Nordstrom Reports Total Sales Growth of 6.6% and Comparable Sales Increase of 0.9%
Third Quarter 2015 Earnings Included
The Company's third quarter performance was below Company expectations,
reflecting softer sales trends that were generally consistent across
channels and merchandise categories.
The Company is executing its customer strategy through multiple growth
initiatives to enhance the customer experience and reach more customers.
During the third quarter, the Company opened three new full-line stores,
including its first international flagship store in
FINANCIAL IMPACT OF CREDIT CARD TRANSACTION
On
For fiscal 2015, the Company estimates a reduction in earnings before
interest and taxes of approximately
THIRD QUARTER SUMMARY
-
Third quarter net earnings were
$81 million and earnings before interest and taxes were$155 million , or 4.8 percent of net sales, compared with net earnings of$142 million and earnings before interest and taxes of$262 million , or 8.6 percent of net sales, during the same period in fiscal 2014.-
This included a reduction in earnings before interest and taxes of
approximately
$46 million , related to the credit card transaction. -
In addition, the impact of the
Trunk Club acquisition and the ongoing entry into Canada represented an incremental reduction to earnings before interest and taxes of$20 million relative to last year.
-
This included a reduction in earnings before interest and taxes of
approximately
-
Total Company net sales of$3.2 billion for the third quarter increased 6.6 percent compared with net sales of$3.0 billion during the same period in fiscal 2014.Total Company comparable sales for the third quarter increased 0.9 percent. -
Nordstrom comparable sales, which consist of full-line stores and
Nordstrom.com, increased 0.3 percent. The top-performing merchandise
category was Cosmetics. In addition, coats, younger customer-focused
departments and dresses continued to reflect strength in Women's
Apparel.
-
Full-line net sales of
$1.6 billion decreased 1.9 percent and comparable sales decreased 2.2 percent compared with the same period last year. The Northwest andSouthern California were the top-performing geographic regions. - Nordstrom.com net sales increased 11 percent, reflecting continued expansion of merchandise selection.
-
Full-line net sales of
-
Net sales in the off-price business increased 12 percent compared with
the same period last year.
-
Nordstrom Rack net sales of$0.9 billion increased 8.4 percent while comparable sales decreased 2.2 percent, compared with the same period in fiscal 2014. - Nordstromrack.com/HauteLook net sales increased 39 percent, continuing to outperform expectations.
-
-
Gross profit of
$1.1 billion , or 33.9 percent of net sales, decreased 163 basis points compared with the same period in fiscal 2014, primarily due to higher markdowns in addition to the planned impact of higher occupancy costs related to store growth and the increased mix ofNordstrom Rack . - Ending inventory increase of 8.0 percent was in-line with the increase in net sales of 6.6 percent.
-
Selling, general and administrative expenses of
$1.0 billion , or 30.8 percent of net sales, increased 68 basis points compared with the same period in fiscal 2014. The increase was in-line with expectations, reflecting growth initiatives related toTrunk Club and Canada in addition to higher fulfillment costs associated with online growth. - The Nordstrom Rewards loyalty program continues to contribute to overall results, with members shopping more frequently and spending more on average than non-members. The Company opened approximately 260,000 new accounts in the third quarter. With 4.6 million active members, sales from members increased 8 percent in the third quarter and represented 38 percent of sales.
-
On
October 1, 2015 , Nordstrom's board of directors authorized an additional$1.0 billion share repurchase program. During the third quarter, the Company repurchased 3.5 million shares of its common stock for$250 million . A total of$1,486 million remains available under its existing share repurchase board authorizations. The actual number, price, manner and timing of future share repurchases, if any, will be subject to market and economic conditions and applicableSecurities and Exchange Commission ("Commission") rules. -
Return on invested capital (ROIC) for the 12 months ended October 31,
2015 was 11.4 percent compared with 13.1 percent in the prior 12-month
period. This decrease reflected ongoing store expansion and increased
technology investments in addition to the acquisition of
Trunk Club . A reconciliation of this non-GAAP financial measure to the closest GAAP measure is included below.
