Nordstrom 2007 Annual Report Download - page 65

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Nordstrom, Inc. and subsidiaries 57
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share and per option amounts
NOTE 15: EARNINGS PER SHARE
Earnings per basic share is computed using the weighted average number of common shares outstanding during the year. Earnings per diluted share
uses the weighted average number of common shares outstanding during the year plus dilutive common stock equivalents, primarily stock options
and performance share units.
The computation of earnings per share is as follows:
Fiscal year 2007 2006 2005
Net earnings $715 $678 $551
Basic shares 245 261 272
Dilutive effect of stock options and performance
share units 45 6
Diluted shares 249 266 278
Earnings per basic share $2.92 $2.60 $2.03
Earnings per diluted share $2.88 $2.55 $1.98
Options and other equity instruments totaling 3 shares in 2007 and 2 shares in 2006 were excluded from earnings per diluted share because their
impact was anti-dilutive.
Since the beginning of 2005, 12 shares have been issued upon the exercise of stock options; we repurchased a total of 64 shares during the three
fiscal years ended February 2, 2008.
NOTE 16: SEGMENT REPORTING
We offer three channels through which our customers can shop: full-line and Rack retail stores and Nordstrom Direct (online and catalog). Our goal
is to create an integrated, consistent merchandise offering for our customers regardless of which channel they choose. These three channels meet
the aggregation criteria set forth in Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related
Information
(“SFAS 131”) with the exception of “distribution method.” Nordstrom Direct sells merchandise via our online store and the catalog as
opposed to in a retail store. As such, we aggregate our full-line and Rack stores into the Retail Stores segment and report Direct as a separate
segment. In the second quarter of 2007, we increased our ownership in Jeffrey. As a result of the additional purchase, Jeffrey is now consolidated
and included in our Retail segment.
The Credit segment earns finance charges and late fee income through operation of the Nordstrom private label and co-branded Nordstrom VISA
credit cards. Intersegment revenues consist of interchange fees charged to our other segments.
The Other segment includes our product development group, which coordinates the design and production of private label merchandise sold in our
retail stores, and our distribution network. This segment also includes our corporate center operations. During the time that we owned them, this
segment also included the operations of our Façonnable stores.
The segment information for 2006 and 2005 has been adjusted from our previous Form 10-K disclosures to reflect the 2007 view of certain costs
between our Retail Stores, Direct, Credit and Other segments. These changes do not impact the consolidated statements of earnings. These changes
include expense related to our loyalty program, intercompany merchant fee income, intercompany borrowings, and sales fulfilled at our Direct
fulfillment center initiated at our full-line stores.