UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) February 21, 2013
NORDSTROM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| WASHINGTON | 001-15059 | 91-0515058 | ||
| (STATE OR OTHER JURISDICTION OF INCORPORATION) |
(COMMISSION FILE NUMBER) |
(I.R.S. EMPLOYER IDENTIFICATION NO.) | ||
| 1617 SIXTH AVENUE, SEATTLE, WASHINGTON | 98101 | |||
| (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | (ZIP CODE) | |||
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE (206) 628-2111
INAPPLICABLE
(FORMER NAME OR FORMER ADDRESS IF CHANGED SINCE LAST REPORT)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 Results of Operations and Financial Condition
On February 21, 2013, Nordstrom, Inc. issued an earnings release announcing its results of operations for the quarter and year ended February 2, 2013, its financial position as of February 2, 2013, and its cash flows for the year ended February 2, 2013. A copy of this earnings release is attached as Exhibit 99.1.
ITEM 7.01 Regulation FD Disclosure
On February 21, 2013, Nordstrom, Inc. issued an earnings release announcing its results of operations for the quarter and year ended February 2, 2013, its financial position as of February 2, 2013, and its cash flows for the year ended February 2, 2013. A copy of this earnings release is attached as Exhibit 99.1.
ITEM 9.01 Financial Statements and Exhibits
| 99.1 | Nordstrom earnings release dated February 21, 2013 relating to the Company’s results of operations for the quarter and year ended February 2, 2013, its financial position as of February 2, 2013, and its cash flows for the year ended February 2, 2013. | |
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 hereunto duly authorized.
| NORDSTROM, INC. | ||
| By: | /s/ Robert B. Sari | |
| Robert B. Sari | ||
| Executive Vice President, | ||
| General Counsel and Corporate Secretary | ||
Dated: February 21, 2013
EXHIBIT INDEX
| EXHIBIT NUMBER |
DESCRIPTION | |
| 99.1 | Nordstrom earnings release dated February 21, 2013 relating to the Company’s results of operations for the quarter and year ended February 2, 2013, its financial position as of February 2, 2013, and its cash flows for the year ended February 2, 2013. | |
Exhibit 99.1
| FOR RELEASE: |
INVESTOR CONTACT: | Rob Campbell | ||
| February 21, 2013 at 1:05 p.m. PST |
Nordstrom, Inc. | |||
| (206) 233-6550 | ||||
| MEDIA CONTACT: | Colin Johnson | |||
| Nordstrom, Inc. | ||||
| (206) 303-3036 | ||||
Nordstrom Reports Fourth Quarter and Fiscal Year 2012 Earnings;
Achieves Record Sales and Earnings for the Year
SEATTLE, Wash. (February 21, 2013) – Nordstrom, Inc. (NYSE: JWN) today reported a 26 percent increase in earnings per diluted share of $1.40 for the fourth quarter ended February 2, 2013 compared to $1.11 per diluted share for the same quarter last year. Net sales in the fourth quarter were $3.6 billion, an increase of 13.5 percent compared with net sales of $3.2 billion during the same period in fiscal 2011. Net earnings of $284 million increased 20 percent compared with net earnings of $236 million for the same quarter last year.
In fiscal year 2012, the Company achieved record sales and earnings while making significant investments to improve the customer experience in store and online. For the third consecutive year, the Company achieved double-digit growth in annual net sales and earnings per diluted share and same-store sales increases in the high single-digit range.
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 2012 (the 53rd week). In the 53rd week, the Company had net sales of approximately $162 million, representing an approximate $0.04 increase to earnings per diluted share for both the quarter and fiscal year. The 53rd week is not included in same-store sales calculations.