EXPANSION UPDATE
To date in fiscal 2015, the Company opened five full-line stores, relocated one full-line store and opened 27 Nordstrom Rack stores. The Company opened the following stores in the third quarter of 2015:
Location | Store Name |
Square
Footage (000's) |
Timing | |||
Nordstrom full-line - U.S. | ||||||
Minneapolis, Minnesota | Ridgedale Center | 140 | October 2 | |||
Torrance, California1 | Del Amo Fashion Center | 149 | October 9 | |||
Wauwatosa, Wisconsin | Mayfair | 150 | October 23 | |||
Nordstrom full-line - Canada | ||||||
Vancouver, British Columbia | Pacific Centre | 231 | September 18 | |||
Nordstrom Rack | ||||||
Albany, New York | Colonie Center | 35 | September 3 | |||
Anchorage, Alaska | The Mall at Sears | 35 | September 3 | |||
Buffalo, New York | Boulevard Consumer Square | 35 | September 3 | |||
Clearwater, Florida | Countryside Mall | 39 | September 3 | |||
Mount Pleasant, South Carolina | Bowman Place | 34 | September 3 | |||
Baton Rouge, Louisiana | The Mall of Louisiana | 30 | October 1 | |||
Long Beach, California | Marina Pacifica Mall | 24 | October 1 | |||
Newark, Delaware | Christiana Fashion Center | 32 | October 1 | |||
Rockaway, New Jersey | Rockaway Commons | 39 | October 1 | |||
Thousand Oaks, California | Janss Marketplace | 39 | October 1 | |||
Cerritos, California | Cerritos Best Plaza | 34 | October 22 | |||
Eatontown, New Jersey | Crossroads at Eatontown | 35 | October 22 | |||
Emeryville, California | East Bay Bridge Center | 38 | October 22 | |||
Fort Collins, Colorado | Foothills Mall | 34 | October 22 | |||
Syracuse, New York | Destiny USA | 30 | October 22 | |||
Wayne, New Jersey | Wayne Town Center | 37 | October 22 |
1 Nordstrom relocated its full-line store at the
Number of stores | October 31, 2015 | November 1, 2014 | ||
Nordstrom full-line - U.S. | 118 | 118 | ||
Nordstrom full-line - Canada | 3 | 1 | ||
Nordstrom Rack | 194 | 167 | ||
Other1 | 8 | 7 | ||
Total | 323 | 293 | ||
1 Other includes our Trunk Club clubhouses, Jeffrey boutiques and our Last Chance store. | ||||
Gross square footage | 28,610,000 | 27,272,000 | ||
FISCAL YEAR 2015 OUTLOOK
The Company updated its annual earnings per diluted share expectations, incorporating third quarter results. Nordstrom's expectations for fiscal 2015 are as follows:
Prior Outlook | Current Outlook | |||
Net sales increase (percent) | 8.5 to 9.5 | 7.5 to 8.0 | ||
Comparable sales increase (percent) | 3.5 to 4.5 | 2.5 to 3.0 | ||
Gross profit % (basis points) | 5 decrease to 5 increase | 50 to 60 decrease | ||
Selling, general and administrative expenses % (basis points) | 65 to 75 increase | 70 to 75 increase | ||
Earnings per diluted share (excluding the impact of the credit transaction and other, and impact of any future share repurchases)1 | $3.70 to $3.80 | $3.40 to $3.50 | ||
Impact of credit transaction and other1 | $51 million EBIT increase | $38 million EBIT decrease | ||
Earnings per diluted share (excluding the impact of any future share repurchases) | $3.85 to $3.95 | $3.30 to $3.40 |
1 The impact of the credit transaction and other primarily represents revenue-sharing related to the program agreement, transaction costs, non-cash accounting adjustments and other loss.
