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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 28, 2023
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to___________
Commission file number 001-15059
https://cdn.kscope.io/e49e5880718c4306c8b38615ef7037f4-jwn-20230128_g1.jpg
Nordstrom, Inc.
(Exact name of registrant as specified in its charter)
Washington
 
91-0515058
State or other jurisdiction of incorporation or organization(I.R.S. Employer Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
(Address of principal executive offices)
Registrant’s telephone number, including area code (206) 628-2111
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, without par value
JWN
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No 
As of July 29, 2022, the aggregate market value of the Registrant’s voting and non-voting stock held by non-affiliates of the Registrant was approximately $3.0 billion using the closing sales price on that day of $23.51. On March 6, 2023, 160,151,038 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2023 Annual Meeting of Shareholders, scheduled to be held on May 17, 2023, are incorporated into Part III.

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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements regarding matters that are not historical facts, and are based on our management’s beliefs and assumptions and on information currently available to our management. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “pursue,” “going forward” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, our anticipated financial outlook for the fiscal year ending February 3, 2024, trends in our operations and the following:
Strategic and Operational
successful execution of our customer strategy to provide customers superior service, products and experiences, online, through our fulfillment capabilities and in stores,
timely and effective implementation and execution of our evolving business model, including:
winning at our market strategy by providing a differentiated and seamless experience, which consists of the integration of our digital and physical assets, development of new supply chain capabilities and timely delivery of products,
broadening the reach of Nordstrom Rack, including delivering great brands at great prices and leveraging our digital and physical assets,
enhancing our platforms and processes to deliver core capabilities to drive customer, employee and partner experiences both digitally and in stores,
our ability to effectively manage our merchandise strategy, including our ability to offer compelling assortments and optimize our inventory to ensure we have the right product mix and quantity in each of our channels and locations, allowing us to get closer to our customers,
our ability to effectively allocate and scale our marketing strategies and resources, including Nordstrom Media Network, as well as realize the expected benefits between The Nordy Club, advertising and promotional campaigns,
our ability to respond to the evolving retail environment, including new fashion trends, environmental considerations and our customers’ changing expectations of service and experience in stores and online, and our development and outcome of new market strategies and customer offerings,
our ability to mitigate the effects of disruptions in the global supply chain, including factory closures, transportation challenges or stoppages of certain imports, and rising prices of raw materials and freight expenses,
our ability to control costs through effective inventory management and supply chain processes and systems,
our ability to acquire, develop and retain qualified and diverse talent by providing appropriate training, compelling work environments and competitive compensation and benefits, especially in areas with increased market compensation, all in the context of any labor shortage and competition for talent,
our ability to realize expected benefits, anticipate and respond to potential risks and appropriately manage costs associated with our credit card revenue sharing program,
potential goodwill impairment charges, future impairment charges, fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames or if our strategic direction changes,
COVID-19, which may have a negative impact on our business and results and may exacerbate any risks noted,
Data, Cybersecurity and Information Technology
successful execution of our information technology strategy, including engagement with third-party service providers,
the impact of any system or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, or that results in the interruption of business processes or causes financial loss, and our compliance with information security and privacy laws and regulations, as well as third-party contractual obligations in the event of such an incident,

4

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Reputation and Relationships
our ability to maintain our reputation and relationships with our customers, employees, vendors and third-party partners and landlords,
our ability to act responsibly and with transparency with respect to our corporate social responsibility practices and initiatives, meet any communicated targets, goals or milestones and adapt to evolving reporting requirements,
our ability to market our brand and distribute our products through a variety of third-party publisher or platform channels, as well as access mobile operating system and website identifiers for personalized delivery of targeted advertising,
the impact of a concentration of stock ownership on our shareholders’ ability to influence corporate matters,
Investment and Capital
efficient and proper allocation of our capital resources,
our ability to properly balance our investments in technology, Supply Chain Network facilities and existing and new store locations, including the expansion of our market strategy,
our ability to maintain or expand our presence, including timely completion of construction associated with Supply Chain Network facilities and new, relocated and remodeled stores, as well as any potential store closures, all of which may be impacted by third parties, consumer demand and other natural or man-made disruptions, and government responses to any such disruptions,
market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate,
compliance with debt and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates,
the actual timing, price, manner and amounts of future share repurchases, dividend payments or share issuances, if any, subject to the discretion of our Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules,
Economic and External
the length and severity of epidemics or pandemics, or other catastrophic events, and the related impact on customer behavior, store and online operations and supply chain functions, as well as our future consolidated financial position, results of operations and cash flows,
the impact of the seasonal nature of our business and cyclical customer spending,
the impact of economic and market conditions in the U.S. and Canada, including inflation and measures to control inflation, and resulting changes to customer purchasing behavior, unemployment and bankruptcy rates, as well as any fiscal stimulus, or the cessation of any fiscal stimulus and the resulting impact on consumer spending and credit patterns,
the impact of economic, environmental or political conditions,
the impact of changing traffic patterns at shopping centers and malls,
financial insecurity or potential insolvency experienced by our vendors, suppliers, developers, landlords, competitors or customers,
weather conditions, natural disasters, climate change, national security concerns, global conflicts, civil unrest, other market and supply chain disruptions, the effects of tariffs, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications,
Legal and Regulatory
our, and our vendors’, compliance with applicable domestic and international laws, regulations and ethical standards, including those related to COVID-19, minimum wage, employment and tax, information security and privacy, consumer credit and environmental regulations and the outcome of any claims, litigation and regulatory investigations and resolution of such matters,
the impact of the current regulatory environment, financial system and tax reforms,
the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations, or changes in underlying assumptions, estimates or judgments,
the outcome of events or occurrences related to the wind-down of business operations in Canada.
These and other factors, including those factors we discuss in Part I, Item 1A. Risk Factors, could affect our financial results and cause our actual results to differ materially from any forward-looking information we may provide. Given these risks, uncertainties and other factors, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing, and these estimates and assumptions may prove to be incorrect. This Annual Report on Form 10-K should be read completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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All references to “we,” “us,” “our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. In addition, forward-looking statements may be impacted by the actual outcome of events or occurrences related to the wind-down of business operations in Canada.

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DEFINITIONS OF COMMONLY USED TERMS
TermDefinition
2019 Plan2019 Equity Incentive Plan
2022 Annual ReportAnnual Report on Form 10-K filed on March 10, 2023
Adjusted EPSAdjusted earnings (loss) per diluted share (a non-GAAP financial measure)
Adjusted ROICAdjusted return on invested capital (a non-GAAP financial measure)
ASCAccounting Standards Codification
ASUAccounting Standards Update
CARES ActCoronavirus Aid, Relief and Economic Security Act
CCAACompanies’ Creditors Arrangement Act
Digital sales
Sales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also includes a reserve for estimated returns.
EBITEarnings (loss) before interest and income taxes
EBIT MarginEarnings (loss) before interest and income taxes as a percent of net sales
EBITDAEarnings (loss) before interest, income taxes, depreciation and amortization
EBITDAREarnings (loss) before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant
EPSEarnings (loss) per share
ESPPEmployee Stock Purchase Plan
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
Fiscal year 2023
53 fiscal weeks ending February 3, 2024
Fiscal year 2022
52 fiscal weeks ending January 28, 2023
Fiscal year 2021
52 fiscal weeks ending January 29, 2022
Fiscal year 2020
52 fiscal weeks ending January 30, 2021
GAAPU.S. generally accepted accounting principles
GMVGross merchandise value
Gross profitNet sales less cost of sales and related buying and occupancy costs
Leverage RatioThe sum of our funded debt and operating lease liabilities divided by the preceding twelve months of Adjusted EBITDAR as defined by our Revolver covenant
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
TermDefinition
NAVNet asset value
NMNNordstrom Media Network, where we use our first party data and marketing infrastructure to drive cooperative marketing with vendors across both offsite and onsite marketing platforms
NordstromNordstrom.com, Nordstrom U.S. stores, Canada, which includes Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, Nordstrom Local, ASOS | Nordstrom and, prior to October 2022, TrunkClub.com.
Nordstrom CanadaNordstrom Canada Retail, Inc., Nordstrom Canada Holdings, LLC and Nordstrom Canada Holdings II, LLC
Nordstrom LocalNordstrom Local service hubs, which offer order pickups, returns, alterations and other services
Nordstrom Rack
NordstromRack.com, Nordstrom Rack U.S. stores, Last Chance clearance stores and, prior to the first quarter of 2021, HauteLook.com
The Nordy ClubOur customer loyalty program
NYSENew York Stock Exchange
Operating Lease CostFixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization
PCAOBPublic Company Accounting Oversight Board (United States)
Property incentivesDeveloper and vendor reimbursements
PSUPerformance share unit
RevolverSenior revolving credit facility
Rights PlanOur limited-duration Shareholder Rights Agreement adopted by the Board of Directors in September 2022
ROU assetOperating lease right-of-use asset
RSURestricted stock unit
SECSecurities and Exchange Commission
SERPUnfunded defined benefit Supplemental Executive Retirement Plan
Secured Notes8.750% senior secured notes that were originally due May 2025
SG&ASelling, general and administrative
Supply Chain NetworkFulfillment centers that primarily process and ship orders to our customers, distribution centers that primarily process and ship merchandise to our stores and other facilities and omni-channel centers that both fulfill customer orders and ship merchandise to our stores
TDToronto-Dominion Bank, N.A.

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PART I
Item 1. Business.
DESCRIPTION OF BUSINESS
Overview
The Company was founded in 1901 as a retail shoe business in Seattle, Washington under the guiding principle that success would come by offering customers the very best service, selection, quality and value. We aspire to be the best fashion retailer in a digitally connected world by leveraging the strength of the Nordstrom and Nordstrom Rack banners and our interconnected business model. We offer an extensive selection of high-quality brand-name and private label merchandise for women, men, young adults and children, with a focus on apparel, shoes, beauty, accessories and home goods. No matter how customers choose to shop, we are committed to delivering superior service, products and experiences — including alterations, order pickup, dining and styling — to make shopping fun, personalized and convenient. We have one reportable segment, which aggregates our two operating segments, Nordstrom and Nordstrom Rack.
Nordstrom is a leading destination for a breadth of products across brands, styles and prices complemented by unmatched services and experiences. As of January 28, 2023, Nordstrom includes the following digital and physical properties:
Nordstrom.com website and mobile application
Nordstrom.ca website
94 Nordstrom stores in the U.S.
six Nordstrom stores and seven Nordstrom Rack stores in Canada
seven Nordstrom Locals
one ASOS | Nordstrom store
Nordstrom Rack is a premier off-price destination with an industry-leading off-price digital presence, offering great brands at great prices. As of January 28, 2023, Nordstrom Rack includes the following digital and physical properties:
NordstromRack.com website and mobile application
241 Nordstrom Rack stores in the U.S.
two Last Chance clearance stores
On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations. See Note 15: Subsequent Events in Item 8 for more information.
Nordstrom Rack purchases merchandise primarily from the same vendors carried at Nordstrom and also serves as an outlet for clearance merchandise from the Nordstrom banner. We continue to expand our offerings of the most coveted brands we carry, as well as source from new vendors, to ensure we have the selection our customers want. Currently, NordstromRack.com offers both a selection of Nordstrom Rack merchandise and limited-time flash sale events on fashion and lifestyle brands, which formerly existed on HauteLook.com prior to the first quarter of 2021 when it was consolidated into NordstromRack.com.
As a business, one of our key advantages lies in our ability to leverage an integrated network of physical and digital assets across both Nordstrom and Nordstrom Rack banners. This creates flexibility and convenience for our customers, no matter how they choose to shop — online, through our apps or in stores. This omni-channel platform is our differentiator, providing customers with more product available for next day pickup, the ability to pick up or return orders to any store location regardless of purchase origin and our suite of personalized services. We have also found the average customer who shops across both banners, in stores and online, spends over twelve times more than a customer utilizing a single channel and banner.
Our Closer to You strategy leverages a strong store fleet and links our omni-channel capabilities at the local market level, positioning us physically closer to the customer and allowing us to drive customer engagement through better service and greater access to product. There are two elements to this strategy. First, we aim to provide customers a greater selection of merchandise available for next-day pickup or delivery without increasing inventory levels. Second, we are increasing engagement with customers by offering express services such as order pickup, returns and alterations at additional convenient locations. In 2022, we continued to scale our market strategy by expanding next-day order pickup capabilities to over 60 additional Rack stores in our top 20 markets.
We also receive credit card revenue through our program agreement with TD, whereby TD is the exclusive issuer of our consumer credit cards and we perform account servicing functions. Credit card revenues, net include our portion of the ongoing credit card revenue, net of credit losses, pursuant to our program agreement with TD. In the fourth quarter of 2022, we amended our program agreement with TD. The original agreement was scheduled to expire in April 2024 and the amendment extends the term through September 2026.

