previous range of $2.81 to $2.90. Our outlook includes consideration for the effects of the timing shift in the 2007 4-5-4 calendar, the company's securitization transaction backed by the co-branded Visa and private label receivables, share repurchases, and other non-comparable items. Outlined in the table below are the anticipated relative effects on earnings per diluted share from non-comparable operating items expected for the remaining quarters of the 2007 fiscal year.
Updated full-year 2007 operating plan versus the prior year:
Fiscal 2007
Same-store Sales 5% to 6% increase
Gross Profit (%) 35 to 45 basis point increase
Selling, General and Admin. Expense (%) 20 to 30 basis point decrease
Interest Expense, net $10 to $15 million increase
Other Income including Finance Charges $20 to $30 million increase
Effective Tax Rate 38.5%
Earnings per Diluted Share $2.91 to $2.97
Diluted Shares Outstanding 255 million
Prior Year Earnings per Diluted Share $2.55
Actual and planned performance for the quarters of fiscal 2007:
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter 2007
(Actual) (Actual) (Plan)(2) (Plan) (Plan)(2)
Same-store sales: 9.5% 5.9% 4% to 5% 2% to 3% 5% to 6%
Earnings per diluted
share:
(a) Expected results
from comparable
operations: $0.59 $0.79 $0.59 to $1.04 to $3.01 to
$0.62 $1.07 $3.07
(b) Impact of
including non-
comparable events:
1. Securitization
transaction(1) ($0.01) ($0.03) ($0.02) ($0.01) ($0.06)
2. 53rd week
timing shift &
calendar $0.02 ($0.03) $0.03 ($0.02) -
3. 2006 Visa /
MasterCard
settlement - ($0.02) - - ($0.02)
4. 2006 53rd
week results - - - ($0.02) ($0.02)
Reported results
(combine a + b
above) $0.60 $0.71 $0.61 to $0.99 to $2.91 to
$0.64 $1.02 $2.97
(1) Notes on the $850 million securitization transaction:
-- With the completion of the securitization transaction, the company
began a new accounting treatment for the co-branded Visa receivables
and securitized debt, which is secured by both the co-branded Visa and
private label receivables. In the first quarter, pre-existing
co-branded Visa receivables totaling $943 million were recorded on the
balance sheet initially at fair value with no allowance for credit
losses. Normal write-offs for uncollectible Visa receivables and other
costs net, estimated at $20 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 expense activity is expected to reduce annual
earnings per diluted share by $0.05 and will be non-recurring in future
periods beyond the 2007 fiscal year.
-- Income and expenses from our co-branded Visa receivables that were
previously reported net in Other Income and Expenses (under
securitization accounting guidance) are reclassified in our earnings
statement. In fiscal 2007, 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, with an accelerated portion in the second
quarter. Interest expense, partially offset by interest income, will
increase approximately $20 to $25 million. Other income including
finance charges will increase $35 to $45 million. The net combination
of these expenses and income is anticipated to reduce annual earnings
per diluted share by $0.01.
(2) Notes on the pending sale of Faconnable:
-- Upon the sale of the Faconnable business, which is expected to close in
the third quarter of 2007, the company anticipates realizing a gain on
the sale. The anticipated impact to reported earnings per diluted
share is $0.08 to $0.10, and is not included in our operating outlook
for the third quarter and total year. The gain on the sale of
Faconnable will be treated as a non-operating event.
THIRD QUARTER 2007 OUTLOOK
The timing shift from the fiscal 2006 53rd week is expected to have a positive impact on third quarter 2007 sales results.
When compared to the planned same-store sales rate of four to five percent for the 2007 third quarter, the monthly same-store sales rates in August and September are expected be above the anticipated quarterly rate. In October, the planned same-store sales rate is expected to be below the anticipated quarterly rate.
For the third quarter of 2007, earnings per diluted share are expected in the range of $0.61 to $0.64, including a $0.01 positive impact from the non-comparable items described in the performance table earlier and excluding the anticipated gain on the sale of Faconnable.