CONFERENCE CALL INFORMATION
The Company's senior management will host a conference call to discuss
third quarter 2015 results and fiscal 2015 outlook at
ABOUT NORDSTROM
Certain statements in this news release contain or may suggest
"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 30, 2016, anticipated annual total and
comparable sales rates, anticipated new store openings in existing, new
and international markets, anticipated Return on
NORDSTROM, INC. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS |
||||||||||||||||
(unaudited; amounts in millions, except per share amounts) | ||||||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||
October 31, 2015 | November 1, 2014 | October 31, 2015 | November 1, 2014 | |||||||||||||
Net sales | $ | 3,239 | $ | 3,040 | $ | 9,953 | $ | 9,172 | ||||||||
Credit card revenues, net | 89 | 100 | 291 | 291 | ||||||||||||
Total revenues | 3,328 | 3,140 | 10,244 | 9,463 | ||||||||||||
Cost of sales and related buying and occupancy costs | (2,142 | ) | (1,961 | ) | (6,468 | ) | (5,912 | ) | ||||||||
Selling, general and administrative expenses | (999 | ) | (917 | ) | (3,018 | ) | (2,693 | ) | ||||||||
Credit transaction and other, net | (32 | ) | — | 19 | — | |||||||||||
Earnings before interest and income taxes | 155 | 262 | 777 | 858 | ||||||||||||
Interest expense, net | (30 | ) | (34 | ) | (94 | ) | (104 | ) | ||||||||
Earnings before income taxes | 125 | 228 | 683 | 754 | ||||||||||||
Income tax expense | (44 | ) | (86 | ) | (263 | ) | (289 | ) | ||||||||
Net earnings | $ | 81 | $ | 142 | $ | 420 | $ | 465 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.43 | $ | 0.74 | $ | 2.22 | $ | 2.45 | ||||||||
Diluted | $ | 0.42 | $ | 0.73 | $ | 2.17 | $ | 2.40 | ||||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 187.2 | 190.7 | 189.1 | 190.0 | ||||||||||||
Diluted | 191.3 | 194.7 | 193.2 | 193.4 | ||||||||||||
NORDSTROM, INC. | ||||||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||||||
(unaudited; amounts in millions) | ||||||||||||
|
||||||||||||
October 31, 2015 | January 31, 2015 | November 1, 2014 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 821 | $ | 827 | $ | 433 | ||||||
Accounts receivable, net | 215 | 2,306 | 2,253 | |||||||||
Merchandise inventories | 2,402 | 1,733 | 2,228 | |||||||||
Current deferred tax assets, net | 247 | 256 | 253 | |||||||||
Prepaid expenses and other | 202 | 102 | 170 | |||||||||
Total current assets | 3,887 | 5,224 | 5,337 | |||||||||
Land, property and equipment (net of accumulated depreciation of $5,020, $4,698 and $4,587) | 3,742 | 3,340 | 3,223 | |||||||||
Goodwill | 447 | 435 | 436 | |||||||||
Other assets | 510 | 246 | 273 | |||||||||
Total assets | $ | 8,586 | $ | 9,245 | $ | 9,269 | ||||||
Liabilities and Shareholders' Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 1,688 | $ | 1,328 | $ | 1,673 | ||||||
Accrued salaries, wages and related benefits | 417 | 416 | 377 | |||||||||
Other current liabilities | 1,075 | 1,048 | 950 | |||||||||
Current portion of long-term debt | 9 | 8 | 8 | |||||||||
Total current liabilities | 3,189 | 2,800 | 3,008 | |||||||||
Long-term debt, net | 2,800 | 3,123 | 3,119 | |||||||||
Deferred property incentives, net | 568 | 510 | 503 | |||||||||