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Products
In order to offer merchandise that our customers want, we purchase from a wide variety of high-quality domestic and foreign suppliers. Additionally, we utilize unowned inventory models beyond traditional wholesale arrangements that provide a broader assortment in new and existing categories. We also have arrangements with agents and contract manufacturers to produce our private label merchandise.
Nordstrom Rack invests in pack and hold inventory, which involves the strategic purchase of merchandise from some of our top brands in advance of the upcoming selling seasons or to minimize inventory gaps from supply chain disruptions, allowing us to buy larger quantities of relevant items when available, then hold a portion of it to deploy in periods with high demand, tight supply or system constraints. This inventory is typically held for six months on average.
Return Policy
We have a fair and reasonable approach to returns, handling them on a case-by-case basis with the ultimate objective of making our customers happy. Almost all merchandise can be returned by mail or at any store location. We have no formal policy on how long we accept returns for purchases made at Nordstrom stores and Nordstrom.com. Our goal is to take care of our customers, which includes making returns and exchanges easy, whether in stores or online, where we offer free shipping on purchases and returns. We generally accept returns of apparel, footwear, accessories and home products with the original price tag and sales receipt up to 30 days from the date of purchase at Nordstrom Rack stores and up to 40 days from the date of order at NordstromRack.com.
Loyalty Program
The Nordy Club is our customer loyalty program that incorporates a traditional point and benefit system, while providing customers exclusive access to products and events, enhanced services, personalized experiences and more convenient ways to shop. Customers accumulate points based on their level of spending and type of participation. Upon reaching certain point thresholds, customers receive Nordstrom Notes, which can be redeemed for goods or services across Nordstrom and Nordstrom Rack. The Nordy Club benefits vary based on the level of customer spend, and include bonus points days and shopping and fashion events.
We offer customers access to a variety of payment products and services, including a selection of Nordstrom-branded Visa® credit cards in the U.S. and Canada, as well as a Nordstrom-branded private label credit card for Nordstrom purchases. When customers use a Nordstrom-branded credit or debit card, they also participate in The Nordy Club and receive additional benefits, which can vary depending on the level of spend, including early access to the Anniversary Sale, enhanced alteration and stylist benefits and incremental accumulation of points toward Nordstrom Notes.
Supply Chain Network
Our Supply Chain Network consists of:
three fulfillment centers that primarily process and ship orders to our customers
six distribution centers that primarily process and ship merchandise to our stores and other facilities
one omni-channel center that both fulfills customer orders and ships merchandise to our stores
We are continually expanding and enhancing our Supply Chain Network facilities and inventory management systems to support our omni-channel capabilities and provide greater access to merchandise selection and faster delivery. We select locations and customize inventory allocations to enable merchandise to flow more efficiently and quickly to our customers. Nordstrom online purchases are primarily shipped to our customers from our fulfillment centers but may also be shipped from our Nordstrom stores, distribution centers or omni-channel centers. Nordstrom in-store purchases are primarily fulfilled from that store’s inventory, but when inventory is unavailable at that store, it may also be shipped to our customers from our fulfillment centers, distribution centers, omni-channel centers or from other Nordstrom stores. Nordstrom Rack online purchases are shipped to our customers from our fulfillment centers and distribution centers. Both Nordstrom and Nordstrom Rack selectively use vendor dropship to supplement online offerings, which are then shipped directly from the vendor to the end customer.
Our first large-scale omni-channel center in Riverside, California, which supports our Nordstrom customers in the West Coast region, opened in 2020. Nordstrom Rack inventory and fulfillment will be added to this facility in the future. Our smaller Local omni-channel Hub in Torrance, California ceased operations in the third quarter of 2022 as we scaled our Riverside location to support demand in that region.
EMPLOYEES
We believe that creating a best-in-class customer experience begins with creating an environment that celebrates and supports all our employees. As we strive to attract and retain the best talent in the industry, we are committed to cultivating a workplace culture where our employees feel included, supported and confident bringing their full selves to work.
As of January 28, 2023, we employed approximately 60,000 employees, which are comprised of approximately 80% hourly employees and 20% salaried employees. Approximately 75% of employees support our stores and approximately 12% support our Supply Chain Network. Due to the seasonal nature of our business, the number of temporary employees may vary and peak during our Anniversary Sale and holiday seasons. Currently, our employees have not chosen to be represented by a union.

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Diversity, Equity, Inclusion & Belonging
Our commitment to fostering a diverse, equitable and inclusive environment is key to our mission of helping our customers feel good and look their best. We believe in equity throughout the retail industry and aim to use our resources, influence and platform to foster greater representation of diversity from all our communities. Over the past several years, we’ve amplified our efforts in this area and set specific ambitions to achieve by the end of 2025, which include:
Delivering $500 million in retail sales from brands owned by, operated by or designed by Black and/or Latinx individuals
Aiming to increase representation of Black and Latinx individuals in people-manager roles by at least 50% on average
Leveraging our internship program and other initiatives to help us reach qualified candidates early in their careers, with an ambition on average of at least 50% of participants in these programs coming from underrepresented populations
To lead and drive this work, we have operationalized diversity, equity, inclusion and belonging through consistent reviews with Erik B. Nordstrom, our Chief Executive Officer, and Farrell B. Redwine, our Chief Human Resources Officer. In addition, our diversity, equity, inclusion and belonging team serves as a center of excellence within the human resources organization and collaborates with leaders across the business to develop and embed diverse, equitable and inclusive strategies.
As part of these ongoing efforts, we have several internal initiatives underway to facilitate a sense of belonging and connection among our teams. One way we do this is through our employee-led, Company-sponsored Employee Resource Groups, which represent a variety of seen and unseen identities. In 2022, eight groups served and were led by our employees, providing company-wide programming to advance understanding and celebrate voices from across our organization.
In 2022, we expanded and strengthened our talent pipelines in collaboration with the OneTen Coalition and in partnership with Morehouse College, where we supported the launch of a new product management track. Starting in the spring 2023 semester, Nordstrom leaders and technologists will teach and mentor students enrolled in the program.
Progress toward our diversity, equity, inclusion and belonging ambitions is tracked and reviewed regularly by our executive team and Board of Directors.
Employee Safety and Well-being
The health and safety of our customers, employees and communities is a responsibility we take very seriously. We continue to offer a variety of mental, emotional and physical wellness resources to support our employees, including digital mental health support and free counseling services through our Employee Assistance Programs.
We seek to listen to and learn from employees across our organization by cultivating an open-door policy, conducting regular listening sessions and utilizing our annual Voice of the Employee survey. We regularly review survey results against industry benchmarks to hold ourselves accountable as we continue to improve and evolve our workplace environment.
We are committed to creating a culture where employees feel as if they can bring their whole selves to work and achieve their career goals through ongoing growth and development opportunities and fair and transparent performance management and promotion processes.
Total Rewards
To support our goals to retain and attract talented employees, we review our benefits and compensation approach annually.
Benefits: We offer a range of benefits to all employees upon meeting eligibility requirements, including health care, wellness programs, financial and retirement plans and time away. In addition, we have increased our focus on well-being by activating a multi-year strategy to bring our people new resources and tools to support total well-being, including mental health support.
Compensation: We’re committed to providing our employees with a great place to grow meaningful careers. We regularly review our pay in the markets in which we operate to ensure we are competitive, and we make updates accordingly throughout the year.
To ensure we are offering a rewards package that aligns with the wants and needs of our employees, we routinely ask employees for their feedback in surveys throughout the year. We use the feedback to improve the overall experience of our employees.

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CORPORATE RESPONSIBILITY
We believe we have a responsibility to support the communities where we operate. Our Corporate Social Responsibility strategy set in 2020 includes five-year goals focused on environmental sustainability, human rights and corporate philanthropy. In 2022, we made meaningful progress in these areas. Specific highlights include:
Environmental Sustainability: We expanded our BEAUTYCYCLE program to Nordstrom Rack stores. This program allows us to accept beauty packaging waste materials that typically can’t be placed in curbside recycling bins. Through BEAUTYCYCLE, we took back more than 25 tons of beauty packaging in 2022, compared with five tons in 2021. We also began replacing our plastic Nordstrom Rack shopping bags with paper bags in support of our goal to reduce single-use plastic in our value chain by 50%.
Human Rights: We are committed to creating safe and fair workplaces for the people who make our products. Our human rights due diligence program is based on international standards, and the foundation of our human rights program is designed around third-party impact assessments and supported by our Partner Code of Conduct and relevant policies and programs, all of which were strengthened during the year and are assessed and improved cyclically. As a part of our human rights due diligence, we audit factories that make Nordstrom Made products for compliance with our Partner Code of Conduct and implement corrective action plans where necessary.
Women’s Rights: We hit a milestone: almost 50% of Nordstrom Made products were produced in factories that offer women’s empowerment training, bringing us closer to our goal of producing 90% of Nordstrom Made products in factories that invest in women’s empowerment by 2025.
Charitable Giving: We donated over $12 million to over 270 organizations located in the communities where we do business. Our employees gave to over 2,900 nonprofits, which we supported with 100% matching. Together with our customers and our employees, we used our platform to drive about $16 million in nonprofit donations based in the U.S. and Canada.
Read our full list of 2025 goals and more about our corporate social responsibility efforts at NordstromCares.com. The information contained or referred to on our website is not deemed to be incorporated by reference into this Annual Report unless otherwise expressly noted.
TRADEMARKS
Our most notable trademarks include Nordstrom, Nordstrom Rack, Zella, BP. and Treasure & Bond. Each of our trademarks is renewable indefinitely, provided it is still used in commerce at the time of the renewal.
SEASONALITY
Our business, like that of other retailers, is subject to seasonal fluctuations and cyclical trends in consumer spending. Our sales are typically higher in our second quarter, which usually includes most of our Anniversary Sale, and in the fourth quarter due to the holidays. Approximately one week of our Anniversary Sale shifted from the third quarter in 2021 to the second quarter in 2022.
Results for any one quarter are not indicative of the results that may be achieved for a full fiscal year. We plan our merchandise purchases and receipts to coincide with expected sales trends. For instance, our merchandise purchases and receipts increase prior to the Anniversary Sale and in the fall as we prepare for the holiday shopping season (typically from November through December). Consistent with our seasonal fluctuations, our working capital requirements have historically increased during the months leading up to the Anniversary Sale and the holidays as we purchase inventory in anticipation of increased sales.
COMPETITIVE CONDITIONS
We operate in a highly competitive business environment. We regularly compete with other international, national, regional and local retailers, including internet-based businesses, omni-channel department stores, specialty stores, off-price stores and boutiques, which may carry similar lines of merchandise. Our specific competitors vary from market to market. We believe the keys to competing in our industry are what will always matter most to our customers: providing compelling product and outstanding service, both digitally and in stores, backed by people who care. This includes serving customers on their terms by providing a seamless digital and physical experience, offering compelling, curated and quality products across a range of price points, and strategically partnering with relevant and limited distribution brands, all in top markets.
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other documents with the SEC. The SEC maintains a website at SEC.gov that contains reports, proxy and information statements, and other information regarding issuers that file with the SEC.
Our website addresses are Nordstrom.com and NordstromRack.com. Our annual and quarterly reports on Form 10-K and Form 10-Q, current reports on Form 8-K, proxy statements, our executives’ statements of changes in beneficial ownership of securities on Form 4 and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available for free on or through our website as soon as reasonably practicable after we electronically file the report with or furnish it to the SEC. Interested parties may also access a webcast of quarterly earnings conference calls and other financial events through our website at investor.nordstrom.com.

