Nordstrom 2003 Annual Report Download

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[more than a store]
NORDSTROM, INC. ANNUAL REPORT 2003
NORDSTROM, INC. ANNUAL REPORT 2003

Table of contents

  • Page 1
    NORDSTROM, INC. ANNUAL REPORT 2003 [more than a store] NORDSTROM, INC. ANNUAL REPORT 2003

  • Page 2
    ... Cash dividends paid per share $6,491,673 398,141 242,841 242,841 1.78 1.76 0.41 $5,975,076 195,624 103,583 90,224 0.67 0.66 0.38 8.6 103.5 134.4 169.2 165.7 166.7 7.9 Sales per Square Foot/ Comp-Store Sales Percentage Change Gross Profit as a Percentage of Sales SG&A Expense as a Percentage...

  • Page 3
    ... Westchester, White Plains, New York Kieran Dodge, Alderwood, Lynnwood, Washington Elizabeth Duong, Valley Fair, San Jose, California People keep talking. They tell you what they like, what they don't like, what works, what's missing. It's a simple process really - one that can lead a company to...

  • Page 4
    ...and delighted I am. Michael, Tysons Corner Center customer " Susan Frad, Alderwood, Lynnwood, Washington To enhance the customer's experience through better information and reduced wait times, new touch-screen "point of sale" registers and "personal book" software will be fully implemented by the...

  • Page 5
    ... can maximize each store's assortment and sales. And this year, two new tools - "point of sale" registers and "personal book" software - will be implemented in all Nordstrom stores to enhance service during and after the sale. Real operators. Personal shoppers. On-site tailors. Salespeople who have...

  • Page 6
    ... Nordstrom experience - spacious aisles, convenient restrooms, public seating and plenty of amenities. Other little extras add an exclusive touch and are available to everyone - elegant complimentary gift boxes, live piano music, a concierge service, personal shoppers, and free skincare and makeup...

  • Page 7
    Rickelle Jones, Alderwood, Lynnwood, Washington " I thought I was ready to go, but Stephanie had not finished her magic. She had arranged a makeover in Cosmetics - the first professional makeover of my life. Kathy, Old Orchard customer "

  • Page 8
    ... to sizes - men's shoes in sizes 5-20 and widths aa to eeeeee, women's shoes in sizes 4-14 and widths aaa to ww, petite to plus-sizes in women's fashions, and short to extraextra-large tall clothes for men - distinguishes us from other retailers. Everyone wants to look great. At Nordstrom we...

  • Page 9
    In all honesty, the " Terry, my salesperson, was keenly aware that the clothes needed to be color-coordinated, sensibly styled and not too costly. She pulled together several items that looked fabulous. shopping experience was magical. Valerie, North County customer " [7]

  • Page 10
    ...' trust and business in everything we do - whether it's in our stores, online or over the phone. By listening to you, and taking care of one customer at a time, we continue to define the Nordstrom experience. It's an experience that's built on people, products and place. But more importantly...

  • Page 11
    ..., I think, to the humbleness of our company. " Right up to the point that we opened the doors I was nervous and I remember saying to We work very hard every day to earn the loyalty of the customer. Bruce Bonnet, Alderwood Store Manager recalling the grand opening of the new Nordstrom Alderwood "

  • Page 12
    message to shareholders Dear customers, employees and shareholders, The year 2003 was a pivotal one for our company. Over the last several years, we have focused on driving sales volume, reducing expenses and upgrading and utilizing new technology - all to improve service and our bottom-line ...

  • Page 13
    ...by the end of 2004. New touch-screen, point-of-sale registers will reduce wait times, speed up merchandise searches across our company, and connect our salespeople to Nordstrom.com and its inventory. These registers also contain "personal book" software, a powerful relationship-building tool that we...

  • Page 14
    ...Rack Mark S. Brashear, 42 Executive Vice President and President, Façonnable James H. Bromley, 40 Executive Vice President and President, Nordstrom Direct Linda Toschi Finn, 56 Executive Vice President, Marketing Kevin T. Knight, 48 Executive Vice President, Chairman and Chief Executive Officer...

