Nordstrom 2008 Annual Report Download - page 38

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Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share and per option amounts
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Founded in 1901 as a shoe store in Seattle, today Nordstrom is a fashion specialty retailer that offers customers a well-edited selection of high-
quality fashion brands focused on clothing, shoes and accessories for men, women and children. This breadth of merchandise allows us to serve both
our affluent customer segment as well as those who appreciate quality products and experiences. We offer a wide selection of brand name and
private label merchandise. We offer our products through multiple retail channels, including 109 ‘Nordstrom’ full-line stores, 56 off-price ‘Nordstrom
Rack’ stores, two ‘Jeffrey’ boutiques, two clearance stores, our catalogs and through our online store at www.nordstrom.com. Our stores are located
throughout the United States.
Our credit operations offer a Nordstrom private label card, two Nordstrom VISA credit cards and a debit card for Nordstrom purchases, which
generate credit card revenues. We offer our customers a variety of payment products and services, including our loyalty program.
Our operations also include a product development group, which coordinates the design and production of private label merchandise sold in our
retail stores.
Fiscal Year
Our fiscal year ends on the Saturday closest to January 31st. References to 2008 relate to the 52-week fiscal year ended January 31, 2009.
References to 2007 and 2006 relate to the 52-week fiscal year ended February 2, 2008 and the 53-week fiscal year ended February 3, 2007,
respectively. Fiscal year 2006 includes an extra week (the 53rd week) as a result of our 4-5-4 retail reporting calendar. References to 2009 relate to
the 52-week fiscal year ending January 30, 2010.
Principles of Consolidation
The consolidated financial statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and balances are
eliminated in consolidation.
Use of Estimates
We make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.
Reclassification
In order to improve the transparency related to our Credit segment, we have reclassified credit card revenues and expenses in our consolidated
statements of earnings in 2007 and 2006 to conform to our 2008 presentation. Credit card revenues were previously included in finance charges and
other, net in our consolidated statement of earnings and selling, general and administrative expenses for our credit segment were previously included in
total selling, general and administrative expenses in our consolidated statements of earnings. These reclassifications did not impact our reported net
earnings, earnings per share or cash flows for these periods.
Net Sales
We record revenues net of estimated returns and we exclude sales taxes. Our retail stores record revenue at the point of sale. Our catalog and online
sales include shipping revenue and are recorded upon estimated receipt by the customer. We recognize revenue associated with our gift cards upon
redemption of the gift card. As part of the normal sales cycle, we receive customer merchandise returns. To recognize the financial impact of sales
returns, we estimate the amount of goods that will be returned and reduce sales and cost of sales accordingly. We utilize historical return patterns
to estimate our expected returns. Our sales return reserves were $70 and $56 at the end of 2008 and 2007.
Credit Card Revenues and Credit Selling, General and Administrative Expenses
Credit card revenues include finance charges, late and other fees generated by our combined Nordstrom private label card and Nordstrom VISA
credit card programs, and interchange fees generated by the use of Nordstrom VISA cards at third-party merchants. These revenues were previously
included in finance charges and other, net in our consolidated statement of earnings. Selling, general and administrative expenses for our credit
segment consist of operational and marketing costs incurred to support and service our credit card programs and bad debt expense, and were
previously included in total selling, general and administrative expenses in our consolidated statements of earnings.
Buying and Occupancy Costs
Buying costs consist primarily of compensation and other costs incurred by our merchandise and product development groups. Occupancy costs
include rent, depreciation, property taxes and facility operating costs of our retail, corporate center and distribution operations.
Shipping and Handling Costs
Our shipping and handling costs include payments to third-party shippers and costs to hold, move and prepare merchandise for shipment.
Shipping and handling costs of $106, $87 and $78 in 2008, 2007 and 2006 were included in selling, general and administrative expenses.