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We have a long-standing commitment to upholding a high level of ethical standards. In addition, we have adopted Codes of Business Conduct and Ethics for our employees, officers and directors and Corporate Governance Guidelines, which comply with the listing standards of the NYSE and SEC requirements. Our Codes of Business Conduct and Ethics, Corporate Governance Guidelines and Committee Charters for the following Board of Director Committees are available through our website:
Audit and Finance
Compensation, People and Culture
Corporate Governance and Nominating
Technology
Any amendments to these documents, or waivers of the requirements they contain, will also be available on our website.
For printed versions of these items or any other inquiries, please contact:
Nordstrom Investor Relations
1617 Sixth Avenue
Seattle, Washington 98101
InvRelations@Nordstrom.com
Item 1A. Risk Factors.
Our business faces many risks. We believe the risks described below outline the items of most concern to us. In evaluating our Company, you should carefully consider the following factors, in addition to the other information in this 2022 Annual Report. Before you buy our common stock or invest in our debt, you should know that making such an investment involves risks including, but not limited to, the risks described below. Any one of the following risks could harm our business, financial condition, results of operations or reputation, each of which could cause our stock price to decline or a default on our debt payments, and you may lose all or a part of your investment. Additional risks, trends and uncertainties not presently known to us or that we currently believe are immaterial may also harm our business, financial condition, results of operations or reputation.
STRATEGIC AND OPERATIONAL RISKS
If we are unable to successfully execute our customer strategy or evolve our business model, it could negatively impact our business and future profitability and growth.
Our market strategy, Closer to You, is a powerful enabler for the business, allowing us to better serve customers and provide greater access to product by leveraging all of our assets of people, product and place at the market level. As our business evolves, we continue to scale our market strategy and focus on better serving our customers through three priorities with significant potential for growth: improving Nordstrom Rack performance, winning in our most important markets and leveraging our digital capabilities. Our Closer to You strategy focuses on our customers by providing a differentiated and seamless experience in a digital world by bringing all of our assets together in each market to serve customers when, where and how they want to shop. We aim to balance our assortment, increase the breadth of selection and continue to leverage our digital and physical assets to increase selection and improve profitability in our Nordstrom Rack banner. As a digital-first business, we are well positioned to support our customers with a scalable platform that has been built to support continued growth. We are expanding our inventory flexibility through unowned inventory models, including strategic brands, wholesale, vertical brands, concession, dropship and other strategies. Additionally, we are scaling our NMN, which allows our brand partners to directly connect with our customers through on and off-site media campaigns to drive traffic, sales and engagement.
Our focus on the customer requires us to build new supply chain capabilities and enhance existing ones, develop applications for electronic devices, improve customer-facing technology, deliver purchased products timely, enhance inventory management systems and allow greater and more fluid inventory availability between digital and retail locations through our Closer to You strategy. In addition, these strategies will require further expansion of and reliance on data science and analytics. This business model has a highly variable cost structure driven by our Supply Chain Network and marketing costs and will continue to require investments in cross-channel operations and supporting technologies. There are also inherent risks associated with the investment in new technologies, and such operational and supporting technologies can be subject to failure, disruption or unavailability and increased vulnerability to cyberattacks and other cyber incidents.
If we do not successfully implement our customer strategy, including thoroughly understanding and delivering on our customer needs and wants, effectively integrating our digital operations and stores and scaling our Closer to You strategy, strengthening our brand awareness, expanding our supply chain initiatives and efficiently getting product to our customers, we may fall short of our customers’ expectations, which would impact our brand, reputation, profitability and growth. Also, if customers shift to digital channels at a different pace than we anticipate, we may need to quickly modify our digital and store or Nordstrom and Nordstrom Rack initiatives and investments. If we do not have or devote the resources necessary to execute upon these strategies, our business could be negatively impacted.

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Our business could suffer if we do not appropriately assess and react to competitive market forces and changes in customer behavior.
The retail environment is rapidly evolving. Customer shopping preferences continue to shift, including increasing expectations for faster delivery of product. In addition, the retail environment is under significant pressure from non-traditional retailers, including the emergence of rental and recommerce companies. We regularly compete with other international, national, regional and local retailers, including internet-based businesses, omni-channel department stores, specialty stores, off-price stores and boutiques, which may carry similar lines of merchandise. Digital channels continue to facilitate comparison shopping, intensifying competition in the retail market, and marketing digitally is controlled by a few key platforms. If we fail to adequately anticipate or respond to customer behavior and expectations, or changing market dynamics, we may lose market share or our ability to remain competitive, causing our sales and profitability to suffer. If the efficiency and allocation of loyalty marketing, advertising and promotional campaigns that attract customers through various programs and media, including digital media and print, is unsuccessful in influencing consumer behavior in our digital channels and stores, or if our competitors are more effective with their programs than we are, our growth and profitability could suffer. We also may not gather accurate and relevant data or effectively utilize that data, which may impact our strategic planning, marketing and loyalty programs and our overall decision making.
Our customer relationships and sales may be negatively impacted if we do not anticipate and respond to consumer preferences and fashion trends or manage inventory levels appropriately.
Our ability to predict or respond to constantly changing fashion trends, demographics, consumer preferences and spending patterns significantly impacts our sales and operating results. We must effectively manage our merchandise mix to curate an assortment that offers newness and greater selection at various price points. Some merchandise may take several months from the time we place a purchase order to the time it is received, and our ability to accelerate or modify that timeline or purchase order contents may be limited. If we do not identify and respond to emerging trends in consumer spending and preferences quickly enough, identify the right partners that align with our customer strategy, broaden or expand our category offering fast enough or in the right areas or develop, evolve and retain our team’s talent, mindset and technical skills to support changing operating models, we may harm our ability to retain our existing customers or attract new customers. We also store a certain level of pack-and-hold inventory to deploy in periods with high demand, tight supply or system constraints. As a result, we are vulnerable to shifts in consumer demand and misjudgments in the assortment and timing of merchandise purchases which may impact our ability to sell through this inventory in future periods. Ensuring we optimize our inventory and improve the planning and management of inventory through use of data and analytics is critical to serving the customer, driving growth and maximizing profitability. If we purchase too much inventory, we may be forced to sell our merchandise at lower average margins by taking significant markdowns, which could harm our business. Conversely, if we fail to purchase enough merchandise, or inventory does not arrive fast enough or as expected, we may lose opportunities for additional sales and potentially harm relationships with our customers.
Any inability to mitigate global labor and merchandise pricing pressures or disruptions may negatively impact our profitability.
Our profitability depends in part on our ability to anticipate and react to operating volatility, including the cost and availability of labor and merchandise. Increases in product and/or delivery costs, including changes in the price of raw materials to us and our vendors that are directly or indirectly related to the production and distribution of our products or increases in energy, labor or fuel and transportation costs, may translate to higher sales prices, which may then impact customer demand. In the near term, we are focused on improving our internal network and processes by diversifying our carrier capacity, gaining better end-to-end visibility of inventory and increasing velocity and throughput in our Supply Chain Network. If we are unable to respond effectively to ongoing pricing pressures or labor shortages, or offset such costs, there could be a material adverse impact on our business and financial results.
Our employees are key to supporting our business and operations effectively, and increased labor costs put pressure on our operating expenses. When wage rates or benefit levels increase in particular markets, increasing our wages or benefits has negatively impacted and may continue to negatively impact our earnings. Conversely, failing to offer competitive wages or benefits could adversely affect our ability to attract or retain sufficient or quality employees, causing increased turnover and our customer service to suffer. Excessive turnover may result in higher costs associated with finding, hiring and training new employees.
Any impediment to our inventory optimization may impact our ability to drive growth and meet customer demand, affecting future results and profitability. Shortages in certain materials and increasing pricing pressures in the highly competitive retail environment have contributed, and may in the future continue to contribute, to fluctuations in the quality, availability and price of our merchandise. The availability of raw materials to the U.S. may hinder our ability to meet customer demand. Vendors and other suppliers of the Company may experience similar fluctuations or restrictions, which may subject us to the effects of their price increases. Additionally, if we do not gather complete, accurate and timely competitive pricing data, or adequately utilize this data to implement an effective pricing strategy, our ability to successfully compete could be negatively impacted, causing our sales, profitability and results of operations to suffer.

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Improvements to our Supply Chain Network, inventory, buying, vendor payment and accounting processes and systems could adversely affect our business if not successfully executed.
Our business depends on accuracy throughout our product flow process. We are making investments to streamline and standardize our Supply Chain Network, inventory, buying, vendor payments and accounting capabilities through changes in technology, methodologies and processes. If we encounter challenges associated with change management, inventory integrity and implementation of associated information technology or adoption of new processes, features or capabilities, our ability to continue to successfully execute or evolve our strategy with changes in the retail environment could be adversely affected. Or, if we are unable to maintain accurate, reliable and effective inventory tracking systems, which are critical to our integrated omni-channel business strategy, it may adversely impact our sales and profitability and may result in canceled orders and increased costs relative to our current expectations.
If we do not effectively attract, retain, train and develop talent and future leaders, our business may suffer.
We rely on the experience of our senior management, who have specific knowledge relating to us and our industry that is difficult to replace, to execute our business strategies and objectives. We have succession plans in place and our Board of Directors reviews these succession plans. If our succession plans do not adequately cover significant and unanticipated turnover, the loss of the services of any of these individuals, or any resulting negative perceptions or reactions, could damage our reputation and our business.
Additionally, our success depends on the talents and abilities of our workforce in all areas of our business, especially personnel that can adapt to complexities and grow their skillset across the changing environment. Our ability to successfully execute our customer strategy depends on attracting, developing and retaining qualified talent with diverse sets of skills, especially functional and technology specialists that directly support our strategies. We have a large workforce, and our ability to meet our labor needs is subject to various external factors such as regional minimum wage and benefits requirements, market pressures, prevailing wage rates, benefit mix, unemployment levels, changing demographics, economic conditions and a dynamic regulatory environment.
We have experienced, and may continue to experience, increased employee attrition due to an intense competition for talent, a competitive wage environment and labor shortages. In the Seattle metropolitan area, where our corporate headquarters are located, we regularly compete for talent with many larger technology-focused companies, which may increase market compensation, especially for certain employee groups. If we are unable to sustain employee satisfaction or offer competitive compensation and benefits, appropriate training and development or a compelling work environment, our culture may be adversely affected, our reputation may be damaged and we may incur costs related to turnover.
Our program agreement with TD, or changes to that agreement, could adversely impact our business.
The program agreement with TD was consummated on terms that allow us to maintain customer-facing activities, while TD facilitates issuance of Nordstrom-branded payment methods and provides payment processing services. If we fail to meet certain service levels, TD has the right to assume certain individual servicing functions including managing accounts and collection activities. If we lose control of such activities and functions, if we do not successfully respond to potential risks and appropriately manage potential costs associated with the program agreement with TD or if these transactions negatively impact the customer service associated with our cards, resulting in harm to our business reputation and competitive position, our operations, cash flows and earnings could be adversely affected. If, upon expiration of our current program agreement in 2026, a new contract has less favorable terms, our results could be negatively impacted. If TD became unwilling or unable to provide these services or if there are changes to the risk management policies implemented under our program agreement with TD, our results may be negatively impacted. If we lose control over certain servicing functions and TD is unable to successfully manage accounts and collection activities, it may heighten the risk of credit losses.
DATA, CYBERSECURITY AND INFORMATION TECHNOLOGY RISKS
Even if we take appropriate measures to safeguard our information, network and environment from security breaches, our customers, employees and business could still be exposed to risk.
We and third-party providers access, collect, store and transmit sensitive and confidential Company, customer and employee data and information, including consumer preferences and credit card information, all of which are subject to demanding and continuously evolving privacy and security laws and regulations. A number of jurisdictions where we do business have enacted or are considering new privacy and data protection laws which impact our responsibilities with respect to this data, including California, Virginia, Colorado, Connecticut and Utah. In addition, the substantial majority of our corporate employees working remotely has resulted in increased demand on our information technology infrastructure, which can be subject to failure, disruption or unavailability, and has increased vulnerability to cyberattacks and other cyber incidents.
We have taken measures to help prevent a breach of our information security and comply with cybersecurity and privacy requirements by implementing safeguards and procedures designed to protect the security, confidentiality and integrity of such information. In addition, we have strengthened our contracts to require, where possible, our third-party providers to implement administrative, physical and technical safeguards and procedures aligned to industry best practices. Like many companies with an ecommerce presence, we, as well as several of our vendors, have suffered breaches of our cybersecurity in the past and are at risk for such breaches in the future.