FOURTH QUARTER SUMMARY
Nordstrom’s fourth quarter performance was consistent with the strong trends the Company experienced throughout the year.
| — | Total Company same-store sales increased 6.3 percent compared with the same period in fiscal 2011. Nordstrom same-store sales, which consist of the full-line and Direct businesses, increased 6.1 percent. Top-performing merchandise categories included Men’s Apparel, Cosmetics, Kids’ Apparel, and Women’s Apparel. |
| — | Full-line same-store sales increased 2.2 percent compared with the same period in fiscal 2011. The South and Midwest regions were the top-performing geographic areas relative to the fourth quarter of 2011. |
| — | Direct sales surpassed $1 billion dollars this year for the first time in its history, driven by a same-store sales increase of 31 percent in the fourth quarter on top of last year’s increase of 35 percent for the same period. Direct sales growth continues to outpace the overall Company, reflecting ongoing initiatives to improve the customer experience online. |
| — | Nordstrom Rack, which opened fifteen stores in fiscal 2012, continued to demonstrate strong sales growth in the fourth quarter with an increase in net sales of 23 percent. Same-store sales increased 7.1 percent for the Rack, which is its largest fourth quarter increase in the last six years. |
| — | Gross profit, as a percentage of net sales, was flat compared with the same period in fiscal 2011. Markdown improvements were offset by higher expenses associated with our enhanced Fashion Rewards program, which generated incremental sales and attracted new members. |
| — | Retail selling, general and administrative expenses, as a percentage of net sales, decreased 45 basis points compared with the same period in fiscal 2011. The decrease was primarily attributable to leverage on increased sales, partially offset by increases in fulfillment costs associated with improving the speed of delivery for shipped sales. |
| — | In the Credit segment, overall performance continued to improve with delinquency and write-off rates well below prior-year levels. Given this performance and the underlying economic trends, the reserve for bad debt was reduced by $10 million. |
| — | Earnings before interest and taxes of $498 million increased 20 percent compared to $417 million for the same quarter last year. Earnings before interest and taxes as a percent of net sales was 13.9 percent compared with 13.1 percent for the same quarter last year. |
| — | During the quarter, the Company repurchased 4.2 million of its shares for $219 million. A total of $393 million remains under its existing share repurchase board authorization. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission rules. |
FULL YEAR RESULTS
| — | Nordstrom achieved record net sales of $11.8 billion, which represented an increase of 12.1 percent compared with prior year net sales of $10.5 billion. Full year same-store sales increased 7.3 percent, on top of last year’s same-store sales increase of 7.2 percent. |
| — | Earnings per diluted share of $3.56 increased 13.4 percent compared to $3.14 for fiscal year 2011. Net earnings of $735 million increased 7.7 percent compared with net earnings of $683 million for fiscal year 2011. |
| — | Return on invested capital (ROIC) for the 12 months ended February 2, 2013 was 13.9 percent, which increased from 13.3 percent in the prior 12-month period due primarily to the growth in earnings. A reconciliation of this non-GAAP financial measure to the closest GAAP measure is included below. |
CAPITAL INVESTMENT AND EXPANSION UPDATE
In fiscal 2013, the Company’s capital expenditures, net of property incentives, are expected to total between $750 and $790 million, compared with approximately $450 million in fiscal 2012. The majority of the increase is attributable to Rack and full-line store growth, improvements to e-commerce delivery and fulfillment, and the planned Manhattan store development.