Other liabilities | 621 | 372 | 365 | |||||||||
Commitments and contingencies | ||||||||||||
Shareholders' equity: | ||||||||||||
Common stock, no par value: 1,000 shares authorized; 185.4, 190.1 and 190.1 shares issued and outstanding | 2,519 | 2,338 | 2,283 | |||||||||
(Accumulated deficit) Retained earnings | (1,047 | ) | 166 | 29 | ||||||||
Accumulated other comprehensive loss | (64 | ) | (64 | ) | (38 | ) | ||||||
Total shareholders' equity | 1,408 | 2,440 | 2,274 | |||||||||
Total liabilities and shareholders' equity | $ | 8,586 | $ | 9,245 | $ | 9,269 | ||||||
NORDSTROM, INC. | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(unaudited; amounts in millions) | ||||||||
|
||||||||
Nine Months Ended | ||||||||
October 31, 2015 | November 1, 2014 | |||||||
Operating Activities | ||||||||
Net earnings | $ | 420 | $ | 465 | ||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
Depreciation and amortization expenses | 424 | 376 | ||||||
Amortization of deferred property incentives and other, net | (61 | ) | (56 | ) | ||||
Deferred income taxes, net | (78 | ) | (39 | ) | ||||
Stock-based compensation expense | 57 | 48 | ||||||
Tax benefit from stock-based compensation | 14 | 14 | ||||||
Excess tax benefit from stock-based compensation | (14 | ) | (15 | ) | ||||
Bad debt expense | 26 | 28 | ||||||
Credit transaction and other, net | (46 | ) | — | |||||
Change in operating assets and liabilities: | ||||||||
Accounts receivable | (73 | ) | (94 | ) | ||||
Proceeds on sale of accounts receivable originated at Nordstrom | 1,297 | — | ||||||
Merchandise inventories | (607 | ) | (574 | ) | ||||
Prepaid expenses and other assets | (36 | ) | (60 | ) | ||||
Accounts payable | 326 | 314 | ||||||
Accrued salaries, wages and related benefits | (2 | ) | (13 | ) | ||||
Other current liabilities | (34 | ) | 38 | |||||
Deferred property incentives | 128 | 77 | ||||||
Other liabilities | 4 | 7 | ||||||
Net cash provided by operating activities | 1,745 | 516 | ||||||
Investing Activities | ||||||||
Capital expenditures | (857 | ) | (616 | ) | ||||
Change in credit card receivables originated at third parties | 33 | (10 | ) | |||||
Proceeds from sale of accounts receivable originated at third parties | 890 | — | ||||||
Other, net | 3 | (12 | ) | |||||
Net cash provided by (used in) investing activities | 69 | (638 | ) | |||||
Financing Activities | ||||||||
Proceeds from long-term borrowings, net of discounts | 13 | 26 | ||||||
Principal payments on long-term borrowings | (6 | ) | (5 | ) | ||||
Defeasance of long-term debt | (339 | ) | — | |||||
Increase (decrease) in cash book overdrafts | 7 | (58 | ) | |||||
Cash dividends paid | (1,116 | ) | (189 | ) | ||||
Payments for repurchase of common stock | (517 | ) | (537 | ) | ||||
Proceeds from issuances under stock compensation plans | 90 | 117 | ||||||
Excess tax benefit from stock-based compensation | 14 | 15 | ||||||
Other, net | 34 | (8 | ) | |||||
Net cash used in financing activities | (1,820 | ) | (639 | ) | ||||
Net decrease in cash and cash equivalents | (6 | ) | (761 | ) | ||||
Cash and cash equivalents at beginning of period | 827 | 1,194 | ||||||
Cash and cash equivalents at end of period | $ | 821 | $ | 433 | ||||