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Despite the fact that we have implemented measures to prevent intentional or inadvertent information security breaches and requested our third-party providers to do the same, these measures cannot completely eliminate cybersecurity risk. Security breaches and cyber incidents, whether at our Company, our third-party providers or other retailers, could expose us to loss, unauthorized release of customer, employee or Company confidential information, litigation, investigation, regulatory enforcement action, penalties and fines, orders to stop any alleged noncompliant activity, information technology system failures or network disruptions, increased cyber-protection and remediation costs, financial losses, potential liability, or loss of customers’, employees’ or third-party providers’ trust and business, any of which could adversely impact our reputation, competitiveness and financial performance. Concerns about our data management practices, including the collection, use, retention, security or disclosure of personal information or other privacy-related matters, even if unfounded, could subject the Company to regulatory inquiries and damage our reputation, adversely affecting our operating results.
Our business may be impacted by information technology system failures or network disruptions.
Our ability to transact with customers and operate our business depends on the efficient operation of various internal and third-party information technology systems, including cloud computing, data centers, hardware, software and applications, to manage certain aspects of our Company, including online and store transactions, logistics and communication, inventory and reporting systems. We seek to build quality and secure systems, select reputable system vendors and implement procedures intended to enable us to protect our systems when we modify them. We test our systems to address vulnerabilities and train our employees regarding practices to protect the safety of our systems.
There are inherent risks associated with modifying or replacing systems, and with new or changed relationships, including accurately capturing and maintaining data, realizing the expected benefit of the change and managing the potential disruption of the operation of the systems as the changes are implemented. Potential issues associated with implementing technology initiatives and the time and resources required to optimize the benefits of new elements of our systems and infrastructure could reduce the efficiency of our operations in the short term.
If we encounter an interruption or deterioration in critical systems or processes or experience the loss of critical data, which may result from security or cybersecurity threats or attacks, natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins or third-party or other disruptions, our business could be harmed both in the short-term and over a longer period. Depending on the severity of the failure, our disaster recovery plans may be inadequate or ineffective. These events could also damage our reputation, result in increased costs or loss of sales and be expensive and time-consuming to remedy.
REPUTATION AND RELATIONSHIP RISKS
Our customer, employee, vendor, third-party partner, landlord and other stakeholder relationships could be negatively affected if we fail to maintain our corporate culture and reputation.
We have a well-recognized culture and reputation that consumers may associate with a high level of integrity, customer service and quality merchandise, and it is one of the reasons customers shop with us and employees choose us as a place of employment. Any significant damage to our reputation, including damages arising from our business, privacy, diversity, environmental or social responsibility practices, news about our Company or factors outside our control or on social media, could diminish customer trust, weaken our vendor relationships, reduce employee morale and productivity and lead to difficulties in recruiting and retaining qualified employees. Additionally, management may not accurately assess the impact of significant legislative changes, including those that relate to privacy, employment matters, labor issues, environmental compliance and health care, impacting our relationship with our customers or our workforce and adversely affecting our sales and operations.
There is also increased focus from both internal and external stakeholders on corporate social responsibility and sustainability matters. If we do not, or are perceived not to, act responsibly with respect to our practices and initiatives, meet any communicated targets, goals or milestones or lack transparency with our initiatives, our reputation could be damaged. We may also incur additional costs as we invest in new ways to operate to better support our communities and the customer or to report our outcomes and results.
In addition, the long-term reputational impact of winding down business operations in Canada to our customers, employees, vendors and third-party partners and landlords is unknown, and we may need to take actions that could increase our expenses and adversely affect the results of our operations.

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Our business depends on third parties for the production, supply and delivery of goods, and a disruption could result in lost sales or increased costs.
Timely receipts of quality merchandise from third parties is critical to our business. Our process to identify qualified vendors and access quality products in an efficient manner on acceptable terms and cost can be complex. Vendors and factors may also be subject to credit capacity limits that restrict shipments. In addition, we rely on a limited number of carriers to deliver our product to customers. Ongoing disruptions in the global supply chain, including factory closures, transportation challenges, rising freight expenses, violations of law or global standards with respect to human rights, quality and safety by any of our importers, manufacturers or distributors, or parties upstream within their respective supply chains, could result in delays in shipments and receipt of goods or damage our reputation. These third parties may experience supply chain or port disruptions, stoppages of certain imports or other difficulties due to economic, business, political, environmental or epidemic conditions, or may shift their business models away from prior practice, any of which could negatively impact our inventory levels, delivery timelines and ability to meet customer demand. Additionally, the countries in which merchandise is manufactured could become subject to new trade restrictions, including increased taxation on imported goods, customs restrictions, tariffs or quotas. Such violations, disruptions or changes could have a material adverse effect on our business, results of operations and liquidity.
We are party to contracts, transactions and business relationships with various third parties, including vendors, suppliers, service providers, landlords and lenders, who may have performance, payment and other obligations to us. If any of the third parties with which we do business become subject to bankruptcy, receivership or similar insolvency proceedings, our rights and benefits in relation to our contracts, transactions and business relationships with such third parties could be terminated, modified in a manner adverse to us or otherwise impaired. We cannot make any assurances that we would be able to arrange for alternate or replacement contracts, transactions or business relationships on terms as favorable as our existing contracts, transactions or business relationships, if at all. Any inability on our part to do so could negatively affect our cash flows, financial condition and results of operations.
The decision to wind down business operations in Canada may negatively impact our relationships with vendors that also supply our U.S. operations in a way that might cause less favorable terms and increased costs, result in less timely and efficient deliveries or impact their ability to sell to us.
Distribution and marketing of, and access to, our products depends on a variety of third-party publishers and platforms. If these third parties limit, prohibit or otherwise interfere with or change the terms of the distribution, use or marketing of our products, it could adversely affect our results of operations.
We market our brands and distribute our products through a variety of third-party publisher and platform channels. Our ability to market on any given platform or channel is subject to the policies of that party. We are dependent on the interoperability of our products with popular mobile operating systems, such as Android or iOS, websites, networks, technologies, products and standards that we do not control. Additionally, mobile operating systems and websites have identifiers within their platforms that advertisers use to deliver personalized and targeted advertising, requiring users to “opt-in.”
Changes in our relationships with mobile operating system partners, websites or mobile carriers, or in their terms of service, could reduce or eliminate our ability to update or distribute our products on these platforms. Any changes, bugs or technical issues in such systems or websites may limit our ability to deliver, target or measure the effectiveness of ads. There is no guarantee that popular platforms will continue to feature our products, or that mobile device users will continue to use our products rather than competing products. If we do not pick the platforms relevant to our customers, if the platforms give preferential treatment to competitors, limit our ability to deliver, target or measure the effectiveness of ads or if there is a sudden shift in platform preference, our ability to market our brand effectively could be negatively impacted. Furthermore, to the extent that users choose not to “opt-in” for advertiser access to customer tracking, our ability to deliver, target or measure the effectiveness of ads or drive usage on our apps is limited.
The concentration of stock ownership in a small number of our shareholders may limit a shareholder’s ability to influence corporate matters and impact the price of our shares.
We have regularly reported in our annual proxy statements the holdings of members of the Nordstrom family, including Bruce A. Nordstrom, our former Co-President and Chairman of the Board, his sister Anne E. Gittinger and certain members of the Nordstrom family within our Executive Team. As of March 10, 2023, these individuals beneficially owned an aggregate of approximately 30% of our common stock. As a result, either individually or acting together, they may be able to exercise considerable influence over matters requiring shareholder approval, including the election of directors or other matters impacting our management or corporate governance. In addition, as reported in our periodic filings, our Board of Directors has from time to time authorized share repurchases. While these repurchases may be partially offset by share issuances under our equity incentive plans and as consideration for acquisitions, the repurchases may nevertheless have the effect of increasing the overall percentage interest held by these shareholders.

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In September 2022, our Board of Directors adopted a limited-duration shareholder rights agreement. The Rights Plan would cause substantial dilution to the ownership of any person or group that acquires 10% or more of the outstanding shares of our common stock, subject to certain exceptions in the plan (including that the ownership of Bruce A. Nordstrom, Anne E. Gittinger and certain other members of the Nordstrom family as of the date of the Rights Plan’s adoption is grandfathered under the plan). By effectively preventing a shareholder or group of shareholders other than the Nordstrom family from acquiring 10% or more of our common stock, the Rights Plan may ensure that the Nordstrom family retains its concentration of ownership relative to other shareholders.
The corporate law of the State of Washington, where we are incorporated, provides that approval of a merger or similar significant corporate transaction requires the affirmative vote of two-thirds of a company’s outstanding shares. The interests of the Nordstrom family shareholders may differ from the interest of our shareholders as a whole. The beneficial ownership of the Nordstrom family shareholders may have the effect of discouraging offers to acquire us, delaying or otherwise preventing a significant corporate transaction because the consummation of any such transaction would likely require their approval. As a result of these factors, the market price of our common stock may be affected.
INVESTMENT AND CAPITAL RISKS
If we fail to appropriately manage our capital, we may negatively impact our operations and shareholder return.
We utilize working capital to finance our operations, pay for capital expenditures, acquisitions and investments, manage our debt levels and return value to our shareholders through dividends and share repurchases. Sufficient cash and liquidity are necessary to fund our business. Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate fluctuations, may increase the cost of financing or restrict access to a potential source of liquidity. A deterioration in our capital structure or the quality and stability of our earnings could result in noncompliance with our debt covenants or a downgrade of our credit rating, constraining the financing available to us or limiting our ability to issue dividends or repurchase shares. In 2022, Fitch Ratings downgraded certain of our debt and other credit ratings. These downgrades, and any future reductions in our credit ratings, could result in restricted access to financing and increased borrowing costs and could adversely impact our operations and financial condition. In addition, if we do not properly allocate our capital to maximize returns or we do not maintain financial flexibility, our operations, cash flows and returns to shareholders could be adversely affected.
Owning and leasing real estate exposes us to possible liabilities and losses.
We own or lease the land, buildings and equipment for all of our Supply Chain Network facilities, stores and corporate locations and are therefore subject to all of the risks associated with owning and leasing real estate. In particular, the value of the assets could decrease, their operating costs could increase or facilities or stores may not be opened as planned due to changes in the real estate market, demographic trends, site competition, dependence on third-party performance or overall economic environment or may be constrained as a result of the COVID-19 pandemic. We are also potentially subject to liability for environmental conditions, exit costs associated with disposal of a store and commitments to pay base rent for the entire lease term or operate a store for the duration of an operating covenant. In addition, the invalidity of, or default or termination under, any of our leases may accelerate required cash payments or interfere with our ability to use and operate all or a portion of certain of our facilities, which may have an adverse impact on our operations and results.
The investment in existing and new locations may not achieve our expected returns, such as our investment in the Canada business which ultimately did not achieve our expectations.
The locations of our Supply Chain Network facilities and existing stores, planned store openings and relocations are assessed based upon desirability, demographics and retail environment. In particular, we have expanded our Closer to You strategy, where we leverage and connect our digital and physical assets within discrete geographic markets to seamlessly serve our customers within those markets and create synergies between our digital assets, Supply Chain Network and stores. We must equip our locations with the proper processes, technology and tools for timely and accurate fulfillment and inventory replenishment. This involves certain risks, including properly balancing our capital investments between fulfillment capabilities, technology, digital channels, new stores, relocations and remodels, assessing the suitability of locations in new domestic and international markets and constructing, furnishing and supplying a facility or store in a timely and cost-effective manner, which may be affected by the actions of third parties, including but not limited to private entities and local, state or federal regulatory agencies.
Customers’ expectations regarding speed of delivery are evolving. If we do not effectively integrate our digital and physical assets as part of our Closer to You strategy, or select locations to optimize our Closer to You strategy, we could incur significantly higher costs and shipping times that do not meet customer expectations, which in turn could have a material adverse effect on our business. Particularly in light of the changing trends between digital and brick-and-mortar shopping channels, sales through our digital channels or at our stores may not meet projections, which could adversely affect our return on investment. If we do not properly allocate capital expenditures between locations, timely complete construction projects associated with Supply Chain Network facilities and new, relocated and remodeled stores or properly maintain any of our properties, customer expectations may not be met, we may lose sales and may incur additional expenses.

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ECONOMIC AND EXTERNAL MARKET RISKS
Our revenues and operating results are affected by the seasonal nature of our business and cyclical trends in consumer spending.
Our business, like that of other retailers, is subject to seasonal fluctuations and cyclical trends in consumer spending. Our sales are typically higher in our second quarter, which usually includes most of our Anniversary Sale, and in the fourth quarter due to the holidays. Approximately one week of our Anniversary Sale shifted from the third quarter in 2021 to the second quarter in 2022. To provide shareholders a better understanding of management’s expectations surrounding results, we provide our financial outlook on our expected operating and financial results for future periods comprised of forward-looking statements subject to certain risks and uncertainties. Any factor that negatively impacts these selling seasons could have an adverse and disproportionate effect on our results of operations for the entire year.
Additionally, factors such as results differing from our outlook, changes in sales and operating income, changes in our market valuations, performance results for the general retail industry, news or announcements by us or our industry competitors or changes in analysts’ recommendations may cause volatility in the price of our common stock and our shareholder returns.
A downturn in economic conditions, currency fluctuations, inflation, increased unemployment and bankruptcy rates, changes in fiscal stimulus and other external market factors have had and could have a significant adverse effect on our business and stock price.
During economic downturns or inflationary periods, including those resulting from the impacts of COVID-19, fewer customers may shop as these purchases may be seen as discretionary, and those who do shop may limit the amount of their purchases. Any reduced demand or changes in customer purchasing behavior may lead to lower sales, higher markdowns and an overly promotional environment or increased marketing and promotional spending.
Our stores located in shopping centers and malls have been and may be affected by consumer traffic at shopping centers and malls.
The majority of our stores are located within shopping centers and malls and may benefit from the abilities that we and other anchor tenants have to generate consumer traffic. A decline in shopping center traffic in favor of ecommerce, the development of new shopping centers and malls, the lack of availability of favorable locations within existing or new shopping centers and malls, the success of individual shopping centers and malls and the success or failure of other anchor tenants have impacted and may impact our ability in the future to maintain or grow our business, as well as our ability to open new stores, which could have an adverse effect on our financial condition or results of operations.
The results from our credit card operations could be adversely affected by changes in market conditions or laws.
Revenues earned under our program agreement with TD are indirectly subject to economic and market conditions that are beyond our control, including, but not limited to, interest rates, consumer credit availability, demand for credit, consumer debt levels, payment patterns, delinquency rates, frequency of fee waivers, frequency or volume of governmental stimulus, personal bankruptcy rates, employment trends, laws and other factors. Additionally, changes in net sales partially translate to program agreement revenues. Changes in economic, market or regulatory conditions, customer behavior or our mix of sales and program agreement revenues could impact our revenues and profitability.
Our business and operations could be materially and adversely affected by severe weather patterns, climate change, natural disasters, widespread pandemics, epidemics, civil unrest and other natural or man-made economic, political or environmental disruptions.
Disruptions, and government responses, could cause, among other things, decreases in consumer spending that could negatively impact our sales, declines in traffic in urban centers, staffing shortages in our Supply Chain Network facilities, stores or corporate offices, interruptions in the flow of merchandise to our stores, disruptions in the operations of our merchandise vendors or property developers, increased costs and a negative impact on our reputation and long-term growth plans, which could vary based on the length and severity of the disruption. We have a significant amount of our total sales, stores and square footage on the west coast of the United States, particularly in California, where we have experienced earthquakes, wildfires and power outages and shortages that increase our exposure to any market-disrupting conditions in this region.

