Nordstrom 2010 Annual Report Download - page 25

Nordstrom, Inc. and subsidiaries 17
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Dollar, share and square footage amounts in millions except percentages, per share and per square foot amounts
OVERVIEW
Nordstrom is a fashion specialty retailer offering high-quality apparel, shoes, cosmetics and accessories for women, men and children. We offer a wide
selection of brand name and private label merchandise through various channels: our ‘Nordstrom’ branded full-line stores and website, our off-price
‘Nordstrom Rack’ stores and our ‘Jeffrey’ boutiques. Our stores are located throughout the United States. In addition, we offer our customers a variety
of payment products and services, including credit and debit cards with an associated loyalty program.
We started to experience positive momentum in our business in the second half of 2009, which continued throughout 2010, allowing us to achieve
record sales and inventory turnover and increased gross profit. This reflected our ongoing efforts in multi-channel execution, merchandising and
inventory management, combined with store expansion and other growth initiatives and, most important, improving customer service. We strive to
provide an outstanding customer experience, regardless of channel, with a balanced offering of compelling new fashion and a high level of service.
Our multi-channel capabilities allow us to better serve our customers by offering greater access to our inventory and making it easier for them to
shop with us however and whenever they choose. We are continuing to invest in these capabilities as part of our commitment to provide a superior
shopping experience.
Our strong financial position has enabled us to continue to invest in our business during the economic downturn through store growth and remodels,
technology, merchandising systems and other opportunities. During 2010, we opened three Nordstrom full-line stores and seventeen Nordstrom Rack
stores, and relocated one Nordstrom full-line store and one Nordstrom Rack store. Overall, our new stores are delivering a high return on investment
while allowing us to expand our presence in top retail markets across the country. In 2011, we plan to open three Nordstrom full-line stores and
seventeen Nordstrom Rack stores, and to relocate two Nordstrom Rack stores. We are also working to improve the customer experience by investing in
areas such as mobile shopping and sales floor tools, social media and updated merchandise allocation and assortment systems in order to evolve with
our customers’ changing needs and expectations.
Our credit business began to recover during 2010 as economic conditions improved. Customer payment rates have returned to pre-recession levels,
resulting in improved delinquency and write-off trends, while our credit and debit card volumes have increased. We continue to open accounts with
high credit quality.
In February 2011, we reached an agreement to acquire HauteLook, Inc., a leader in the online private sale marketplace. This acquisition, which we expect
to close during the first quarter of 2011, will enable us to participate in this fast-growing channel and provide a platform that can lead to greater
innovation and speed in the way we serve customers in all channels.
We begin 2011 in a strong position and are gaining market share in a competitive retail industry. Our customer-driven model enables us to adapt quickly
to the changing consumer environment. We continue to operate under a solid financial framework focused on creating a superior shopping experience
for our customers and producing high returns for our shareholders.
RESULTS OF OPERATIONS
Our reportable segments are Retail and Credit. Our Retail segment includes our Nordstrom branded full-line stores and online store, and our Nordstrom
Rack and Jeffrey stores. For purposes of discussion and analysis of our results of operations, we combine our Retail segment results with revenues and
expenses in the “Corporate/Other” column of our segment reporting footnote (collectively, the “Retail Business”). We analyze our results of operations
through earnings before interest and income taxes for our Retail Business and Credit, while interest expense, income taxes and net earnings are
discussed on a total company basis.