Nordstrom 2002 Annual Report Download - page 17

management’s discussion
and analysis
NORDSTROM INC. AND SUBSIDIARIES 15
Diluted Earnings per Share
Earnings per share decreased in 2002 due to the write down
of the supply chain tool, the minority interest purchase and
reintegration costs and the cumulative effect of accounting change.
Excluding the impact of these charges, earnings per share would
have been $1.19, an increase from the prior year of 28.0%. This
increase was primarily driven by an increase in comparable store
sales, an improvement in gross profit percent and a decrease in
selling, general and administrative expenses as a percent of sales.
Earnings per share for 2001 were 19.2% higher than 2000 due to
charges recognized in 2000, which include the write-down of
Streamline, the management severance and the asset impairments.
Excluding the impact of these charges, 2000 earnings per share
would have been $1.04 resulting in a 2001 earnings per share
decrease of 10.6%. This decrease is primarily due to a decline in
comparable store sales and a decline in gross profit percent offset by
decreases in selling, general and administrative expenses as a
percent of sales.
Fourth Quarter Results
Fourth quarter 2002 earnings per share were $0.44 compared
with $0.38 in 2001. Total sales for the quarter increased by 7.3%
versus the same quarter in the prior year and comparable store
sales increased by 1.9%. The increase in sales was primarily due
to the opening of eight full-line stores and four Nordstrom Rack
stores during the year. Gross profit as a percentage of sales was
flat with the same quarter in the prior year.
Selling, general and administrative expenses as a percent of sales
decreased in the quarter compared to the prior year primarily due
to improved selling costs and reduced sales promotion offset by
higher distribution costs and information systems expense.
LIQUIDITY AND CAPITAL RESOURCES
We finance our working capital needs, capital expenditures,
acquisitions and share repurchase activity with a combination
of cash flows from operations and borrowings.
We believe that our operating cash flows, existing cash and available
credit facilities are sufficient to finance our operations and planned
growth for the foreseeable future.
Operating Activities
Our operations are seasonal in nature. The second quarter, which
includes our Anniversary Sale, accounts for approximately 28%
of net sales, while the fourth quarter, which includes the holiday
season, accounts for about 29% of net sales. Cash requirements
are highest in the third quarter as we build our inventory for the
holiday season.
The decrease in net cash provided by operating activities between
2002 and 2001 was primarily due to increases in inventories and
accounts receivable partially offset by an increase in net earnings
before noncash items and an increase in our accrual for income
taxes. Inventory grew as we added stores during the year. Accounts
receivable increased as Nordstrom VISA credit sales improved. The
increased income tax accrual resulted from the timing of payments.
Net cash provided by operating activities increased approximately
$235 million in 2001 compared to 2000 primarily due to decreases
in inventories and accounts receivable. The inventories decreased
as a result of improved inventory management, while accounts
receivable declined due to lower credit sales.
In 2003, cash flows provided by operating activities are expected
to remain fairly consistent with 2002. Inventory increases from store
openings are expected to slow, offset by slower increases in accounts
payable. Accounts receivable should increase modestly as credit
sales grow.
Investing Activities
For the last three years, investing activities have primarily consisted
of capital expenditures, the minority interest purchase of
Nordstrom.com and the acquisition of Façonnable.
98 99 00 01 02
$1.60
$1.40
$1.20
$1.00
$0.80
$1.41 $1.46 $0.78 $0.93 $0.66
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