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LEGAL AND REGULATORY RISKS
We are subject to certain laws, litigation, regulatory matters and ethical standards, and compliance or failure to comply with or adequately address developments as they arise could adversely affect our reputation and operations.
Our policies, procedures and practices and the technology we implement are intended to comply with applicable federal, state, local and foreign laws, tariffs, rules and regulations, as well as responsible business, social and environmental practices, all of which may change from time to time. Our and our vendors’ compliance with these requirements and/or changes to them may cause our business to be adversely impacted, or even limit or restrict the activities of our business. In addition, if we fail to comply with applicable laws and regulations or implement responsible business, social, environmental and supply chain practices, we could be subject to damage to our reputation, class action lawsuits, regulatory investigations, legal and settlement costs, charges and payments, civil and criminal liability, increased cost of regulatory compliance, losing our ability to offer or accept credit and debit card payments from our customers, restatements of our financial statements, disruption of our business and loss of customers. New and emerging privacy and data protection laws may increase compliance expenses and limit business opportunities and strategic initiatives, including customer engagement. Any required changes to our employment practices could result in the loss of employees, reduced sales, increased employment costs, low employee morale and harm to our business and results of operations. In addition, political and economic factors could lead to unfavorable changes in federal, state and foreign tax laws, which may affect our tax assets or liabilities and adversely affect our results of operations. We are also regularly involved in various litigation matters that arise in the ordinary course of business. Litigation or regulatory developments could adversely affect our business and financial condition.
Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 requires management assessments of the effectiveness of our internal controls over financial reporting through documenting, testing, monitoring and enhancement of internal control over financial reporting. If we fail to implement or maintain adequate internal controls, we may not produce reliable financial reports or fail to prevent or detect financial fraud, which may adversely affect our financial position, investor confidence or our stock price.
Changes to accounting rules and regulations could affect our financial results or financial condition.
Accounting principles and related pronouncements, implementation guidelines and interpretations with regard to a wide variety of accounting matters that are relevant to our business, including, but not limited to, revenue recognition, inventory valuation, long-lived asset recoverability and income taxes, are highly complex and involve subjective assumptions, estimates and judgments. Changes in these rules and regulations, changes in our interpretation or our misapplication of the rules or regulations, changes in accounting policies or changes in underlying assumptions, estimates or judgments could adversely affect our financial performance or financial position.
If Nordstrom Canada is unable to make a fair and orderly wind-down of its business operations, or if our existing reserves are not adequate to cover our ultimate liability, our financial condition and results of operations could be adversely affected.
On March 2, 2023, we announced the decision to discontinue support for Nordstrom Canada’s operations. Accordingly, Nordstrom Canada has commenced a wind-down of its business operations, obtaining an Initial Order from the Ontario Superior Court of Justice under the CCAA on March 2, 2023 to facilitate the wind-down in an orderly fashion. Nordstrom Canada intends to wind down its Nordstrom and Nordstrom Rack stores across Canada, with the help of a third-party liquidator, and its Canadian ecommerce platform. The ecommerce platform ceased operations on March 2, 2023. The in-store wind-down is anticipated to be completed by late June 2023. We expect to incur pre-tax charges of approximately $300 to $350 related to the wind-down in the first quarter of 2023, driven primarily by the write-down of our investment in Nordstrom Canada. Given the early stage of the exit activities, our estimates of losses are based on currently available information and our assessment of the validity of certain claims. These estimates may change as new information becomes available. Our reserves relating to these matters may not be adequate to cover our ultimate liability and amounts beyond our reserves could have a material adverse effect on our financial condition and results of operations. In addition, we may suffer other losses for which we have not established reserves, although we believe that possibility is not probable. If Nordstrom Canada is unable to effectively and efficiently execute the wind-down of business operations, we may incur additional costs and cash outflows.
COVID-19 RISKS
The COVID-19 global pandemic may continue to have an effect on our business and results of operations.
The COVID-19 pandemic continues to have unpredictable impacts on workforces, customers, consumer sentiment, economies, financial markets and business practices. The direct effects of COVID-19 and associated consumer and governmental responses have had, and may continue to have, a material adverse impact on global economic conditions and our business, results of operations and financial condition.
STRATEGIC AND OPERATIONAL
We, as well as our vendors and third-party service providers, may continue to experience operational effects due to supply chain disruptions, labor shortages, social distancing restrictions and the need to adapt to ever-changing government-imposed restrictions, regulatory requirements, operating procedures and protocols. We are unable to accurately predict the full impact COVID-19 will have on our longer-term operations, particularly with respect to our current mix of merchandise offerings, shifts in product and channel preferences, store traffic and digital demand trends, employment relations and corporate culture.

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In addition, the operations, supply chain and financial condition of many of our vendors may continue to be affected by COVID-19, including difficulty sourcing products and labor or obtaining the financing necessary to manufacture the products they sell to us. As a result, any business disruption may impact our ability to timely acquire the products we sell to our customers. To the extent our vendors may be unable to produce, sell or ship products to us or our customers, our business may be negatively impacted.
ECONOMIC AND EXTERNAL
We may be negatively impacted by any deterioration in economic conditions caused by a resurgence of COVID-19 and the impact of that deterioration on discretionary consumer spending and changes in consumer behavior. We are unable to accurately predict the full impact that COVID-19 will have on the global economy and on our employees, vendors, suppliers and customers going forward due to uncertainties, including the currently unknowable duration and spread of COVID-19, actions taken to limit the spread, the public’s willingness to comply with such actions and the impact of any governmental regulations imposed in response to the pandemic.
To the extent the COVID-19 pandemic and its associated economic challenges adversely affects our business and financial results, it may also have the effect of heightening many of the other risks previously described.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
(Square footage amounts in thousands)
The following table summarizes the Supply Chain Network and retail locations we own or lease and the total square footage by category as of January 28, 2023:
Number of locations
Supply Chain NetworkNordstromNordstrom RackTotal square footage
Leased buildings on leased land34242 14,837 
Owned buildings on leased land— 55— 10,062 
Owned buildings on owned land248,250 
Partly owned and partly leased— 2— 544 
Total10 115 243 33,693 
The following table summarizes our Supply Chain Network and retail store count and square footage activity:
 CountSquare footage
Fiscal year2022202120222021
Total, beginning of year367 369 33,982 34,080 
Openings1:
Nordstrom1 —  — 
Nordstrom Rack2 55 29 
Closures1
(2)(3)(344)(127)
Total, end of year368 367 33,693 33,982 
1 Square footage includes adjustments due to relocations, remodels or changes in lease-term square footage.

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The following table lists our Supply Chain Network and retail store count and square footage by state/province as of January 28, 2023:
Supply Chain NetworkNordstromNordstrom RackTotal
CountSquare FootageCountSquare FootageCountSquare FootageCountSquare Footage
U.S.
Alabama— — — — 35 1 35 
Alaska— — — — 35 1 35 
Arizona— — 235 10 337 11 572 
California2,571 29 4,051 55 2,009 88 8,631 
Colorado— — 387 239 9 626 
Connecticut— — 341 36 3 377 
Delaware— — 127 32 2 159 
Florida221 1,031 16 534 23 1,786 
Georgia— — 383 154 6 537 
Hawaii— — 195 78 3 273 
Idaho— — — — 37 1 37 
Illinois— — 947 16 594 20 1,541 
Indiana— — 134 60 3 194 
Iowa1,529 — — 35 3 1,564 
Kansas— — 219 35 2 254 
Kentucky— — — — 33 1 33 
Louisiana— — — — 90 3 90 
Maine— — — — 30 1 30 
Maryland451 603 219 10 1,273 
Massachusetts— — 595 266 11 861 
Michigan— — 430 178 7 608 
Minnesota— — 380 134 6 514 
Missouri— — 342 69 4 411 
Nevada— — 207 101 4 308 
New Jersey— — 817 284 12 1,101 
New Mexico— — — — 34 1 34 
New York— — 838 11 394 16 1,232 
North Carolina— — 300 74 4 374 
Ohio— — 549 224 9 773 
Oklahoma— — — — 67 2 67 
Oregon374 363 218 9 955 
Pennsylvania976 381 240 10 1,597 
Rhode Island— — — — 38 1 38 
South Carolina— — — — 101 3 101 
Tennessee— — 145 69 3 214 
Texas— — 1,413 18 613 26 2,026 
Utah— — 277 130 6 407 
Virginia— — 452 268 9 720 
Washington— — 1,270 10 383 16 1,653 
Washington D.C.— — — — 66 2 66 
Wisconsin— — 150 67 3 217 
Canada
Alberta— — 208 — — 3 208 
British Columbia— — 262 — — 2 262 
Ontario— — 899 — — 8 899 
Total10 6,122 115 18,931 243 8,640 368 33,693 
Our headquarters are located in Seattle, Washington, where our offices consist of both leased and owned space. On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations (see Note 15: Subsequent Events in Item 8 for more information).
As of March 10, 2023, we have announced 18 Nordstrom Rack store openings and one Nordstrom Rack store relocation in 2023 and one Nordstrom Rack store opening in 2024.

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Item 3. Legal Proceedings.
We are subject from time to time to various claims and lawsuits arising in the ordinary course of business, including lawsuits alleging violations of state and/or federal wage and hour and other employment laws, privacy and other consumer-based claims. Some of these lawsuits may include certified classes of litigants, or purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some may remain unresolved for several years. We believe the recorded accruals in our Consolidated Financial Statements are adequate in light of the probable and estimable liabilities.
On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations. Nordstrom Canada entities obtained an Initial Order from the Ontario Superior Court of Justice under the CCAA to facilitate the wind-down in an orderly fashion. See Note 15: Subsequent Events in Item 8 for more information.
As of the date of this report, we do not believe any other currently identified claim, proceeding or litigation, either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters are subject to inherent uncertainties, our view of them may change in the future.
Item 4. Mine Safety Disclosures.
None.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.
(Dollar and share amounts in millions, except per share amounts and where noted otherwise)
MARKET AND SHAREHOLDER INFORMATION
Our common stock, without par value, is traded on the NYSE under the symbol “JWN.” The approximate number of record holders of common stock as of March 6, 2023 was 4,532. On this date, we had 160,151,038 shares of common stock outstanding.
DIVIDENDS
The following table summarizes our historical dividends declared and paid per share:
Fiscal year2022
20211
1st Quarter$0.19 $— 
2nd Quarter0.19 — 
3rd Quarter0.19 — 
4th Quarter0.19 — 
Full Year$0.76 $— 
1 On March 23, 2020, in response to uncertainty from the COVID-19 pandemic, we announced the suspension of our quarterly dividend payments beginning in the second quarter of 2020. Payments were reinstated in the first quarter of 2022.
Any future determination to pay cash dividends and the amount of dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, operating results, capital requirements, contractual commitments and such other factors as the Board of Directors deems relevant (see Note 10: Shareholders’ Equity in Item 8).
SHARE REPURCHASES
The following is a summary of our fourth quarter share repurchases:
Total Number
of Shares
Purchased
Average
Price Paid
Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
November 2022
(October 30, 2022 to November 26, 2022)
0.01 $21.76 0.01 $447 
December 2022
(November 27, 2022 to December 31, 2022)
0.3 $17.80 0.3 $442 
January 2023
(January 1, 2023 to January 28, 2023)
0.2 $17.35 0.2 $438 
Total0.5 $17.72 0.5 
See Note 10: Shareholders’ Equity in Item 8 for more information about our August 2018 and May 2022 share repurchase programs. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to the discretion of the Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules.

