Nordstrom 2006 Annual Report Download - page 33

Nordstrom, Inc. and subsidiaries 15
RESULTS OF OPERATIONS
Net Sales (Dollars in Millions)
Fiscal year
2006
2005
2004
Net sales
$8,560.7
$7,722.9
$7,131.4
Net sales increase
10.8%
8.3%
10.6%
Same-store sales increase
7.5%
6.0%
8.5%
Percentage of net sales by merchandise category:
Women’s apparel
35%
35%
36%
Shoes
20%
21%
20%
Men’s apparel
18%
18%
18%
Cosmetics
11%
11%
11%
Women’s accessories
10%
9%
9%
Children’s apparel
3%
3%
3%
Other
3%
3%
3%
2006 VS 2005 NET SALES
All of our Full-Line store regions and most of our Full-Line store merchandise categories had same-store sales increases. Our Full-Line stores had
a 5.9% same-store sales increase, ahead of last year’s result of 5.4%. Some other retailers who combine an offering of high-end merchandise and
customer service continued to experience positive sales growth in 2006. Our largest same-store sales increases came from our accessories,
cosmetics and men’s apparel merchandise categories. Women’s apparel experienced same-store sales decreases in the first half of the year, but
had same-store sales increases in the second half, resulting in a low single digit increase for the full year. The designer category, which benefited
from additional investment because it is an important component of our merchandise strategy, had a double-digit same-store sales increase.
Our Rack same-store sales increased 10.9% in 2006, on top of last year’s 14.8% increase. Rack purchases the majority of its merchandise from
third-parties and serves as a clearance channel for our Full-Line stores. The sales growth came from all regions and merchandise categories.
Our online store sales drove Nordstrom Direct’s 2006 total net sales increase of 23.0%. Our online sales benefited from the overall Internet
marketplace expansion, driven by the continued adoption of higher-speed Internet connections which allow for convenient and efficient shopping,
as well as utilization of the Internet as a tool for research and information before making a purchase decision. Catalog sales experienced an
overall decline because we reduced our catalog mailings beginning in the middle of 2005.
Total net sales increased 10.8% as a result of our same-store sales increases as well as from the five Full-Line stores and one Rack store opened
since February 2005. We also relocated one Full-Line store and expanded one Rack store, which contributed to our increase in total net sales.
In the 53rd week, we had sales of $117.7. Sales for the 53rd week represented 1.5% of the total percentage increase versus the prior year.
2005 VS 2004 NET SALES
In our Full-Line stores, our accessories, cosmetics and men’s apparel merchandise categories experienced the largest same-store sales increases.
Our shoes division had same-store sales increases. Our women’s apparel merchandise category had mixed same-store sales performance; women’s
intimate, junior and contemporary apparel were the leaders in the women’s category, while women’s special sizes, better and bridge apparel had
same-store sales decreases in 2005.
Our Rack same-store sales increased 14.8% in 2005, on top of an increase of 13.2% in 2004. Our sales increase was driven by the Rack’s merchandise
mix, especially our ability to offer customers branded merchandise.
Nordstrom Direct’s 2005 sales, including shipping revenue, increased by 1.1%. Online store sales had a double-digit increase. In February 2005, we
reduced our shipping fees, which drove additional online sales but reduced our overall shipping revenue. As part of the multi-channel strategy (see
page 6), we reduced our Direct catalog mailings significantly beginning in July 2005 and we shifted the merchandise offering to be more aligned with
the Full-Line stores. The decrease in the number of Direct catalog mailings, along with a continuing shift of catalog customers to our online store,
resulted in a drop in catalog sales in 2005.
Total net sales also increased as a result of our same-store sales increases as well as from the six Full-Line stores opened since February 2004.
2007 FORECAST OF SAME-STORE SALES
In 2007, we plan to open three Full-Line stores and one Rack store, increasing retail square footage by approximately 2.4%. We are assuming low
single digit same-store sales growth in our Full-Line and Rack stores, with a higher growth rate for Nordstrom Direct. In total, we expect 2007
same-store sales to increase 3% to 4%.