Nordstrom has announced plans to open the following stores in fiscal year 2013:
| Location | Store Name | Square Footage (000’s) |
Timing | |||||
| Nordstrom Full-line Stores |
||||||||
| Glendale, California1 |
Americana at Brand | 135 | Fall | |||||
| Nordstrom Rack |
||||||||
| Ann Arbor, Michigan |
Arborland Center | 30 | April 18 | |||||
| Auburn Hills, Michigan |
Baldwin Commons | 35 | April 18 | |||||
| Birmingham, Alabama |
River Ridge Shopping Center | 35 | May 16 | |||||
| Boston, Massachusetts |
The Newbry | 38 | March 14 | |||||
| Columbia, Maryland |
Columbia Crossing | 40 | May 16 | |||||
| Portland, Maine |
Maine Crossing | 30 | May 16 | |||||
| Upland, California |
Colonies Crossroads | 35 | March 14 | |||||
| Washington, D.C. |
Downtown DC | 35 | April 18 | |||||
| Atlanta, Georgia |
Perimeter Expo | 36 | Fall | |||||
| Cleveland, Ohio |
Promenade in Crocker Park | 34 | Fall | |||||
| Columbus, Ohio |
Easton Market | 35 | Fall | |||||
| Concord, California |
Sunvalley Shopping Center | 47 | Fall | |||||
| Culver City, California2 |
Westfield Culver City | 38 | Fall | |||||
| El Paso, Texas |
The Fountains at Farah | 35 | Fall | |||||
| Honolulu, Hawaii3 |
Ward Village Shops | 45 | Fall | |||||
| Naples, Florida |
The Mercato | 30 | Fall | |||||
| 1 | Nordstrom plans to relocate its full-line store at Glendale Galleria in Glendale, California to the nearby Americana at Brand. |
| 2 | Nordstrom plans to relocate its Nordstrom Rack store at Howard Hughes Center in Los Angeles, California to Westfield Culver City in Culver City, California. |
| 3 | Nordstrom plans to relocate its Nordstrom Rack store at Ward Center in Honolulu, Hawaii to the nearby Ward Village Shops. |
FISCAL YEAR 2013 OUTLOOK
In 2013, Nordstrom plans to continue to invest and build upon the foundation for sustainable growth in sales, earnings and Return on Invested Capital (“ROIC”). The 2013 expectations include infrastructure expenses totaling between $20 and $25 million, related to the entry into Canada, in which the first store will open in 2014, and incremental costs from the accelerated Rack store growth.
The Company’s expectations for fiscal 2013, which are shown in comparison to the 53-week fiscal 2012 where applicable, are as follows:
| Total sales | 4.5 to 6.5 percent increase | |
| Same-store sales1 | 3.5 to 5.5 percent increase | |
| Credit card revenues | $0 to $5 million increase | |
| Gross profit (%) | 10 to 30 basis point decrease | |
| Retail selling, general and administrative expenses (%) | 10 to 30 basis point decrease | |
| Credit selling, general and administrative expenses ($) | $20 to $30 million increase | |
| Interest expense, net | $5 million decrease | |
| Effective tax rate | 39.0 percent | |
| Earnings per diluted share, excluding the impact of any future share repurchases |
$3.65 to $3.80 | |
| Diluted shares outstanding | Approximately 203 million |
| 1 | 2012 is not restated (2013 weeks 1-52 versus 2012 weeks 1-52). |
The 53rd week in fiscal 2012 creates a timing shift in the 4-5-4 calendar for fiscal 2013 that is expected to impact comparisons of performance to the prior year. For example, in 2013 the Anniversary Sale will occur in the second quarter, while in fiscal 2012 it overlapped the second and third quarters.
As a result of the 53rd week timing shift, the Company is providing the following view of quarterly trends, relative to its annual fiscal 2013 expectations:
| Compared to Annual Fiscal 2013 Guidance Range | ||||||||
| Annual Fiscal 2013 Guidance |
First Quarter
2013 |
Second Quarter
2013 |
Second Half
2013 | |||||
| Same-store sales |
3.5 to 5.5 percent increase | In-line | Above | Below | ||||
| Earnings per diluted share |
3 to 7 percent increase | In-line | Above | Below | ||||
CONFERENCE CALL INFORMATION
The Company’s senior management will host a conference call to discuss fourth quarter and fiscal year 2012 results and 2013 outlook at 4:45 p.m. Eastern Standard Time today. To listen to the live call online and view the speakers’ slides and Performance Summary document, visit the Investor Relations section of the Company’s corporate website at http://investor.nordstrom.com. An archived webcast with the speakers’ slides and Performance Summary document will be available in the webcasts section for one year. Interested parties may also dial 415-228-4850 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 402-998-1419 (a passcode is not required) until the close of business on February 28, 2013.
