Nordstrom 2006 Annual Report Download - page 22

4
PART I
Item 1. Business.
DESCRIPTION OF BUSINESS
Nordstrom incorporated in the state of Washington in 1946 as the successor to a retail shoe business that started in 1901. We are one of the nation’s
leading fashion specialty retailers, with 155 U.S. stores located in 27 states. The west coast and east coast are the areas in which we have the largest
presence. Nordstrom is comprised of four segments: Retail Stores, Credit, Direct, and Other.
Retail Stores derives its revenues from sales of high-quality apparel, shoes, cosmetics and accessories. It includes our 98 Full-Line ‘Nordstrom’
stores, 50 discount ‘Nordstrom Rack’ stores, two clearance stores that operate under the name ‘Last Chance,’ and one free-standing shoe store. The
Nordstrom Rack stores serve as outlets for clearance merchandise from our Full-Line stores and purchase merchandise directly from manufacturers.
In 2006, we opened one Full-Line store (Palm Beach Gardens, Florida), relocated one Full-Line Store (Canoga Park, California) and opened one Rack
store (San Marcos, California). In 2007, we are scheduled to open three Full-Line stores (Natick, Massachusetts; Novi, Michigan; Denver, Colorado) and
one Rack store (Tukwila, Washington). In 2008, we are scheduled to open eight Full-Line stores and relocate one Full-Line store.
Through our wholly owned federal savings bank, Nordstrom fsb, we offer a private label card, two co-branded Nordstrom VISA credit cards and a
debit card for Nordstrom purchases. The credit and debit cards feature a shopping-based loyalty program designed to increase customer visits and
spending in our Retail Stores and Direct segments. Our Credit segment generates earnings through finance charges and securitization-related gains
on these cards.
Direct generates revenues from sales of high-quality apparel, shoes, cosmetics and accessories by serving our customers on the Web at
www.nordstrom.com and through our catalogs. Most of the Direct segment’s sales are shipped via third-party carriers from our fulfillment center
in Cedar Rapids, Iowa.
Our Other segment includes our four U.S. based ‘Façonnable’ boutiques and the 36 Façonnable boutiques located in France, Portugal and Belgium.
Façonnable is a wholesaler and retailer of high quality men’s, women’s and boys’ apparel and accessories with distribution to over 45 countries.
Façonnable has licensee and franchisee agreements with others who operate wholesale distribution and/or boutique locations in Spain, Turkey,
Greece, the Middle East, Taiwan, Canada and Latin America. The Other segment also includes our product development team, called Nordstrom
Product Group, which designs and coordinates the production of private label merchandise sold in our retail stores. In addition, this segment
includes our corporate center operations.
For more information about our business and our reportable segments, see Item 7, “Management’s Discussion and Analysis of Financial Condition
and Results of Operation” on page 14 and Note 15 of the Notes to Consolidated Financial Statements in Item 8 on page 48.
FISCAL YEAR END
Our fiscal year ends on the Saturday closest to January 31st. References to 2006 relate to the 53-week fiscal year ended February 3, 2007.
References to 2005 and 2004 relate to the 52-week fiscal years ended January 28, 2006 and January 29, 2005. References to 2007 relate to
the 52 weeks ending February 2, 2008.
TRADEMARKS
We have approximately 169 registered trademarks or trademark applications. Our most notable trademarks include Nordstrom, Nordstrom Rack,
Façonnable, Caslon, John W. Nordstrom, and Classiques Entier. Each of our trademarks is renewable indefinitely provided that it is still used in
commerce at the time of the renewal.
RETURN POLICY
We offer our customers a fair and liberal return policy at our Full-Line stores and Nordstrom Direct (online and catalog). Our Nordstrom Rack stores
accept returns up to 30 days from the date of purchase. In general, our return policy is somewhat more generous than industry standards.
We utilize historical return patterns to estimate our expected returns.
SEASONALITY
Due to our anniversary sale in July and the holidays in December, sales are higher for our Retail Stores in the second and fourth quarters of the fiscal
year than in the first and third quarters.
INVENTORY
We plan our merchandise purchases and receipts to coincide with the selling patterns that we expect. For instance, we purchase and receive a larger
amount of merchandise in the fall as we prepare for the holiday shopping season (from late November through early January). Also, our merchandise
purchases and receipts increase prior to our Anniversary Sale, which extends over the last two weeks of July. We pay for our merchandise purchases
under the terms established with our vendors, which is usually within 30 days of the date that the merchandise was shipped to us.
In order to offer merchandise that our customers want, we purchase merchandise from a wide variety of high-quality suppliers. In 2006,
our ten largest suppliers accounted for approximately 21% of our merchandise purchases. We also have arrangements with agents and contract
manufacturers to produce our private label merchandise. We do not have long-term purchase commitments or arrangements with any of our