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STOCK PRICE PERFORMANCE
The following graph compares the cumulative total return of Nordstrom common stock, Standard & Poor’s Retail Index (“S&P Retail”), Standard & Poor’s 500 Index (“S&P 500”) and Nordstrom’s peer group for each of the last five fiscal years ended January 28, 2023. The Retail Index is composed of 21 retail companies representing an industry group of the S&P 500. Our peer group is consistent with the retail peer group that we include in the Compensation Discussion and Analysis section of our Proxy Statement for our 2023 Annual Meeting of Shareholders and is weighted by the market capitalization of each component. The following graph assumes an initial investment of $100 each in Nordstrom common stock, S&P Retail, S&P 500 and Nordstrom’s peer group on February 3, 2018 and assumes reinvestment of dividends.
https://cdn.kscope.io/e49e5880718c4306c8b38615ef7037f4-jwn-20230128_g2.jpg
End of fiscal year1
201720182019202020212022
Nordstrom common stock$100$97$83$81$50$44
S&P Retail$100$108$129$183$189$152
S&P 500$100$100$121$141$168$154
Nordstrom’s peer group$100$116$121$136$146$154
1 Dollar amounts are in ones.

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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Dollar and share amounts in millions, except per share amounts and where noted otherwise)
The following MD&A provides a narrative of our financial performance and is intended to promote understanding of our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, Item 8: Financial Statements and Supplementary Data and generally discusses the results of operations for fiscal year 2022 compared with 2021. For our comparison and discussion of 2021 and 2020, see Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II of our 2021 Annual Report. For our discussion of market risk information for 2021, see Item 7A: Quantitative and Qualitative Disclosures About Market Risk in Part II of our 2021 Annual Report. The following discussion and analysis contains forward-looking statements and should also be read in conjunction with Item 1A: Risk Factors in Part I as well as other cautionary statements and risks described elsewhere in this 2022 Annual Report, before deciding to purchase, hold or sell shares of our common stock.
Overview
Results of Operations
Liquidity
Capital Resources
Critical Accounting Estimates
Recent Accounting Pronouncements

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OVERVIEW
In 2022, we delivered a 5% increase in total Company net sales despite challenging macroeconomic conditions. For the year, net earnings were $245 and $1.51 per diluted share. Excluding a gain on the sale of our interest in a corporate office building, Trunk Club wind-down costs and a supply chain technology and related asset impairment charge, adjusted EBIT was $5021, Adjusted EBIT margin was 3.3%1 and adjusted EPS was $1.691. Customer demand decelerated beginning in late June and this trend continued through the holiday season, and while these pressures impacted all customer segments, they were more pronounced in customers with lower income profiles. We took action to navigate the macroeconomic uncertainty and position our business for success. This included managing expenses to align with sales expectations, optimizing product mix and clearing through excess inventory. While this strategy required more markdowns than we had initially planned in 2022, we exited the year with inventory levels down 15% and are positioned for greater agility amidst continuing macroeconomic uncertainty.
While we navigate this ever-shifting landscape, we remain committed to our long-term strategic and financial goals. We also continue building capabilities to better serve customers and deliver increased profitability, with a focus on improving Nordstrom Rack performance, winning in our most important markets and leveraging our digital capabilities. We have a loyal customer base and acquired approximately 10 million new customers and 2.5 million new Nordy Club members in 2022. In 2023, we will build on these successes through three priorities: improving Nordstrom Rack performance, increasing our inventory productivity and optimizing our supply chain.
Nordstrom Rack – We are committed to delivering profitable growth while improving the customer experience through three key initiatives.
First is our continued focus on increasing our supply of premium brands at Nordstrom Rack. We cleared out older and unproductive inventory in the fourth quarter, which gives us greater flexibility to improve our merchandise assortment as we enter 2023. We are prioritizing 100 nationally recognized strategic brands that help us drive sales and grow market share. We are dedicated to having great brands at great prices at each of our locations, and these brands are a differentiator for the Rack as many are not widely available in the off-price space. These brands accounted for half of Rack sales in 2022 and they make up 60% of our on-order for the first half of 2023. By increasing our inventory turnover at the Rack, we can increase the flow of these great brands, give customers newness each time they visit and increase customer engagement.
Second is expanding our reach and convenience for customers through opening new Rack stores. Rack stores are our largest source of new customer acquisition and we have an opportunity to attract more customers and drive profitable growth through a proven model. We opened two new Rack stores in 2022 and have announced plans to open 20 more.
Finally, we aim to drive greater engagement and higher profitability at NordstromRack.com. Our digital capabilities are unique in the off-price space, and we see opportunities to leverage our digital assets to increase engagement with Rack customers. We also continue to optimize our operational model to drive improved profitability. In the third quarter of 2022, we reduced Rack store-based order fulfillment and raised the minimum order amount to receive free ship-to-store delivery on NordstromRack.com. These actions reduced order cancellations, simplified Rack operations and improved profitability, but negatively impacted topline growth at the Rack.
Inventory Productivity – Better inventory discipline across our operations provides customers with relevant and new assortments from the world’s best brands. Supply chain disruptions and volatility over the past three years had a significant impact on our inventory management and outcomes. As supply chains have stabilized, we have a significant opportunity to improve our earnings and returns on invested capital through increased productivity from our merchandise inventory, which is our largest annual investment.
Supply Chain Optimization – We made significant progress on our supply chain initiatives in 2022, which drove improvement in the customer experience and profitability despite ongoing cost pressures. We made progress on optimizing unit flow, improved productivity in our distribution and fulfillment centers and increased delivery speed. In 2023, we expect to see further benefits from these and additional supply chain optimization actions.
Although there is continued macroeconomic uncertainty heading into 2023, our priorities, along with the capabilities we have built with our Closer to You strategy and digital assets, prepare us to manage short-term pressures. With our strong balance sheet and cash position, we also have the flexibility to respond to shifting demand. We are navigating short-term headwinds, while also continuing to build capabilities to better serve our customers, drive profitable growth and increase shareholder value.
1 Adjusted EBIT, Adjusted EBIT margin and Adjusted EPS are non-GAAP financial measures. For a reconciliation between GAAP and non-GAAP financial measures, see Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures) below.

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RESULTS OF OPERATIONS
In our ongoing effort to enhance the customer experience, we are focused on providing a seamless retail experience across our Company. We invested early in integrating our operations, merchandising and technology across our stores and online in both our Nordstrom and Nordstrom Rack banners. By connecting our digital and physical assets across Nordstrom and Nordstrom Rack, we are able to better serve customers when, where and how they want to shop. We have one Retail reportable segment and analyze our results on a total company basis, using customer, market share, operational and net sales metrics.
We monitor a number of key operating metrics to evaluate our Company’s performance. In addition to net sales, net earnings (loss) and other results under GAAP, two other key operating metrics we use are GMV and inventory turnover rate.
GMV: calculated as the total dollar value of items sold through our digital platforms and stores. GMV includes net sales from inventory we own, as well as the retail value of merchandise sold under our unowned inventory models with our vendors. We use GMV as an indicator of the scale and growth of our operations and the impact of our unowned inventory models.
Inventory Turnover Rate: calculated as the trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory. Inventory turnover rate is an indicator of our success in optimizing inventory volumes in accordance with customer demand.
Net Sales
The following table summarizes net sales:
Fiscal year2022 2021 
Nordstrom$10,279 $9,640 
Nordstrom Rack4,813 4,762 
Total net sales$15,092 $14,402 
Net sales increase:
Nordstrom6.6 %37.8 %
Nordstrom Rack1.1 %41.7 %
Total Company4.8 %39.1 %
Digital sales as a % of total net sales38 %42 %
Digital sales (decrease) increase(6 %)%
Nordstrom GMV increase6.9 %39.6 %
Total Company GMV increase5.0 %40.3 %
Total Company net sales and GMV increased for the full fiscal year compared with 2021. Our Anniversary Sale event increased 5.0% while holiday sales, in fiscal November and December, decreased 3.5%, when compared with the same periods in 2021. The top-performing merchandise categories were Men’s Apparel, Shoes and Women’s Apparel, compared with 2021. During the year, we opened two and closed one Nordstrom Rack stores and opened one ASOS | Nordstrom store.
Digital sales decreased compared with 2021. Eliminating store-based order fulfillment for Nordstrom Rack digital orders during the third quarter and sunsetting Trunk Club earlier in fiscal 2022 negatively impacted digital sales by approximately 300 basis points.
Nordstrom net sales and GMV increased compared with 2021, which reflected an increase in the average selling price per item sold, partially offset by a decrease in the number of items sold.
Nordstrom Rack net sales increased compared with 2021, which reflected an increase in the average selling price per item sold, partially offset by a decrease in the number of items sold.
See Note 2: Revenue in Item 8 for information about disaggregated revenues.
Credit Card Revenues, Net
Credit card revenues, net increased $51 compared with 2021, primarily as a result of higher finance charges due to larger outstanding balances.

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2023 Total Revenue Outlook
In fiscal 2023, which includes a 53rd week, we expect total revenue, including retail sales and credit card revenues, to decline 4% to 6% compared with fiscal 2022. Our outlook includes approximately 250 basis points of negative impact from the wind-down of business operations in Canada (see Note 15: Subsequent Events in Item 8 for more information) and approximately 130 basis points of positive impact from the 53rd week.
Gross Profit
The following table summarizes gross profit:
Fiscal year2022 2021 
Gross profit$5,073 $5,058 
Gross profit as a % of net sales33.6 %35.1 %
Inventory turnover rate4.20 4.18 
Gross profit increased $15, compared with 2021, primarily due to higher sales partially offset by higher markdowns. Gross profit decreased 150 basis points as a rate of net sales, compared with 2021, primarily due to higher markdown rates, especially in the second half of the year as we prioritized rightsizing inventory levels.
Ending inventory as of January 28, 2023 decreased 15%, compared with January 29, 2022, versus a 4% decrease in sales in the fourth quarter of 2022, compared with 2021. The decrease in inventory levels compared with 2021 is a result of our focus on rightsizing inventory levels in a highly promotional environment in the fourth quarter of 2022.
Selling, General and Administrative Expenses
SG&A is summarized in the following table:
Fiscal year2022 2021 
SG&A expenses$5,046 $4,953 
SG&A expenses as a % of net sales33.4 %34.4 %
SG&A increased $93 in 2022, compared with 2021, primarily due to variable expenses associated with higher sales and a supply chain technology and related asset impairment charge of $70, partially offset by supply chain expense efficiencies (see Note 1: Nature of Operations and Summary of Significant Accounting Policies in Item 8). As a result of the supply chain expense efficiencies, SG&A decreased 95 basis points as a rate of net sales compared with 2021.
Earnings Before Interest and Income Taxes
EBIT is summarized in the following table:
Fiscal year2022 2021 
EBIT$465 $492 
EBIT as a % of net sales3.1 %3.4 %
EBIT decreased $27 and 35 basis points as a rate of net sales in 2022, compared with 2021, primarily due to higher markdowns and a supply chain technology and related asset impairment charge, partially offset by supply chain expense efficiencies and higher sales.
Interest Expense, Net
Interest expense, net is summarized in the following table:
Fiscal year20222021 
Interest on long-term debt and short-term borrowings$150 $258 
Less:
Interest income(10)(1)
Capitalized interest(12)(11)
Interest expense, net$128 $246 
Interest expense, net decreased $118 in 2022 compared with 2021, primarily due to debt refinancing charges of $88 related to the redemption of the Secured Notes in 2021, the redemption of the 4% senior notes in 2021 and an increase in interest income.

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Income Tax Expense
Income tax expense is summarized in the following table:
Fiscal year20222021
Income tax expense$92 $68 
Effective tax rate27.2 %27.5 %
The following table illustrates the components of our effective tax rate:
Fiscal year20222021
Statutory rate21.0 %21.0 %
CARES Act impact (0.9 %)
State and local income taxes, net of federal income taxes5.9 %3.4 %
Federal credits(3.8 %)(4.0 %)
Non-deductible expenses1.2 %2.7 %
Stock-based compensation1.8 %2.0 %
Valuation allowance0.4 %1.8 %
Taxes on foreign operations1.6 %1.3 %
Other, net(0.9 %)0.2 %
Effective tax rate27.2 %27.5 %
The decrease in the effective tax rate for 2022 compared with 2021, was primarily due to reductions in non-deductible executive compensation and valuation allowance on foreign losses, partially offset by unfavorable state provision-to-return differences compared with favorable differences in 2021.
Earnings Per Share
EPS is as follows:
Fiscal year2022 2021 
Basic$1.53 $1.12 
Diluted$1.51 $1.10 
Diluted EPS increased $0.41 in 2022 compared with 2021, primarily due to higher net earnings as a result of lower interest expense, partially offset by lower EBIT. In the first quarter of 2021, we recorded an interest expense charge of $88 related to the redemption of the Secured Notes.