  • Page 15
    ...' and Management Reports Consolidated Statements of Earnings Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Eleven-Year Statistical Summary Retail Store Facilities 52 53 Officers of the...

  • Page 16
    ... inventory system which includes a more sophisticated replenishment system, a warehouse management system in our distribution centers and our financial system. We are currently rolling out our "Point of Sale" registers including new Personal Book technology and installing a new human resources...

  • Page 17
    ... at both full-line stores and Nordstrom Rack stores. Sales at Nordstrom Direct declined slightly with a planned reduction in catalog sales partially offset by an increase in Internet sales. $5,529 $5,149 $5,634 In 2004, we plan to open two full-line stores, increasing retail square footage by...

  • Page 18
    ...•Information technology expense declined this year after the completion of our perpetual inventory implementation. •Distribution costs improved as a result of efficiencies gained from our new warehouse management system. •Nordstrom Direct continued to execute planned reductions in catalog size...

  • Page 19
    ...perpetual inventory system. Minority Interest Purchase and Reintegration Costs During 2002, we purchased the outstanding shares of Nordstrom.com, Inc. series C preferred stock for $70.0 million. The excess of the purchase price over the fair market value of the preferred stock and professional fees...

  • Page 20
    ... in comparable store sales for the quarter and the opening of four full-line stores and two Nordstrom Rack stores during the year. Sales Reconciliation QTD 2003 QTD 2002 Number of Days Reported GAAP Reported GAAP sales Plus Feb. 1, 2003 sales Reported 4-5-4 sales 4-5-4 Adjusted Days Less Nov...

  • Page 21
    ... three years, we plan to open fewer stores, slow spending on information systems and increase our spending on the improvement of existing facilities. To maximize the profitability of our new stores, we are opening fewer new stores but are placing them in established large regional shopping centers...

  • Page 22
    ... We have $200 million in outstanding term notes collateralized by our Nordstrom VISA credit card receivables. On an ongoing basis, our Nordstrom VISA receivables are transferred to a master note trust, which has issued Class A and B notes to third party investors. We hold securities that represent...

  • Page 23
    ... the next year. Purchase orders totaling $681.2 million have also been excluded from this table. Other long-term liabilities include estimated repayment schedules primarily for postretirement benefits based on their current payout rates. Other long-term liabilities not requiring cash payments, such...

  • Page 24
    ...liabilities. We regularly evaluate our estimates including those related to doubtful accounts, inventory valuation, intangible assets, income taxes, self-insurance liabilities, post-retirement benefits, sales return accruals, contingent liabilities and litigation. We base our estimates on historical...

  • Page 25
    ... information see Note 9: Off-balance sheet financing. Valuation of Long-Lived Assets We review our intangibles and other long-lived assets annually for impairment or when events or changes in circumstances indicate the carrying value of these assets may not be recoverable. We estimate the fair value...

  • Page 26
    management's discussion and analysis In December 2003, the FASB revised SFAS No. 132, "Employers' Disclosures about Pensions and other Postretirement Benefits," establishing additional annual disclosure requirements about plan assets, investment strategy, measurement date, plan obligations and cash...

  • Page 27
    ... Intangible Assets, for the year ended January 31, 2003, as discussed in Note 2 to the consolidated financial statements. MANAGEMENT REPORT We are responsible for the preparation, integrity and fair presentation of our financial statements and the other information that appears in the annual report...

  • Page 28
    ...(66.8) 33.2 (30.6) 2.6 (1.4) - 2.4 3.6 (1.4) 2.2 - 2.2 Fiscal Year Net sales Cost of sales and related buying and occupancy Gross profit Selling, general and administrative Operating income Interest expense, net Minority interest purchase and reintegration costs Service charge income and other, net...

  • Page 29
    ...: Notes payable Accounts payable Accrued salaries, wages and related benefits Income taxes and other accruals Current portion of long-term debt Total current liabilities Long-term debt Deferred lease credits Other liabilities Shareholders' equity: Common stock, no par: 500,000,000 shares authorized...