CONFERENCE CALL INFORMATION:
Company management will be hosting a conference call and webcast to discuss first quarter results at 4:15 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 866-498-1469. 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 157 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, two Jeffrey boutiques, one free-standing shoe store, and two clearance stores. Nordstrom also operates 37 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 our third and fourth quarters, anticipated monthly, quarterly and annual same-store sales rates, anticipated store openings, trends in company operations, and the anticipated closing of the sale of the Faconnable business and its impact on our earnings. Actual future results and trends may differ materially from historical results or current expectations depending upon factors including, but not limited to, our ability to respond to the business environment and fashion trends, effective inventory management, the impact of economic and competitive market forces, successful execution of our store growth strategy including the timely completion of construction associated with newly planned stores, 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 multi-channel strategy, our ability to safeguard our brand and reputation, efficient and proper allocation of our capital resources, successful execution of our technology strategy, the impact of terrorist activity or war on our customers and the retail industry, trends in personal bankruptcies and bad debt write-offs, changes in interest rates, our ability to maintain our relationships with our employees, our ability to control costs, weather conditions and hazards of nature and the timing and amounts of share repurchases by the company. Our SEC reports, including our Form 10-K for the fiscal year ended February 3, 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 Michael Boyd, 206-373-3038
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - 2nd 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
8/4/07 indicated) 7/29/06 indicated)
Net sales $2,389,498 100.0% $2,270,468 100.0%
Cost of sales and
related buying &
occupancy costs (1,513,920) (63.4%) (1,446,633) (63.7%)
Gross profit 875,578 36.6% 823,835 36.3%
Selling, general
and administrative
expenses (636,134) (26.6%) (579,552) (25.5%)
Operating income 239,444 10.0% 244,283 10.8%
Interest expense,
net (16,811) (0.7%) (12,783) (0.6%)
Other income
including finance
charges, net 70,316 2.9% 60,851 2.7%
Earnings before
income tax expense 292,949 12.3% 292,351 12.9%
Income tax expense (112,519) (38.4%)(2) (113,597) (38.9%)(2)
Net earnings $180,430 7.6% $178,754 7.9%
Earnings per share
Basic $0.72 $0.68
Diluted $0.71 $0.67
ADDITIONAL DATA
Weighted average shares outstanding
Basic 251,022 261,512
Diluted 255,354 266,226
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income taxes.
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF EARNINGS - Year to Date
(unaudited; amounts in thousands, except per share data and percentages)
Six Months % of sales(1) Quarter % of sales(1)
ended (except as ended (except as
8/4/07 indicated) 7/29/06 indicated)
Net sales $4,343,370 100.0% $4,057,691 100.0%
Cost of sales and
related buying
& occupancy costs (2,728,672) (62.8%) (2,569,636) (63.3%)
Gross profit 1,614,698 37.2% 1,488,055 36.7%
Selling, general
and administrative
expenses (1,170,148) (26.9%) (1,073,772) (26.5%)
Operating income 444,550 10.2% 414,283 10.2%
Interest expense,
net (24,023) (0.6%) (23,534) (0.6%)
Other income
including finance
charges, net 126,167 2.9% 114,689 2.8%
Earnings before
income tax expense 546,694 12.6% 505,438 12.5%
Income tax expense (209,467) (38.3%)(2) (195,453) (38.7%)(2)
Net earnings $337,227 7.8% $309,985 7.6%
Earnings per share
Basic $1.33 $1.17
Diluted $1.30 $1.15
ADDITIONAL DATA
Weighted average shares outstanding
Basic 254,485 264,501
Diluted 259,059 269,556
(1) Subtotals and totals may not foot due to rounding.
(2) Percent of earnings before income taxes.