ABOUT NORDSTROM
Nordstrom, Inc. is one of the nation’s leading fashion specialty retailers. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 240 stores in 31 states, including 117 full-line stores, 119 Nordstrom Racks, two Jeffrey boutiques, one treasure&bond store and one clearance store. Nordstrom also serves customers through Nordstrom.com and through its catalogs. Additionally, the Company operates in the online private sale marketplace through its subsidiary HauteLook. 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 February 1, 2014, anticipated annual same-store sales rate, anticipated Return on Invested Capital, anticipated store openings, anticipated capital expenditures for fiscal year 2013 and trends in our 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 may differ materially from historical results or current expectations depending upon factors including, but not limited to: the impact of economic and market conditions and the resultant impact on consumer spending patterns; our ability to respond to the
business environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online; effective inventory management; successful execution of our growth strategy, including possible expansion into new markets, technological investments and acquisitions, our ability to realize the anticipated benefits from such growth initiatives, and 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 ability to manage the change in our business/financial model as we increase our investment in e-commerce and our online business; our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders; successful execution of our multi-channel strategy, including planning, procurement and allocation capabilities; our compliance with applicable banking and related laws and regulations impacting our ability to extend credit to our customers; impact of the current regulatory environment and financial system and health care reforms; the impact of any systems failures, cybersecurity and/or security breaches, including any security breaches that result in the theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; our compliance with employment laws and regulations and other laws and regulations applicable to us, including the outcome of claims and litigation and resolution of tax matters; compliance with debt covenants and availability and cost of credit; our ability to safeguard our brand and reputation; successful execution of our information technology strategy; our ability to maintain our relationships with vendors; trends in personal bankruptcies and bad debt write-offs; changes in interest rates; efficient and proper allocation of our capital resources; weather conditions, natural disasters, health hazards or other market disruptions, or the prospects of these events and the impact on consumer spending patterns; disruptions in our supply chain; the geographic locations of our stores; the effectiveness of planned advertising, marketing and promotional campaigns; our ability to control costs; and the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances associated with option exercises or other matters. Our SEC reports, including our Form 10-K for the fiscal year ended January 28, 2012, our Forms 10-Q for the fiscal quarters ended April 28, 2012, July 28, 2012 and October 27, 2012, and our Form 10-K for the fiscal year ended February 2, 2013, to be filed with the SEC on or about March 18, 2013, 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited; amounts in millions, except per share amounts)
| Quarter Ended | Year Ended | |||||||||||||||||||
| 2/2/13 | 1/28/12 | 2/2/13 | 1/28/12 | |||||||||||||||||
| Net sales |
$ 3,596 | $ 3,169 | $ 11,762 | $ 10,497 | ||||||||||||||||
| Credit card revenues |
106 | 97 | 386 | 380 | ||||||||||||||||
|
|
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|
|
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|
|
|
|||||||||||||
| Total revenues |
3,702 | 3,266 | 12,148 | 10,877 | ||||||||||||||||
| Cost of sales and related buying and occupancy costs |
(2,239) | (1,973) | (7,432) | (6,592) | ||||||||||||||||
| Selling, general and administrative expenses: |
||||||||||||||||||||
| Retail |
(912) | (818) | (3,166) | (2,807) | ||||||||||||||||
| Credit |
(53) | (58) | (205) | (229) | ||||||||||||||||
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|
|||||||||||||
| Earnings before interest and income taxes |
498 | 417 | 1,345 | 1,249 | ||||||||||||||||
| Interest expense, net |
(42) | (38) | (160) | (130) | ||||||||||||||||
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|
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| Earnings before income taxes |