STATEMENTS OF
EARNINGS BY BUSINESS
(unaudited; dollar amounts in
millions)
Retail Business
Our Retail Business includes our Nordstrom branded full-line stores and
online store,
Quarter Ended | ||||||||||||||
October 31, 2015 | November 1, 2014 | |||||||||||||
Amount | % of net sales1 | Amount | % of net sales1 | |||||||||||
Net sales | $ | 3,239 | 100.0 | % | $ | 3,040 | 100.0 | % | ||||||
Cost of sales and related buying and occupancy costs | (2,140 | ) | (66.1 | %) | (1,960 | ) | (64.5 | %) | ||||||
Gross profit | 1,099 | 33.9 | % | 1,080 | 35.5 | % | ||||||||
Selling, general and administrative expenses | (951 | ) | (29.3 | %) | (875 | ) | (28.8 | %) | ||||||
Earnings before interest and income taxes | 148 | 4.6 | % | 205 | 6.8 | % | ||||||||
Interest expense, net | (27 | ) | (0.8 | %) | (29 | ) | (1.0 | %) | ||||||
Earnings before income taxes | $ | 121 | 3.7 | % | $ | 176 | 5.8 | % | ||||||
Nine Months Ended | ||||||||||||||
October 31, 2015 | November 1, 2014 | |||||||||||||
Amount | % of net sales1 | Amount | % of net sales1 | |||||||||||
Net sales | $ | 9,953 | 100.0 | % | $ | 9,172 | 100.0 | % | ||||||
Cost of sales and related buying and occupancy costs | (6,463 | ) | (64.9 | %) | (5,908 | ) | (64.4 | %) | ||||||
Gross profit | 3,490 | 35.1 | % | 3,264 | 35.6 | % | ||||||||
Selling, general and administrative expenses | (2,871 | ) | (28.8 | %) | (2,557 | ) | (27.9 | %) | ||||||
Other loss | (10 | ) | (0.1 | %) | — | — | ||||||||
Earnings before interest and income taxes | 609 | 6.1 | % | 707 | 7.7 | % | ||||||||
Interest expense, net | (82 | ) | (0.8 | %) | (90 | ) | (1.0 | %) | ||||||
Earnings before income taxes | $ | 527 | 5.3 | % | $ | 617 | 6.7 | % |
1 Subtotals and totals may not foot due to rounding.
The following table summarizes net sales within our Retail Business:
Quarter Ended | Nine Months Ended | |||||||||||||||
October 31, 2015 | November 1, 2014 | October 31, 2015 | November 1, 2014 | |||||||||||||
Nordstrom full-line stores - U.S. | $ | 1,634 | $ | 1,666 | $ | 5,431 | $ | 5,423 | ||||||||
Nordstrom.com | 414 | 371 | 1,518 | 1,291 | ||||||||||||
Nordstrom | 2,048 | 2,037 | 6,949 | 6,714 | ||||||||||||
Nordstrom Rack | 885 | 816 | 2,573 | 2,316 | ||||||||||||
Nordstromrack.com/HauteLook | 129 | 93 | 363 | 249 | ||||||||||||
Other retail1 | 107 | 45 | 250 | 60 | ||||||||||||
Total Retail segment | 3,169 | 2,991 | 10,135 | 9,339 | ||||||||||||
Corporate/Other | 70 | 49 | (182 | ) | (167 | ) | ||||||||||
Total net sales | $ | 3,239 | $ | 3,040 | $ | 9,953 | $ | 9,172 |
1 Other retail includes
STATEMENTS OF
EARNINGS BY BUSINESS
(unaudited; dollar amounts in
millions)
Credit
On
Prior to the close of the credit card receivable transaction, our Credit business earned finance charges, interchange fees, late fees and other revenue through operation of the Nordstrom private label and Nordstrom Visa credit cards. Following the close of the credit card receivable transaction, and under the new program agreement with TD, we receive a substantial portion of revenue generated by the credit card portfolio owned by TD. We recorded certain assets that amortize and deferred revenues that we recognize when earned during the program agreement.
