Total Net Sales Grow 14 percent, Same-Store Sales Increase 11 percent

SEATTLE--(BUSINESS WIRE)--Nov. 8, 2012-- Nordstrom, Inc. (NYSE: JWN) today reported net earnings of $146 million for the third quarter ended October 27, 2012. This represented an increase of 15.0 percent compared with earnings of $127 million for the same quarter last year. Earnings per diluted share of $0.71 increased 20.3 percent from $0.59 per diluted share for the same quarter last year.

Third quarter same-store sales, which reflected a timing shift that moved a week of the Anniversary Sale event into August this year, increased 10.7 percent compared with the same period in fiscal 2011. Combined second and third quarter same-store sales, which removes the impact of the Anniversary Sale shift, increased 7.3 percent compared with the same period in fiscal 2011. Net sales in the third quarter were $2.71 billion, an increase of 13.8 percent compared with net sales of $2.38 billion during the same period in fiscal 2011.

THIRD QUARTER SUMMARY

Nordstrom’s third quarter performance demonstrated strong top-line growth, consistent with the Company’s initiatives and investments to improve the customer experience across all channels.

• Nordstrom net sales, which consist of the full-line and Direct businesses, increased $204 million, or 11.5 percent, compared with the same period in fiscal 2011. Same-store sales increased 11.2 percent. Top-performing merchandise categories included Men’s Shoes, Men’s Apparel and Kids’ Apparel.
• Full-line same-store sales increased 8.1 percent compared with the same period in fiscal 2011. The Midwest and Northwest regions were the top-performing geographic areas relative to the third quarter of 2011.
• Direct sales outpaced the overall Company performance, with an increase of 38 percent, reflecting the Company’s ongoing initiatives in e-commerce. This increase was on top of last year’s third quarter increase of 33 percent that included the impact of the launch of free shipping and free returns online in late August 2011.
• Nordstrom Rack, which opened thirteen stores during the first nine months of the year, continued to demonstrate strong sales growth in the third quarter with increases in net sales of 16.3 percent and same-store sales of 8.1 percent.
• Gross profit, as a percentage of net sales, decreased 37 basis points compared with last year’s third quarter, due to costs associated with our enhanced Fashion Rewards program in driving new and deeper customer relationships.
• Retail selling, general and administrative expenses, as a percentage of net sales, decreased 30 basis points compared with last year’s third quarter. The decrease was primarily due to expense leverage from the Anniversary Sale shift, partially offset by increases in fulfillment costs associated with the substantial growth in online sales.
• In the Credit segment, overall performance continues to improve with delinquency and write-off rates at well below prior-year levels. Given the overall performance of the credit portfolio and underlying economic trends, the reserve for bad debt was reduced by $10 million.
• Earnings before interest and taxes increased $37 million to $277 million, or 9.9 percent of total revenues, from $240 million, or 9.7 percent of total revenues, in last year’s third quarter.
• Return on invested capital (ROIC) for the 12 months ended October 27, 2012, was 12.9 percent, compared with 13.7 percent achieved in the prior 12-month period. The Company anticipates that ROIC for fiscal 2012 will exceed ROIC for fiscal 2011. A reconciliation of this non-GAAP financial measure to the closest GAAP measure is included below.
• During the quarter, the Company repurchased 1.5 million of its shares for $85 million. A total of $612 million remains under its existing share repurchase authorization. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission rules.

EXPANSION UPDATE

In September, Nordstrom announced plans to open its first stores in Canada with four full-line stores in Calgary, Ottawa, Vancouver and Toronto. Nordstrom also announced plans to open two full-line stores in Jacksonville, Fla., and The Woodlands near Houston, Texas in 2014.

Nordstrom opened the following stores in the third quarter of 2012:

FISCAL YEAR 2012 OUTLOOK

The Company’s revised expectations for fiscal 2012 are as follows:

CONFERENCE CALL INFORMATION

The Company’s senior management will host a conference call to discuss third quarter 2012 results at 4:45 p.m. Eastern Standard Time today. To listen to the live call online and view the speakers’ slides, visit the Investor Relations section of the Company’s corporate website at http://investor.nordstrom.com. An archived webcast with the speakers’ slides will be available in the webcasts section for one year. Interested parties may also dial 415-228-4850 (passcode: NORD). A telephone replay will be available beginning approximately one hour after the conclusion of the call by dialing 402-998-0566 (a passcode is not required) until the close of business on November 15th, 2012.

