Nordstrom 1999 Annual Report Download - page 32

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Management’s
Discussion and Analysis
NORDSTROM, INC. AND SUBSIDIARIES
30
The following discussion and analysis reviews the past
three years, as well as additional information on future
expectations and trends. Some of the information in this
annual report, including anticipated store openings,
planned capital expenditures and trends in company
operations, are forward-looking statements, which are
subject to risks and uncertainties. Actual future results
and trends may differ materially depending upon a vari-
ety of factors, including, but not limited to, the
Company’s ability to predict fashion trends, consumer
apparel buying patterns, the Company’s ability to control
costs and expenses, trends in personal bankruptcies and
bad debt write-offs, employee relations, adverse weather
conditions and other hazards of nature such as earth-
quakes and floods, the Company’s ability to continue its
expansion plans, and the impact of ongoing competitive
market factors. This discussion and analysis should be
read in conjunction with the basic consolidated financial
statements and the Ten-Year Statistical Summary.
Overview
During 1999 (the fiscal year ended January 31, 2000),
Nordstrom, Inc. and its subsidiaries (collectively, the
“Company”) achieved record sales and an improvement
in gross margin.These improvements were offset by third
quarter 1999 charges of approximately $10 million (pre-
tax), primarily associated with the restructuring of the
Company’s information technology services area in order
to improve efficiency and effectiveness. The Company
also experienced substantially increased operating ex-
penses associated with the accelerated development of
N O RD STRO M .com and N O RD ST ROM shoes.com.
On November 1, 1999, the Company established a new
subsidiary, N O RD ST ROM .com, to promote the rapid expan-
sion of both its Internet commerce and catalog businesses.
The Company contributed the assets and certain liabili-
ties associated with its Internet commerce and catalog
businesses and $10 million in cash to the subsidiary.
Affiliates of Benchmark Capital and Madrona Investment
Group, collectively, contributed $16 million in cash to the
new entity. The Company owns approximately 81.4% of
N ORD ST ROM .com, with Benchmark Capital and Madrona
Investment Group holding the remaining interest.
The first major endeavor in November 1999 by
N ORD ST RO M .com was the launching of the Internet site
N ORD ST RO M shoes.com, which offers online access to mil-
lions of pairs of shoes.The launch was supported by a mul-
timedia national advertising campaign.
Also during 1999, the Company opened four new full-
line stores in Providence, R hode Island; Mission Viejo,
California; Columbia, Maryland; and Norfolk, Virginia.
The Company also opened three new Rack stores in
Sacramento, California; Brea, California; and Gaithersburg,
Maryland.