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in thousands)
8/4/07 2/3/07 7/29/06
Assets
Current assets:
Cash and cash equivalents $179,033 $402,518 $280,150
Accounts receivable, net 1,802,485 662,447 702,536
Investment in asset
backed securities - 428,175 354,348
Merchandise inventories 1,053,342 962,245 985,667
Current deferred tax
assets 178,483 169,320 165,298
Prepaid expenses and other 65,795 53,459 60,445
Restricted cash - - 150,000
Assets held for sale 228,702 219,856 212,176
Total current assets 3,507,840 2,898,020 2,910,620
Land, buildings and
equipment, net 1,822,499 1,736,105 1,728,034
Goodwill 52,926 24,177 24,177
Other assets 182,287 163,276 129,846
Total assets $5,565,552 $4,821,578 $4,792,677
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $777,162 $554,981 $710,391
Accrued salaries, wages
and related benefits 217,379 333,309 213,723
Other current liabilities 438,427 424,215 369,024
Income taxes payable 79,706 76,089 120,068
Current portion of
long-term debt 8,201 6,795 307,419
Liabilities related to
assets held for sale 40,047 42,232 35,546
Total current liabilities 1,560,922 1,437,621 1,756,171
Long-term debt, net 1,492,055 623,652 624,861
Deferred property
incentives, net 356,476 355,579 355,597
Other liabilities 250,132 236,205 211,688
Shareholders' equity:
Common stock, no par
value: 1,000,000 shares
authorized; 247,549,
257,313 and 256,500
shares issued and
outstanding 892,046 826,421 751,281
Retained earnings 1,025,354 1,350,680 1,095,181
Accumulated other
comprehensive loss (11,433) (8,580) (2,102)
Total shareholders' equity 1,905,967 2,168,521 1,844,360
Total liabilities and
shareholders' equity $5,565,552 $4,821,578 $4,792,677
NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in thousands)
Six Months Six Months
ended ended
Operating Activities 8/4/07 7/29/06
Net earnings $337,227 $309,985
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization of buildings
and equipment 137,197 138,632
Amortization of deferred property
incentives and other, net (21,465) (16,280)
Stock-based compensation expense 14,163 14,083
Deferred income taxes, net (27,245) (31,632)
Tax benefit of stock-based payments 18,156 18,092
Excess tax benefit from stock-based payments (17,287) (15,109)
Provision for bad debt expense 41,688 6,448
Change in operating assets and liabilities:
Accounts receivable (1,177,781) (78,971)
Investment in asset backed securities 420,387 200,803
Merchandise inventories (115,076) (79,747)
Prepaid expenses (8,910) (11,809)
Other assets (24,984) (1,232)
Accounts payable 135,478 192,158
Accrued salaries, wages and related
benefits (113,604) (64,777)
Other current liabilities 7,609 (29,356)
Income taxes payable 15,753 38,457
Property incentives 26,378 8,866
Other liabilities (588) 974
Net cash (used in) provided by operating
activities (352,904) 599,585
Investing Activities
Capital expenditures (221,958) (115,720)
Proceeds from sale of assets 11,959 128
Purchases of short-term investments - (109,550)
Sales of short-term investments - 163,550
Increase in restricted cash - (150,000)
Other, net 4,202 (2,820)
Net cash used in investing activities (205,797) (214,412)
Financing Activities
Proceeds from LT borrowings 1,000,000 -
Principal payments on long-term debt (152,295) (2,312)
Increase in cash book overdrafts 102,357 5,604
Proceeds from exercise of stock options 21,640 24,700
Proceeds from employee stock purchase plan 8,919 8,370
Excess tax benefit from stock-based payments 17,287 15,109
Cash dividends paid (69,592) (56,249)
Repurchase of common stock (589,999) (562,921)
Other, net (3,101) 97
Net cash provided by (used in) financing
activities 335,216 (567,602)
Net decrease in cash and cash equivalents (223,485) (182,429)
Cash and cash equivalents at beginning of
period 402,518 462,579
Cash and cash equivalents at end of period $ 179,033 $ 280,150
SOURCE Nordstrom, Inc.
Investors, RJ Jones, +1-206-303-3007, or Media, Michael Boyd, +1-206-373-3038, both of Nordstrom, Inc.
http://www.nordstrom.com