ABOUT NORDSTROM

Nordstrom, Inc. is one of the nation’s leading fashion specialty retailers. Founded in 1901 as a shoe store in Seattle, today Nordstrom operates 240 stores in 31 states, including 117 full-line stores, 119 Nordstrom Racks, two Jeffrey boutiques, one treasure&bond store and one clearance store. Nordstrom also serves customers through Nordstrom.com and through its catalogs. Additionally, the Company operates in the online private sale marketplace through its subsidiary HauteLook. Nordstrom, Inc.’s common stock is publicly traded on the NYSE under the symbol JWN.

Certain statements in this news release contain “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the fiscal year ending February 2, 2013, anticipated annual same-store sales rate, anticipated Return on Invested Capital, anticipated store openings and trends in our operations. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to: the impact of economic and market conditions and the resultant impact on consumer spending patterns; our ability to respond to the business environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online; effective inventory management; successful execution of our growth strategy, including possible expansion into new markets, technological investments and acquisitions, our ability to realize the anticipated benefits from such growth initiatives, and the timely completion of construction associated with newly planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties; our ability to manage the change in our business/financial model as we increase our investment in e-commerce and our online business; our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders; successful execution of our multi-channel strategy, including planning, procurement and allocation capabilities; our compliance with applicable banking and related laws and regulations impacting our ability to extend credit to our customers; impact of the current regulatory environment and financial system and health care reforms; the impact of any systems failures, cybersecurity and/or security breaches, including any security breaches that result in the theft, transfer or unauthorized disclosure of customer, employee or company information or our compliance with information security and privacy laws and regulations in the event of such an incident; our compliance with employment laws and regulations and other laws and regulations applicable to us, including the outcome of claims and litigation and resolution of tax matters; compliance with debt covenants and availability and cost of credit; our ability to safeguard our brand and reputation; successful execution of our information technology strategy; our ability to maintain our relationships with vendors; trends in personal bankruptcies and bad debt write-offs; changes in interest rates; efficient and proper allocation of our capital resources; weather conditions, natural disasters, health hazards or other market disruptions, or the prospects of these events and the impact on consumer spending patterns; disruptions in our supply chain; the geographic locations of our stores; the effectiveness of planned advertising, marketing and promotional campaigns; our ability to control costs; and the timing and amounts of share repurchases by the company, if any, or any share issuances by the company, including issuances associated with option exercises or other matters. Our SEC reports, including our Form 10-K for the fiscal year ended January 28, 2012, and our Forms 10-Q for the fiscal quarters ended April 28, 2012 and July 28, 2012, contain other information on these and other factors that could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. The company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

¹Capitalized operating leases is our best estimate of the asset base we would record for our leases that are classified as operating if they had met the criteria for a capital lease, or we purchased the property. Asset base is calculated as described in footnote 5 below.

²Based upon our effective tax rate multiplied by the net operating profit for the 12 fiscal months ended October 27, 2012 and October 29, 2011.

³Based upon the trailing 12-month average.

⁴Based upon the trailing 12-month average for accounts payable, accrued salaries, wages and related benefits, and other current liabilities.

⁵Based upon the trailing 12-month average of the monthly asset base, which is calculated as the trailing 12-months rent expense multiplied by eight. The multiple of eight times rent expense is a commonly used method of estimating the asset base we would record for our capitalized operating leases described in footnote 1.

• Adjusted Debt is not exact, but rather our best estimate of the total company debt we would hold if we had purchased the property and issued debt associated with our operating leases;
• EBITDAR does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, including leases, or the cash requirements necessary to service interest or principal payments on our debt; and
• Other companies in our industry may calculate Adjusted Debt to EBITDAR differently than we do, limiting its usefulness as a comparative measure.

¹The components of Adjusted Debt are as of October 27, 2012 and October 29, 2011, while the components of EBITDAR are for the 12 months ended October 27, 2012 and October 29, 2011.

²The multiple of eight times rent expense used to calculate Adjusted Debt is a commonly used method of estimating the debt we would record for our leases that are classified as operating if they had met the criteria for a capital lease, or we had purchased the property.

• Free Cash Flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs; and
• Other companies in our industry may calculate Free Cash Flow differently than we do, limiting its usefulness as a comparative measure.

Source: Nordstrom, Inc.

Nordstrom, Inc.
INVESTOR CONTACT: Rob Campbell, 206-233-6550
MEDIA CONTACT: Colin Johnson, 206-303-3036