Nordstrom 2003 Annual Report Download - page 20

Diluted Earnings per Share
In 2002, our earnings per share included the write down of a supply chain
tool, the Nordstrom.com minority interest purchase and reintegration
costs and the cumulative effect of accounting change, for a total impact
of $71.0 million or $0.53 per share. We believe that excluding these
charges provides a more comparable basis from which to evaluate
performance between years. Without the impact of these charges, 2002
earnings per share would have been $1.19.
Our earnings per share in 2003 increased to $1.76 from $0.66 in 2002.
Excluding the prior year charges noted above, 2003 earnings per share
increased $0.57 or 48%. This increase was primarily driven by a strong
increase in comparable store sales, significant improvement in gross
profit percent and a moderate decrease in selling, general and administrative
expenses as a percent of sales.
Earnings per share decreased in 2002 compared to 2001 due to the
charges described above. Excluding the impact of these charges, earnings
per share would have been $1.19, an increase from 2001 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.
Diluted earnings per share are expected to increase 15% - 18% in 2004.
Fourth Quarter Results
Fourth quarter 2003 earnings were $104.3 million compared with $60.0
million in 2002. Total sales for the quarter increased by 10.4% versus the
same quarter in the prior year and comparable store sales increased by
8.5%. The increase in total sales resulted from an increase in comparable
store sales for the quarter and the opening of four full-line stores and two
Nordstrom Rack stores during the year.
Gross profit as a percentage of sales showed strong improvement,
increasing to 36.8% from 33.3% last year. Significant improvements in
markdowns and shrinkage combined with a small improvement in buying
and occupancy expenses substantially increased gross profit as a
percent of sales.
Selling, general and administrative expenses as a percent of sales
increased to 29.1% from 28.6% last year primarily due to higher incentive
compensation offset by improved selling costs, lower distribution costs,
lower marketing costs and lower information systems expense.
GAAP Sales Reconciliation (in millions)
We converted to a 4-5-4 Retail Calendar at the beginning of 2003. Sales
performance numbers included in this document have been calculated
on a comparative 4-5-4 basis. We believe that adjusting for the difference
in days provides a more comparable basis (4-5-4 vs 4-5-4) from which to
evaluate sales performance. The following reconciliation bridges the
reported GAAP sales to the 4-5-4 comparable sales.
% Change % Change
Dollar Total Comp
Sales Reconciliation QTD 2003 QTD 2002 Increase Sales Sales
Number of Days
Reported GAAP 91 92
Reported GAAP sales $1,932.5 $1,750.6 $181.9 10.4% 7.0%
Less Nov. 1-2, 2002 sales - $(43.7)
Plus Feb. 1, 2003 sales - $18.2
Reported 4-5-4 sales $1,932.5 $1,725.1 $207.4 12.0% 8.5%
4-5-4 Adjusted Days 91 91
% Change % Change
Dollar Total Comp
Sales Reconciliation YTD 2003 YTD 2002 Increase Sales Sales
Number of Days
Reported GAAP 365 365
Reported GAAP sales $6,491.7 $5,975.1 $516.6 8.6% 4.1%
Less Feb. 1, 2003 sales $(18.2) -
Less Feb. 1-2, 2002 sales - $(30.9)
Plus Feb. 1, 2003 sales - $18.2
Reported 4-5-4 sales $6,473.5 $5,962.4 $511.1 8.6% 4.3%
4-5-4 Adjusted Days 364 364
management’s discussion and analysis
NORDSTROM, INC. and SUBSIDIARIES
[18 ]
99 00 01 02 03
$1.46
$0.78
$0.93
$0.66
$1.76