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Nordstrom Reports Third Quarter 2012 Earnings

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.

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