In the second quarter of 2015, we reclassified substantially all of our
U.S. Visa and private label credit card receivables from "held for
investment" to "held for sale" and, as such, recorded these receivables
at the lower of cost (par) or fair value. Due to this classification
change, the allowance on these receivables of
The following tables summarize the results of our Credit business for
the quarter and nine months ended
Quarter Ended | Nine Months Ended | |||||||||||||||||||
October 31, 2015 | November 1, 2014 | October 31, 2015 | November 1, 2014 | |||||||||||||||||
Credit card revenues, net | $ | 89 | $ | 100 | $ | 291 | $ | 291 | ||||||||||||
Credit expenses | (50 | ) | (43 | ) | (152 | ) | (140 | ) | ||||||||||||
Credit transaction, net | (32 | ) | — | 29 | — | |||||||||||||||
Earnings before interest and income taxes | 7 | 57 | 168 | 151 | ||||||||||||||||
Interest expense | (3 | ) | (5 | ) | (12 | ) | (14 | ) | ||||||||||||
Earnings before income taxes | $ | 4 | $ | 52 | $ | 156 | $ | 137 | ||||||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||
October 31, 2015 | November 1, 2014 | October 31, 2015 | November 1, 2014 | |||||||||||||||||
Allowance at beginning of period | $ | 1 | $ | 80 | $ | 75 | $ | 80 | ||||||||||||
Bad debt expense | 6 | 6 | 26 | 28 | ||||||||||||||||
Write-offs | (11 | ) | (14 | ) | (49 | ) | (52 | ) | ||||||||||||
Recoveries | 5 | 3 | 13 | 19 | ||||||||||||||||
Credit transaction - reversal of allowance for credit losses | — | — | (64 | ) | — | |||||||||||||||
Allowance at end of period | $ | 1 | $ | 75 | $ | 1 | $ | 75 | ||||||||||||
Annualized net write-offs as a percentage of average credit card receivables1 | N/A | 2.0 | % | N/A | 2.1 | % | ||||||||||||||
October 31, 2015 | November 1, 2014 | |||||||||||||||||||
30 days or more delinquent as a percentage of ending credit card receivables1 | N/A | 2.0 | % |
1 As a significant majority of the Company's receivables were
sold on
RETURN ON INVESTED
CAPITAL (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollar
amounts in millions)
We believe ROIC is a useful financial measure for investors in
evaluating the efficiency and effectiveness of our use of capital and
believe ROIC is an important component of shareholders' return over the
long term. In addition, we incorporate ROIC in our executive incentive
compensation measures. For the 12 fiscal months ended October 31, 2015,
our ROIC decreased to 11.4% compared with 13.1% for the 12 fiscal months
ended November 1, 2014, primarily due to ongoing store expansion and
increased technology investments in addition to the acquisition of
ROIC is not a measure of financial performance under generally accepted accounting principles ("GAAP") and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to ROIC is return on assets. The following is a reconciliation of the components of ROIC and return on assets:
12 Fiscal Months Ended | ||||||||
October 31, 2015 | November 1, 2014 | |||||||
Net earnings | $ | 675 | $ | 732 | ||||
Add: income tax expense | 438 | 458 | ||||||
Add: interest expense | 129 | 155 | ||||||
Earnings before interest and income tax expense | 1,242 | 1,345 | ||||||
Add: rent expense | 165 | 133 | ||||||
Less: estimated depreciation on capitalized operating leases1 | (88 | ) | (70 | ) | ||||
Net operating profit | 1,319 | 1,408 | ||||||
Less: estimated income tax expense2 | (519 | ) | (542 | ) | ||||
Net operating profit after tax | $ | 800 | $ | 866 | ||||
Average total assets3 | $ | 9,362 | $ | 8,733 | ||||
Less: average non-interest-bearing current liabilities4 | (2,965 | ) | (2,658 | ) | ||||
Less: average deferred property incentives3 | (536 | ) | (498 | ) | ||||
Add: average estimated asset base of capitalized operating leases5 | 1,171 | 1,035 | ||||||
Average invested capital | $ | 7,032 | $ | 6,612 | ||||
Return on assets | 7.2 | % | 8.4 | % | ||||
ROIC | 11.4 | % | 13.1 | % |
1 Capitalized operating leases is our best estimate of the
asset base we would record for our leases that are classified as
operating if they had met the criteria for a capital lease, or we had
purchased the property. Asset base is calculated as described in
footnote 5 below.
2 Based upon our effective tax rate
multiplied by the net operating profit for the 12 fiscal months ended
October 31, 2015 and November 1, 2014.