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Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures)
The following are key financial metrics and, when used in conjunction with GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS exclude certain items that we do not consider representative of our core operating performance. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBIT and Adjusted EBITDA is net earnings. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBIT margin is net earnings as a percent of net sales. The financial measure calculated under GAAP which is most directly comparable to Adjusted EPS is diluted EPS.
Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for, net earnings, net earnings as a percent of net sales, operating cash flows, earnings per share, earnings per diluted share or other financial measures performed in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies’ financial measures and therefore may not be comparable to methods used by other companies. The following is a reconciliation of net earnings to Adjusted EBIT and Adjusted EBITDA and net earnings as a percent of net sales to Adjusted EBIT margin:
Fiscal year20222021
Net earnings$245 $178 
Income tax expense92 68 
Interest expense, net128 246 
Earnings before interest and income taxes465 492 
Supply chain impairment70 — 
Trunk Club wind-down costs18 — 
Gain on sale of interest in a corporate office building(51)— 
Adjusted EBIT502 492 
Depreciation and amortization expenses604 615 
Amortization of developer reimbursements(72)(78)
Adjusted EBITDA$1,034 $1,029 
Net sales$15,092$14,402
Net earnings as a % of net sales1.6 %1.2 %
EBIT margin %3.1 %3.4 %
Adjusted EBIT margin %3.3 %3.4 %
The following is a reconciliation of diluted EPS to Adjusted EPS:
Fiscal year20222021
Diluted EPS$1.51 $1.10 
Supply chain impairment0.44 — 
Trunk Club wind-down costs0.11 — 
Gain on sale of interest in a corporate office building(0.31)— 
Debt refinancing charges included within interest expense, net 0.54 
Income tax impact on adjustments1
(0.06)(0.13)
Adjusted EPS$1.69 $1.51 
1 The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate for the respective non-GAAP adjustment.

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Adjusted ROIC (Non-GAAP financial measure)
We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. In addition, we have incorporated it in our executive incentive measures, and we believe it is an important indicator of shareholders’ return over the long term.
Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of calculating a non-GAAP financial measure 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 ROIC is return on assets. The following shows the components to reconcile the return on assets calculation to Adjusted ROIC:
Fiscal year20222021
Net earnings$245 $178 
Income tax expense92 68 
Interest expense138 247 
Earnings before interest and income tax expense475 493 
Operating lease interest1
85 87 
Adjusted net operating profit560 580 
Estimated income tax expense2
(152)(159)
Adjusted net operating profit after tax$408 $421 
Average total assets$9,069 $9,301 
Average deferred property incentives in excess of ROU assets3
(197)(232)
Average non-interest bearing current liabilities(3,185)(3,352)
Average invested capital$5,687 $5,717 
Return on assets2.7 %1.9 %
Adjusted ROIC7.2 %7.4 %
1 Operating lease interest is a component of Operating Lease Cost recorded in occupancy costs. We add back operating lease interest for purposes of calculating adjusted net operating profit for consistency with the treatment of interest expense on our debt.
2 Estimated income tax expense is calculated by multiplying the adjusted net operating profit by the effective tax rate for the trailing twelve-month periods ended January 28, 2023 and January 29, 2022. The effective tax rate is calculated by dividing income tax expense by earnings before income taxes for the same trailing twelve-month periods.
3 For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities on the Consolidated Balance Sheets. The current and non-current amounts are used to reduce average total assets above, as this better reflects how we manage our business.

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LIQUIDITY
We strive to maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to maintain appropriate levels of short-term borrowings. In the short term, our ongoing working capital and capital expenditure requirements, and any dividend payments or share repurchases, are generally funded through cash flows generated from operations. In addition, we have access to the commercial paper market and can draw on our Revolver for working capital, capital expenditures and general corporate purposes. Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial position, manage refinancing risk and allow flexibility for strategic initiatives. We regularly assess our debt and leverage levels, capital expenditure requirements, debt service payments, dividend payouts, share repurchases and other future investments.
We ended fiscal year 2022 with $687 in cash and cash equivalents and $800 of additional liquidity available on our Revolver. Cash and cash equivalents as of January 28, 2023 increased from $322 in 2021, driven by lower payments for merchandise inventory and our amended 2022 TD program agreement, partially offset by value returned to shareholders through dividends and share repurchases. We believe that our operating cash flows are sufficient to meet our cash requirements for the next 12 months and beyond. Our cash requirements are subject to change as business conditions warrant and opportunities arise and we may elect to raise additional funds in the future through the issuance of either debt or equity.
The following is a summary of our cash flows by activity:
Fiscal year20222021
Net cash provided by operating activities$946 $705 
Net cash used in investing activities(393)(521)
Net cash used in financing activities(186)(544)
Operating Activities
The majority of our operating cash inflows are derived from sales. We also receive cash payments for property incentives from developers and vendors. Our operating cash outflows generally consist of payments to our merchandise vendors (net of vendor allowances) and shipping carriers, payments to our employees for wages, salaries and other employee benefits and payments to our landlords for rent. Operating cash outflows also include payments for income taxes and interest payments on our short-term and long-term borrowings.
Net cash provided by operating activities increased $241 between 2022 and 2021 primarily due to lower payments for inventory and our amended 2022 TD program agreement, partially offset by the receipt of the income tax refund related to the loss carryback provision of the CARES Act in 2021.
Investing Activities
Our investing cash outflows include payments for capital expenditures, including technology, stores and supply chain improvements. Our investing cash inflows are generally from proceeds from sales of property and equipment. Activity also includes the purchase and sale of financial interests of certain private companies and venture capital funds.
Net cash used in investing activities decreased $128 between 2022 and 2021 primarily due to the sale of our interest in a corporate office building in 2022 and our investment in ASOS.com Ltd. in 2021 (see Note 1: Nature of Operations and Summary of Significant Accounting Policies in Item 8).

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Capital Expenditures
Our capital expenditures, net are summarized as follows:
Fiscal year20222021
Capital expenditures$473 $506 
Less: deferred property incentives1
(20)(10)
Capital expenditures, net$453 $496 
Capital expenditures, net category allocation:
Technology66 %61 %
New stores, relocations, remodels and other24 %22 %
Supply chain10 %17 %
Total100 %100 %
1 Deferred property incentives are included in our cash provided by operations in our Consolidated Statements of Cash Flows in Item 8. We operationally view the property incentives we receive from our developers and vendors as an offset to our capital expenditures.
Fiscal year
20231
2022 2021 2020 2019 2018 
Capital expenditures as a % of net sales3%-4%3.1 %3.5 %3.7 %6.2 %4.2 %
1 Rate represents amounts forecasted in 2023.
Capital expenditures as a percentage of net sales in 2022 were at the lower end of our outlook, and decreased compared with 2021 primarily due to decreases in supply chain expenditures and completion of investments in our New York City Nordstrom flagship store in 2022. Going forward, we expect capital expenditure requirements on average to range from 3% to 4% of net sales, and primarily support investments in technology and supply chain capabilities. Approximately $42 of our purchase obligation commitments relate to capital expenditures, all of which we expect to impact our liquidity in the next year (see Note 12: Commitments and Contingencies in Item 8).
Financing Activities
The majority of our financing activities include long-term debt or Revolver proceeds and/or payments, dividend payments and repurchases of common stock.
Net cash used in financing activities decreased $358 between 2022 and 2021 primarily due to net long-term debt activity in 2021, partially offset by dividends paid in 2022, compared with none in 2021.
Share Repurchases
In determining the sizing and timing of share repurchases, we analyze a number of different factors, including our liquidity position, current market and economic conditions, as well as alternative uses of capital, including those used to offset anticipated dilution from equity incentive plans. Share repurchases are made as conditions warrant, in the open market and are then retired. We repurchased 2.8 shares of our common stock for $62 in 2022 and had $438 remaining in share repurchase capacity as of January 28, 2023, compared with no share repurchases in 2021. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to the discretion of the Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules (see Note 10: Shareholders’ Equity in Item 8).
Dividends
In determining the dividends to pay, we analyze our dividend payout ratio and dividend yield, while taking into consideration our current and projected operating performance and liquidity, subject to our Revolver covenants (see Note 5: Debt and Credit Facilities in Item 8). Our expected dividend payments in 2023 are a continuation of 50% of the pre-COVID levels. In 2022, we paid $119, or $0.76 per share, compared with no dividends in 2021 (see Note 10: Shareholders’ Equity in Item 8).

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Cash Requirements
We have various commitments and other executory contracts that are disclosed in the following Notes to Consolidated Financial Statements in Item 8:
Note 4: Leases
Note 5: Debt and Credit Facilities
Note 7: Self-Insurance
Note 8: Supplemental Executive Retirement Plan
Note 11: Income Taxes
Note 12: Commitments and Contingencies
Note 15: Subsequent Events
Other commitments include $66 for deferred compensation and other accrued benefits, $9 of which is payable within one year.
Off-Balance Sheet Arrangements
In connection with our workers’ compensation programs, we have standby letters of credit issued on our behalf with $13 available and $2 outstanding as of January 28, 2023 (see Note 7: Self-Insurance in Item 8). In management’s opinion, we have no off-balance sheet arrangements that have a material current or future effect on our financial condition or financial statements.
Free Cash Flow (Non-GAAP financial measure)
Free Cash Flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business.
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 calculating a non-GAAP financial measure 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:
Fiscal year20222021
Net cash provided by operating activities$946 $705 
Capital expenditures(473)(506)
Change in cash book overdrafts(14)(32)
Free Cash Flow$459 $167 

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CAPITAL RESOURCES
Borrowing Capacity and Activity
During the second quarter of 2022, we terminated and replaced our prior revolving credit facility set to expire in September 2023 with a new $800 Revolver that expires in May 2027. As of January 28, 2023, we had no borrowings outstanding under our Revolver and no issuances outstanding under our commercial paper program. For more information about our credit facilities, see Note 5: Debt and Credit Facilities in Item 8.

The following represents our principal long-term debt and Revolver activity:
Long-term DebtRevolver
QuarterFirstSecondThirdFourthFirstSecondThirdFourth
2022
Borrowings$— $— $— $— $— $— $100 $— 
Payments— — — — — — — (100)
2021
Borrowings675 — — — 200 — 200 — 
Payments(600)(500)— — — (200)— (200)
Impact of Credit Ratings and Revolver Covenants
Changes in our credit ratings may impact our costs to borrow, whether our personal property secures our Revolver and whether and to what extent we are permitted to pay dividends or conduct share repurchases.
For our Revolver, the interest rate applicable to any borrowings we may enter into depends upon the type of borrowing incurred plus an applicable margin, which is determined based on our credit ratings. At the time of this report, our credit ratings and outlook were as follows:
Credit RatingsOutlook
Moody’sBa1Stable
Standard & Poor’sBB+Negative
FitchBB+Stable
Should the ratings assigned to our long-term debt improve, the applicable margin associated with any borrowings under the Revolver may decrease, resulting in a lower borrowing cost under this facility. Conversely, should the ratings assigned to our long-term debt worsen, the applicable margin associated with any borrowings under the Revolver may increase, resulting in a higher borrowing cost under this facility.
As of January 28, 2023, we were in compliance with all covenants. We have certain limitations with respect to the payment of dividends and share repurchases under our Revolver agreement. For more information about our Revolver covenants, see Note 5: Debt and Credit Facilities in Item 8.
On March 1, 2023, we amended our Revolver agreement in contemplation of a wind-down of business operations in Canada. See Note 15: Subsequent Events in Item 8 for more information.