456 | 379 | 1,185 | 1,119 | ||||||||||||||||
| Income tax expense |
(172) | (143) | (450) | (436) | ||||||||||||||||
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|
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| Net earnings |
$ 284 | $ 236 | $ 735 | $ 683 | ||||||||||||||||
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| Earnings per share: |
||||||||||||||||||||
| Basic |
$ 1.43 | $ 1.13 | $ 3.62 | $ 3.20 | ||||||||||||||||
| Diluted |
$ 1.40 | $ 1.11 | $ 3.56 | $ 3.14 | ||||||||||||||||
| Weighted-average shares outstanding: |
||||||||||||||||||||
| Basic |
198.9 | 208.2 | 203.0 | 213.5 | ||||||||||||||||
| Diluted |
202.4 | 212.3 | 206.7 | 217.7 | ||||||||||||||||
NORDSTROM, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; amounts in millions)
| 2/2/13 | 1/28/12 | |||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 1,285 | $ | 1,877 | ||||
| Accounts receivable, net |
2,129 | 2,033 | ||||||
| Merchandise inventories |
1,360 | 1,148 | ||||||
| Current deferred tax assets, net |
227 | 220 | ||||||
| Prepaid expenses and other |
80 | 282 | ||||||
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|
|
|
|||||
| Total current assets |
5,081 | 5,560 | ||||||
| Land, buildings and equipment, net |
2,579 | 2,469 | ||||||
| Goodwill |
175 | 175 | ||||||
| Other assets |
254 | 287 | ||||||
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| Total assets |
$ | 8,089 | $ | 8,491 | ||||
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| Liabilities and Shareholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 1,011 | $ | 917 | ||||
| Accrued salaries, wages and related benefits |
404 | 388 | ||||||
| Other current liabilities |
804 | 764 | ||||||
| Current portion of long-term debt |
7 | 506 | ||||||
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|
|||||
| Total current liabilities |
2,226 | 2,575 | ||||||
| Long-term debt, net |
3,124 | 3,141 | ||||||
| Deferred property incentives, net |
485 | 500 | ||||||
| Other liabilities |
341 | 319 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, no par value: 1,000 shares authorized; 197.0 and 207.6 shares issued and outstanding |
1,645 | 1,484 | ||||||
| Retained earnings |
315 | 517 | ||||||
| Accumulated other comprehensive loss |
(47) | (45) | ||||||
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|
|||||
| Total shareholders’ equity |
1,913 | 1,956 | ||||||
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| Total liabilities and shareholders’ equity |
$ | 8,089 | $ | 8,491 | ||||
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NORDSTROM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; amounts in millions)
| Year Ended | ||||||||||
| 2/2/13 | 1/28/12 | |||||||||
| Operating Activities |
||||||||||
| Net earnings |
$ | 735 | $ | 683 | ||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||
| Depreciation and amortization expenses |
429 | 371 | ||||||||
| Amortization of deferred property incentives and other, net |
(63) | (46) | ||||||||
| Deferred income taxes, net |
22 | 14 | ||||||||
| Stock-based compensation expense |
53 | 50 | ||||||||
| Tax benefit from stock-based compensation |
23 | 20 | ||||||||
| Excess tax benefit from stock-based compensation |
(24) | (22) | ||||||||
| Provision for bad debt expense |
56 | 101 | ||||||||
| Change in operating assets and liabilities: |
||||||||||
| Accounts receivable |
(113) | (98) | ||||||||
| Merchandise inventories |
(170) | (137) | ||||||||
| Prepaid expenses and other assets |
5 | - | ||||||||
| Accounts payable |
48 | 54 | ||||||||
| Accrued salaries, wages and related benefits |
13 | 6 | ||||||||
| Other current liabilities |
36 | 95 | ||||||||
| Deferred property incentives |
58 | 78 | ||||||||
| Other liabilities |
2 | 8 | ||||||||
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| Net cash provided by operating activities |
1,110 | 1,177 | ||||||||
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| Investing Activities |
||||||||||
| Capital expenditures |
(513) | (511) | ||||||||
| Change in restricted cash |
200 | (200) | ||||||||
| Change in credit card receivables originated at third parties |
(42) | (7) | ||||||||
| Other, net |
(14) | (10) | ||||||||
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|
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| Net cash used in investing activities |
(369) | (728) | ||||||||
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|
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| Financing Activities |
||||||||||
| Proceeds from long-term borrowings, net of discounts |
- | 824 | ||||||||
| Principal payments on long-term borrowings |
(506) | (6) | ||||||||