  • Page 30
    ...currency translation adjustment Securitization fair value adjustment, net of tax of $1,355 Comprehensive net earnings Cash dividends paid ($0.36 per share) Issuance of common stock for: Stock option plans Employee stock purchase plan Stock compensation Purchase and retirement of common stock Balance...

  • Page 31
    ... inventories Prepaid expenses Other assets Accounts payable Accrued salaries, wages and related benefits Income taxes and other accruals Other liabilities Net cash provided by operating activities Investing Activities Capital expenditures Additions to deferred lease credits Proceeds from sale...

  • Page 32
    ... financial statements Dollars in thousands except per share amounts Note 1: Summary of Significant Accounting Policies The Company: We are a fashion specialty retailer offering high-quality apparel, shoes and accessories for women, men and children with 148 U.S. stores located in 27 states...

  • Page 33
    ... amounts of cash equivalents and notes payable approximate fair value. See Note 13 for the fair values of our long-term debt, including current maturities and interest rate swap agreements. Asset Impairment: We review our intangibles and other long-lived assets annually for impairment or when...

  • Page 34
    ....com in the first quarter of 2002 resulted in additional goodwill of $24,178 of which $8,462 was allocated to the Retail Stores reporting unit and $15,716 to the Catalog/Internet reporting unit. We test our intangible assets for impairment by comparing the fair value of the reporting unit with its...

  • Page 35
    ... amount of our intangible assets for the year ended January 31, 2004 and 2003 are as follows: Retail Stores Segment Goodwill Tradename Catalog/ Internet Segment Goodwill Note 3: Employee Benefits We provide a profit sharing plan and 401(k) plan for our employees. The profit sharing plan is non...

  • Page 36
    ... Fiscal Year Service cost Interest cost Amortization of adjustments Total SERP expense Assumption percentages: Discount rate Rate of compensation increase Measurement date Note 5: Interest Expense, Net The components of interest expense, net are as follows: Fiscal Year Short-term debt Long-term debt...

  • Page 37
    ... outstanding shares of Nordstrom.com, Inc. series C preferred stock in 2002 resulted in an expense of $40,389, which we believe will not be deductible for tax purposes. As a result, we have established a valuation allowance of $15,752 to offset the deferred tax asset related to this purchase. Note...

  • Page 38
    ... by VISA credit card receivables ("VISA VFN") with 5-year term notes also backed by the VISA credit card receivables. Class A and B notes with a combined face value of $200 million were issued to third party investors. These proceeds were used to retire the $200 million outstanding on the VISA VFN...

  • Page 39
    notes to consolidated financial statements The following table illustrates the sensitivity in the fair market value estimates of the retained interests given independent changes in assumptions as of January 31, 2004: +10% Gross Yield Interest Expense on Issued Classes Card Holders Payment Rate ...

  • Page 40
    ... (described in Note 10.) Nothing was outstanding at January 31, 2004 and 2003. We have an unsecured line of credit totaling $300 million, which is available as liquidity support for our commercial paper program, and expires in November 2004. Under the terms of the agreement, we pay a variable rate...

  • Page 41
    ... related debt. The fair value of long-term debt, including current maturities, using quoted market prices of the same or similar issues, was approximately $1,336,000 and $1,443,000 at January 31, 2004 and 2003. We own a 49% interest in a limited partnership which constructed a new corporate office...

  • Page 42
    ... 4,166,239 shares are reserved for future stock option grants pursuant to the Plan. We apply APB No. 25, "Accounting for Stock Issued to Employees," in measuring compensation costs under our stock-based compensation programs. Stock options are issued at the fair market value of the stock at the date...

  • Page 43
    ... information about stock options outstanding for the Nordstrom, Inc. Plan as of January 31, 2004: Options Outstanding Weighted Average Remaining Contractual Life (Years) WeightedAverage Exercise Price Options Exercisable WeightedAverage Exercise Price Range of Exercise Prices Shares Shares...