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Adjusted Debt to EBITDAR (Non-GAAP financial measure)
Adjusted debt to EBITDAR is one of our key financial metrics and we believe that our debt levels are best analyzed using this measure, as it provides a reflection of our creditworthiness which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with the updates in our new Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases. Our goal is to manage debt levels to achieve and maintain investment-grade credit ratings while operating with an efficient capital structure. For more information regarding our Revolver, see Note 5: Debt and Credit Facilities in Item 8.
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 GAAP financial measures. Our method of calculating a non-GAAP financial measure 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 shows the components to reconcile the debt to net earnings calculation to Adjusted debt to EBITDAR:
January 28, 2023
Debt$2,856 
Operating lease liabilities1,784 
Adjusted debt$4,640 
Four Quarters Ended January 28, 2023
Net earnings$245 
Income tax expense92 
Interest expense, net128 
Earnings before interest and income taxes465 
Depreciation and amortization expenses604 
Operating Lease Cost280 
Amortization of developer reimbursements1
72 
Other Revolver covenant adjustments2
61 
Adjusted EBITDAR$1,482 
Debt to Net Earnings11.6 
Adjusted debt to EBITDAR3.1 
1 Amortization of developer reimbursements is a non-cash reduction of Operating Lease Cost and is therefore added back to Operating Lease Cost for purposes of our Revolver covenant calculation.
2 Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended January 28, 2023, other Revolver covenant adjustments primarily included costs associated with a supply chain technology and related asset impairment and the wind-down of Trunk Club, partially offset by a gain on sale of the Company’s interest in a corporate office building.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with GAAP requires that we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results may differ from these estimates and assumptions. The following discussion highlights the estimates we believe are critical and should be read in conjunction with the Notes to Consolidated Financial Statements in Item 8. Our management has discussed the development and selection of these critical accounting estimates with the Audit and Finance Committee of our Board of Directors, and the Audit and Finance Committee has reviewed our disclosures that follow.
Sales Return Reserve
We reduce sales and cost of sales by an estimate of future customer merchandise returns, which is calculated based on historical and expected return patterns, and record a sales return reserve and an estimated returns asset. We record the impact of the sales return reserve in our separate Nordstrom and Nordstrom Rack banners. The majority of our returns from both digital and physical sales come through our stores. Estimating future returns requires substantial judgment based on current and historical trends and actual returns may vary from our estimates. A 10% change in the sales return reserve, net of the estimated returns asset, would have an approximately $23 impact on our EBIT for the year ended January 28, 2023.

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The Nordy Club Loyalty Program and Gift Cards
We record breakage revenue for The Nordy Club, including unused points and unredeemed Nordstrom Notes, and gift cards based on historical and expected redemption trends. We have experienced an increase in redemption rates, leading to decreased breakage rates for The Nordy Club. A one percentage point change in our gift card breakage rate would impact our EBIT by approximately $42 for the year ended January 28, 2023.
Merchandise Inventories
Merchandise inventories are stated at the lower of cost or market value using the retail inventory method. Under the retail method, the valuation of inventories is determined by applying a calculated cost-to-retail ratio to the retail value of ending inventory. Inherent in the retail inventory method are certain management judgments that may affect the ending inventory valuation, as well as gross profit. To determine if the retail value of our inventory should be marked down, we consider current and anticipated demand, customer preferences, age of the merchandise and fashion trends. We record reserves for excess and obsolete inventory based on historical trends and specific identification.
We take physical inventory counts at our stores and Supply Chain Network locations and adjust for differences between recorded amounts and counted amounts. Following each physical inventory cycle and using the most recent physical inventory count and historical results, we record an estimate for shrink based on a percentage of sales until the next physical inventory count.
Impairment of Long-Lived Assets
When facts and circumstances indicate the carrying values of buildings, equipment and ROU assets may be impaired, we compare the carrying value to the related projected future cash flows, among other quantitative and qualitative analyses. Cash flow analysis requires judgment regarding many factors, such as revenues, growth rates, expenses and capital expenditures.
These projections are inherently subject to uncertainties and while we believe the inputs and assumptions utilized in our future cash flows are reasonable, our estimates may change in the near term based on our current and future performance.
Income Taxes
We pay income taxes based on the tax statutes, regulations and case law of the various jurisdictions in which we operate. Our income tax expense and deferred tax assets and liabilities reflect our best estimate of current and future taxes to be paid. Tax expense may be affected by numerous items, such as changes in tax law, changes in business operations, the results of tax audits and changes to our forecasts of income and loss due to economic and other conditions, such as COVID-19. Significant judgments and estimates are required in determining consolidated tax expense.
Deferred tax assets and liabilities arise from differences between the financial reporting and tax basis of assets and liabilities and for operating loss and tax credit carryforwards. The deferred tax assets and liabilities are calculated using the enacted tax rates and laws expected to be in effect when the differences are expected to reverse. In evaluating the likelihood of realizing the benefit of our deferred tax assets, we consider all available evidence, including historical results and projected future taxable income. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying business.
We recorded a valuation allowance against certain foreign deferred tax assets as of January 28, 2023 and January 29, 2022 and intend to maintain the valuation allowance until there is sufficient evidence to support its reversal. Increases or decreases in the valuation allowance will result in an increase or decrease in our effective tax rate in the period the change occurs. We believe there is a reasonable possibility within the next twelve months that sufficient negative evidence may become available that requires recording a valuation allowance against the remainder of our foreign deferred tax assets. See Note 15: Subsequent Events in Item 8 for more information.
The benefits of uncertain tax positions are recorded in our financial statements only after determining it is more likely than not the uncertain tax positions would sustain challenge by taxing authorities. We are periodically audited by federal, state and foreign tax authorities related to our tax filing positions and allocation of income among various tax jurisdictions. Although we believe our liabilities for uncertain tax positions are reasonable, because of the complexity of some of these uncertainties, the ultimate resolution may result in an outcome that is materially different from our current estimated liability. Furthermore, we are unable to reasonably estimate the timing of related future cash payments. Any differences will be reflected as increases or decreases to income tax expense in the period of resolution.

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RECENT ACCOUNTING PRONOUNCEMENTS
In December 2022, the SEC adopted the final rule under SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures, which requires new disclosures regarding insider trading policies and procedures, the use of certain insider trading plans and director and executive compensation regarding equity compensation awards made close in time to our disclosure of material nonpublic information. Quarterly disclosure requirements under this final rule will be effective for us in the second quarter of 2023 and annual disclosure requirements will be effective for us in the fourth quarter of 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
(Dollars in millions)
INTEREST RATE RISK
For our long-term debt of $2,856, our exposure to interest rate risk is primarily limited to changes in fair value. As our debt is primarily fixed-rate, changes in interest rates do not materially impact our cash flows. However, changes in interest rates increase or decrease the fair value of our debt, depending on whether market rates are lower or higher than our fixed rates. As of January 28, 2023, the fair value of our long-term debt was $2,278 (see Note 5: Debt and Credit Facilities and Note 6: Fair Value Measurements in Item 8).
We are exposed to interest rate risk primarily from changes in short-term interest rates. Interest rate fluctuations can affect our interest income and interest expense. As of January 28, 2023, we had cash and cash equivalents of $687 which generate interest income at variable rates and no borrowings outstanding under our Revolver, for which we pay interest at a variable rate.
FOREIGN CURRENCY EXCHANGE RISK
The majority of our revenues, expenses and capital expenditures are transacted in U.S. Dollars. Our U.S. operations periodically enter into merchandise purchase orders denominated in British Pounds or Euros. From time to time, we may use forward contracts to hedge against fluctuations in foreign currency prices. As of January 28, 2023, our outstanding forward contracts did not have a material impact on our Consolidated Financial Statements.
Our Canadian operations are comprised of the Nordstrom.ca website, six Nordstrom stores and seven Nordstrom Rack stores. Our Canadian operations enter into merchandise purchase orders denominated in U.S. Dollars for some portion of our inventory. As sales in Canada are denominated in the Canadian Dollar, gross profit for our Canadian operations can be impacted by foreign currency fluctuations. As of January 28, 2023, activities associated with foreign currency exchange risk have not had a material impact on our Consolidated Financial Statements (see Note 1: Nature of Operations and Summary of Significant Accounting Policies in Item 8.) On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations. See Note 15: Subsequent Events in Item 8 for more information.
There have been no material changes in our primary risk exposures or management of market risks since the prior year.

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Item 8: Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings
Consolidated Statements of Comprehensive Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Note 2: Revenue
Note 3: Land, Property and Equipment
Note 4: Leases
Note 5: Debt and Credit Facilities
Note 6: Fair Value Measurements
Note 7: Self-Insurance
Note 8: Supplemental Executive Retirement Plan
Note 9: Stock-based Compensation
Note 10: Shareholders’ Equity
Note 11: Income Taxes
Note 12: Commitments and Contingencies
Note 13: Earnings Per Share
Note 14: Segment Reporting
Note 15: Subsequent Events

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Nordstrom, Inc.
Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the “Company”) as of January 28, 2023, and January 29, 2022, and the related consolidated statements of earnings, comprehensive earnings, shareholders’ equity, and cash flows, for each of the three years in the period ended January 28, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 28, 2023, and January 29, 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 28, 2023, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 28, 2023, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 10, 2023, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below arose from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit and Finance Committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Merchandise Inventories—Refer to Note 1 to the financial statements
Critical Audit Matter Description
The Company’s merchandise inventories are generally stated at the lower of cost or market using the retail inventory method (“RIM”). Under the RIM, the valuation of inventories is determined by applying a calculated cost-to-retail ratio to the retail value of ending inventory. The value of the Company’s inventory on the balance sheet is then reduced by a charge to cost of sales for retail inventory markdowns taken on the selling price. To determine if the retail value of its inventory should be marked down, the Company considers many factors, including current and anticipated demand, customer preferences, age of the merchandise and fashion trends. Recorded markdowns represent one of the most significant inputs into the RIM calculation due to their impact on inventory valuation. Accordingly, the Company’s process of recording markdowns is subjective, particularly as it relates to timing of markdowns.
Given the management judgments necessary to identify and record markdowns in a timely manner, performing audit procedures to evaluate the timeliness of markdowns required a high degree of auditor judgment.

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How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the timing of markdowns taken, included the following, among others:
We tested the effectiveness of controls designed to ensure that markdowns are recorded timely.
We evaluated the reasonableness of the timing of markdowns recorded by performing analytical procedures to compare current period trends to historical trends at varying levels of disaggregation (i.e., total company, operating segment, and business unit level) across multiple fiscal periods, including, but not limited to, metrics such as markdowns relative to sales trends, inventory turnover, and inventory aging.
We evaluated management’s ability to identify triggering events and accurately forecast markdown activity by:
Comparing actual markdowns recorded to management’s historical forecasts
Reading information included in Company press releases
Reading internal communications to management and the Board of Directors
We performed a retrospective review of markdowns recorded in periods subsequent to fiscal year-end to assess whether any unusual trends occurred that would indicate untimely markdowns.
/s/ Deloitte & Touche LLP
Seattle, Washington
March 10, 2023

We have served as the Company’s auditor since 1970.

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Nordstrom, Inc.
Consolidated Statements of Earnings
(In millions except per share amounts)
Fiscal year202220212020
Net sales$15,092 $14,402 $10,357 
Credit card revenues, net438 387 358 
Total revenues15,530 14,789 10,715 
Cost of sales and related buying and occupancy costs(10,019)(9,344)(7,600)
Selling, general and administrative expenses(5,046)(4,953)(4,162)
Earnings (loss) before interest and income taxes465 492 (1,047)
Interest expense, net(128)(246)(181)
Earnings (loss) before income taxes337 246 (1,228)
Income tax (expense) benefit(92)(68)538 
Net earnings (loss)$245 $178 ($690)
Earnings (loss) per share:
Basic$1.53 $1.12 ($4.39)
Diluted$1.51 $1.10 ($4.39)
Weighted-average shares outstanding:
Basic160.1 159.0 157.2 
Diluted162.1 162.5 157.2 
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Nordstrom, Inc.
Consolidated Statements of Comprehensive Earnings
(In millions)
Fiscal year202220212020
Net earnings (loss)$245 $178 ($690)
Postretirement plan adjustments, net of tax of ($12), ($6) and $0
32 18 (1)
Foreign currency translation adjustment(8)2 (1)
Comprehensive net earnings (loss)$269 $198 ($692)
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

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Nordstrom, Inc.
Consolidated Balance Sheets
(In millions)
January 28, 2023January 29, 2022
Assets
Current assets:
Cash and cash equivalents$687 $322 
Accounts receivable, net265 255 
Merchandise inventories1,941 2,289 
Prepaid expenses and other current assets316 306 
Total current assets3,209 3,172 
Land, property and equipment, net3,351 3,562 
Operating lease right-of-use assets1,470 1,496 
Goodwill249 249 
Other assets466 390 
Total assets$8,745 $8,869 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$1,238 $1,529 
Accrued salaries, wages and related benefits
291 383 
Current portion of operating lease liabilities258 242 
Other current liabilities1,203 1,160 
Total current liabilities2,990 3,314 
Long-term debt, net2,856 2,853 
Non-current operating lease liabilities1,526 1,556 
Other liabilities634 565 
Commitments and contingencies (Note 12)
Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 160.1 and 159.4 shares issued and outstanding
3,353 3,283 
Accumulated deficit(