| Proceeds from sale of interest rate swap |
- | 72 | ||||||||
| Increase (decrease) in cash book overdrafts |
5 | (30) | ||||||||
| Cash dividends paid |
(220) | (197) | ||||||||
| Payments for repurchase of common stock |
(725) | (840) | ||||||||
| Proceeds from issuances under stock compensation plans |
91 | 76 | ||||||||
| Excess tax benefit from stock-based compensation |
24 | 22 | ||||||||
| Other, net |
(2) | 1 | ||||||||
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|
|||||||
| Net cash used in financing activities |
(1,333) | (78) | ||||||||
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| Net (decrease) increase in cash and cash equivalents |
(592) | 371 | ||||||||
| Cash and cash equivalents at beginning of year |
1,877 | 1,506 | ||||||||
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| Cash and cash equivalents at end of year |
$ | 1,285 | $ | 1,877 | ||||||
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NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; dollar and share amounts in millions)
Retail
Our Retail business includes our Nordstrom branded full-line stores and website, our Nordstrom Rack stores, and our other retail channels including HauteLook, our Jeffrey stores and our treasure&bond store. It also includes unallocated corporate center expenses. The following tables summarize the results of our Retail business for the quarter and year ended February 2, 2013 compared with the quarter and year ended January 28, 2012:
| Quarter Ended 2/2/13 |
% of sales1 | Quarter Ended 1/28/12 |
% of sales1 | |||||||||||||||||
| Net sales |
$ | 3,596 | 100.0% | $ | 3,169 | 100.0% | ||||||||||||||
| Cost of sales and related buying and occupancy costs |
(2,201) | (61.2%) | (1,950) | (61.5%) | ||||||||||||||||
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|||||||||||||
| Gross profit |
1,395 | 38.8% | 1,219 | 38.5% | ||||||||||||||||
| Selling, general and administrative expenses |
(912) | (25.4%) | (818) | (25.8%) | ||||||||||||||||
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|||||||||||||
| Earnings before interest and income taxes |
483 | 13.4% | 401 | 12.6% | ||||||||||||||||
| Interest expense, net |
(35) | (1.0%) | (34) | (1.1%) | ||||||||||||||||
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| Earnings before income taxes |
$ | 448 | 12.4% | $ | 367 | 11.6% | ||||||||||||||
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| Year Ended 2/2/13 |
% of sales1 | Year Ended 1/28/12 |
% of sales1 | |||||||||||||||||
| Net sales |
$ | 11,762 | 100.0% | $ | 10,497 | 100.0% | ||||||||||||||
| Cost of sales and related buying and occupancy costs |
(7,318) | (62.2%) | (6,517) | (62.1%) | ||||||||||||||||
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|||||||||||||
| Gross profit |
4,444 | 37.8% | 3,980 | 37.9% | ||||||||||||||||
| Selling, general and administrative expenses |
(3,166) | (26.9%) | (2,807) | (26.7%) | ||||||||||||||||
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|||||||||||||
| Earnings before interest and income taxes |
1,278 | 10.9% | 1,173 | 11.2% | ||||||||||||||||
| Interest expense, net |
(134) | (1.1%) | (117) | (1.1%) | ||||||||||||||||
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|||||||||||||
| Earnings before income taxes |
$ | 1,144 | 9.7% | $ | 1,056 | 10.1% | ||||||||||||||
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1Subtotals and totals may not foot due to rounding.
NORDSTROM, INC.
STATEMENTS OF EARNINGS BY SEGMENT
(unaudited; dollar and share amounts in millions)
Credit
Our Credit business earns finance charges, interchange fees, late fees and other revenue through operation of the Nordstrom private label and Nordstrom VISA credit cards. The following tables summarize the results of our Credit business for the quarter and year ended February 2, 2013 compared with the quarter and year ended January 28, 2012:
| Quarter Ended | Year Ended | |||||||||||||||||||
| 2/2/13 | 1/28/12 | 2/2/13 | 1/28/12 | |||||||||||||||||
| Credit card revenues |
$ | 106 | $ | 97 | $ | 386 | $ | 380 | ||||||||||||
| Interest expense |
(7) | (4) | (26) | (13) | ||||||||||||||||
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| Net credit card income |
99 | 93 | 360 | 367 | ||||||||||||||||
| Cost of sales and related buying and occupancy costs – loyalty program |
(38) | (23) | (114) | (75) | ||||||||||||||||
| Selling, general and administrative expenses: |
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| Operational and marketing expenses |
(45) | (39) | (149) | (128) | ||||||||||||||||
| Bad debt provision |
(8) | (19) | (56) | (101) | ||||||||||||||||