  • Page 44
    ... Purchase Plan We offer an Employee Stock Purchase Plan as a benefit to our employees. Employees participate through payroll deductions in amounts related to their base compensation. At the end of each offering period, the participants purchase shares at 85% of the lower of the fair market value...

  • Page 45
    ... Note 18: Segment Reporting We have four segments: Retail Stores, Credit Operations, Catalog/Internet, and Corporate and Other. The Retail Stores segment derives its revenues from sales of high-quality apparel, shoes and accessories. It includes our full-line, Nordstrom Rack and Façonnable stores...

  • Page 46
    ...,048 (a) Segment assets in Corporate and Other include unallocated assets in corporate headquarters, consisting primarily of cash, land, buildings and equipment, and deferred tax assets. (b) Includes foreign sales of $92,524, $82,126 and $78,210 for the years ended January 31, 2004, 2003 and 2002...

  • Page 47
    .... Fiscal Year Excess of the purchase price over the fair market value of the preferred stock Nordstrom.com option/warrant buyback expense Professional fees incurred Total Note 21: Self Insurance 2002 $40,389 10,432 2,347 $53,168 We are self insured for certain losses related to health and welfare...

  • Page 48
    ... not-for-profit corporation bringing claims on behalf of the City of Spokane and the Spokane Parking Public Development Authority. The claims relate to the River Park Square Mall and Garage Project in Spokane, Washington (the "Project"), which includes a Nordstrom store. The portion of the complaint...

  • Page 49
    notes to consolidated financial statements Note 24: Selected Quarterly Data (unaudited) Fiscal Year 2003 Net sales Gross profit Earnings before income taxes Net earnings Basic earnings per share Diluted earnings per share Dividends per share Common stock price High Low Fiscal Year 2002 Net sales ...

  • Page 50
    ...Merchandise inventories Current assets Current liabilities Working capital Working capital ratio Land, buildings and equipment, net Long-term debt, including current portion Debt/capital ratio Shareholders' equity Shares outstanding Book value per share Total assets Operations Net sales Gross profit...

  • Page 51
    eleven-year statistical summary 1999 $557,190 38,830 797,845 1,564,648 866,509 698,139 1.81 1,429,492 804,982 .4249 1,185,614 132,279,...,708) 180,831 (37,646) - - 88,509 231,694 (90,804) 140,890 - 140,890 .86 .86 .17 2.7% 3.92% 12.85% 383 74 9,282,000 NORDSTROM, INC. and SUBSIDIARIES [ 49 ]

  • Page 52
    ... Paramus Short Hills New York Garden City White Plains North Carolina Durham Pennsylvania King of Prussia Rhode Island Providence Virginia Arlington Dulles McLean Norfolk Richmond 241,000 148,000 253,000 166,000 128,000 1989 2002 1988 1999 2003 CENTRAL STATES GROUP Illinois Chicago Oak Brook...

  • Page 53
    ... Year Store Opened Location Fresno, CA Beachwood Place Easton Town Center Barton Creek Square Dallas Galleria Stonebriar Centre The Galleria North East Mall 231,000 174,000 150,000 249,000 149,000 226,000 149,000 1997 2001 2003 1996 2000 2003 2001 Ontario, CA Oxnard, CA Roseville, CA Sacramento, CA...

  • Page 54
    ... Marketing Member of Executive Team Vice President, Corporate Merchandise Manager, Women's Shoes, Full-line Stores Delena M. Sunday, 43 Executive Vice President, Human Resources and Diversity Affairs Member of Executive Team Bonnie M. Junell, 47 Vice President, Corporate Merchandise Manager, Point...

  • Page 55
    ..., Washington John N. Nordstrom, 67 Retired Co-Chairman of the Board of Directors Seattle, Washington FORM 10-K The Company's annual report on Form 10-K for the year ended January 31, 2004 will be provided to shareholders upon request to: Nordstrom, Inc. Investor Relations P. O. Box 2737 Seattle...