3 Based
upon the trailing 12-month average.
4 Based upon the
trailing 12-month average for accounts payable, accrued salaries, wages
and related benefits, and other current liabilities.
5 Based
upon the trailing 12-month average of the monthly asset base. The asset
base for each month is calculated as the trailing 12 months of rent
expense multiplied by eight. The multiple of eight times rent expense is
a commonly used method of estimating the asset base we would record for
our capitalized operating leases described in footnote 1.
ADJUSTED DEBT TO
EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollar
amounts in millions)
Adjusted Debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") is one of our key financial metrics, and we believe that our debt levels are best analyzed using this measure. Our goal is to manage debt levels to maintain an investment-grade credit rating and operate with an efficient capital structure. In evaluating our debt levels, this measure provides a reflection of our credit worthiness that could impact our credit rating and borrowing costs. We also have a debt covenant that requires an adjusted debt to EBITDAR leverage ratio of less than four times. As of October 31, 2015 and November 1, 2014, our Adjusted Debt to EBITDAR was 2.1.
Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted Debt to EBITDAR is debt to net earnings. The following is a reconciliation of the components of Adjusted Debt to EBITDAR and debt to net earnings:
20151 |
|
20141 |
|
|||||||
Debt | $ | 2,809 | $ | 3,127 | ||||||
Add: estimated capitalized operating lease liability2 | 1,320 | 1,068 | ||||||||
Less: fair value hedge adjustment included in long-term debt | (26 | ) | (39 | ) | ||||||
Adjusted Debt | $ | 4,103 | $ | 4,156 | ||||||
Net earnings | $ | 675 | $ | 732 | ||||||
Add: income tax expense | 438 | 458 | ||||||||
Add: interest expense, net | 129 | 155 | ||||||||
Earnings before interest and income taxes | 1,242 | 1,345 | ||||||||
Add: depreciation and amortization expenses | 557 | 498 | ||||||||
Add: rent expense | 165 | 133 | ||||||||
Add: non-cash acquisition-related charges | 13 | 8 | ||||||||
EBITDAR | $ | 1,977 | $ | 1,984 | ||||||
Debt to Net Earnings | 4.2 | 4.3 | ||||||||
Adjusted Debt to EBITDAR | 2.1 | 2.1 |
1 The components of Adjusted Debt are as of October 31, 2015
and November 1, 2014, while the components of EBITDAR are for the 12
months ended October 31, 2015 and November 1, 2014.
2
Based upon the estimated lease liability as of the end of the
period, calculated as the trailing 12 months of rent expense multiplied
by eight. The multiple of eight times rent expense is a commonly used
method of estimating the debt we would record for our leases that are
classified as operating if they had met the criteria for a capital lease
or we had purchased the property.
FREE CASH FLOW
(NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in
millions)
Free Cash Flow is one of our key liquidity measures, and when used in
conjunction with GAAP measures, provides investors with a meaningful
analysis of our ability to generate cash from our business. For the nine
months ended
Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:
Nine Months Ended | ||||||||
October 31, 2015 | November 1, 2014 | |||||||
Net cash provided by operating activities | $ | 1,745 | $ | 516 | ||||
Less: capital expenditures | (857 | ) | (616 | ) | ||||
Less: cash dividends paid | (1,116 | ) | (189 | ) | ||||
Add (Less): change in credit card receivables originated at third parties | 33 | (10 | ) | |||||
Add (Less): change in cash book overdrafts | 7 | (58 | ) | |||||
Free Cash Flow | $ | (188 | ) | $ | (357 | ) | ||
Net cash provided by (used in) investing activities | $ | 69 | $ | (638 | ) | |||
Net cash used in financing activities | (1,820 | ) | (639 | ) |
View source version on businesswire.com: http://www.businesswire.com/news/home/20151112006357/en/
Source:
Nordstrom, Inc.
INVESTOR CONTACT: Trina Schurman,
206-303-6503
MEDIA CONTACT: Dan Evans, 206-303-3036