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| Earnings before income taxes |
$ | 8 | $ | 12 | $ | 41 | $ | 63 | ||||||||||||
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| The following table illustrates the activity in our allowance for credit losses for the quarter and year ended February 2, 2013 and January 28, 2012: | ||||||||||||||||||||
| Quarter Ended | Year Ended | |||||||||||||||||||
| 2/2/13 | 1/28/12 | 2/2/13 | 1/28/12 | |||||||||||||||||
| Allowance at beginning of period |
$ | 95 | $ | 125 | $ | 115 | $ | 145 | ||||||||||||
| Bad debt provision |
8 | 19 | 56 | 101 | ||||||||||||||||
| Write-offs |
(25) | (34) | (111) | (153) | ||||||||||||||||
| Recoveries |
7 | 5 | 25 | 22 | ||||||||||||||||
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| Allowance at end of period |
$ | 85 | $ | 115 | $ | 85 | $ | 115 | ||||||||||||
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| Annualized net write-offs as a percentage of average credit card receivables |
3.3% | 5.4% | 4.1% | 6.3% | ||||||||||||||||
| 2/2/13 | 1/28/12 | |||||||
| 30+ days delinquent as a percentage of ending credit card receivables |
1.9% | 2.6% | ||||||
| Allowance as a percentage of ending credit card receivables |
4.0% | 5.5% | ||||||
NORDSTROM, INC.
RETURN ON INVESTED CAPITAL (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollar and share 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 (SEC). The following disclosure provides additional information regarding our Return on Invested Capital (ROIC) for the years ended February 2, 2013 and January 28, 2012:
We define ROIC as follows: Net Operating Profit after Taxes divided by Average Invested Capital.
For the 12 fiscal months ended February 2, 2013, our ROIC increased to 13.9 percent compared with 13.3 percent for the 12 fiscal months ended January 28, 2012. Our ROIC increased compared with the prior year primarily due to an increase in our earnings before interest and income tax expense.
We believe that ROIC is a useful financial measure for investors in evaluating our operating performance. When analyzed in conjunction with our net earnings and total assets and compared with return on assets (net earnings divided by average total assets), it provides investors with a useful tool to evaluate our ongoing operations and our management of assets from period to period. ROIC is one of our key financial metrics, and we also incorporate it into our executive incentive measures. We believe that overall performance as measured by ROIC correlates directly to shareholders’ return over the long term. ROIC is not a measure of financial performance under GAAP, 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 with similarly titled measures reported by other companies. The closest measure calculated using GAAP amounts is return on assets, which increased to 8.9 percent from 8.7 percent for the 12 fiscal months ended February 2, 2013, compared with the 12 fiscal months ended January 28, 2012. The following is a comparison of return on assets to ROIC:
| 12 fiscal months ended | ||||||||||
| 2/2/13 | 1/28/12 | |||||||||
| Net earnings |
$ | 735 | $ | 683 | ||||||
| Add: income tax expense |
450 | 436 | ||||||||
| Add: interest expense |
162 | 132 | ||||||||
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| Earnings before interest and income tax expense |
1,347 | 1,251 | ||||||||
| Add: rent expense |
105 | 78 | ||||||||
| Less: estimated depreciation on capitalized operating leases1 |
(56) | (42) | ||||||||
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| Net operating profit |
1,396 | 1,287 | ||||||||
| Estimated income tax expense2 |
(530) | (501) | ||||||||
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| Net operating profit after tax |
$ | 866 | $ | 786 | ||||||
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| Average total assets3 |
$ | 8,274 | $ | 7,890 | ||||||
| Less: average non-interest-bearing current liabilities4 |
(2,262) | (2,041) | ||||||||
| Less: average deferred property incentives3 |
(494) | (504) | ||||||||
| Add: average estimated asset base of capitalized operating leases5 |
724 | 555 | ||||||||
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| Average invested capital |
$ | 6,242 | $ | 5,900 | ||||||
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| Return on assets |
8.9% | 8.7% | ||||||||
| ROIC |
13.9% | 13.3% | ||||||||
| 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 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 February 2, 2013 and January 28, 2012. |
| 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, which is calculated as the trailing 12-months 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. |