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Nordstrom, Inc. and subsidiaries 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 2014
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to___________
Commission file number 001-15059
NORDSTROM, INC.
(Exact name of registrant as specified in its charter)
Washington 91-0515058
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
1617 Sixth Avenue, Seattle, Washington 98101
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code 206-628-2111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO
As of August 2, 2013 the aggregate market value of the Registrant’s voting and non-voting stock held by non-affiliates of the Registrant was
approximately $10.0 billion using the closing sales price on that day of $61.99. On March 10, 2014, 189,692,666 shares of common stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2014 Annual Meeting of Shareholders scheduled to be held on May 7, 2014 are incorporated into
Part III.
Table of Contents

Table of contents

  • Page 1
    ... was approximately $10.0 billion using the closing sales price on that day of $61.99. On March 10, 2014, 189,692,666 shares of common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 2014 Annual Meeting of Shareholders scheduled to be held on May...

  • Page 2
    [This page intentionally left blank.]

  • Page 3
    ... Compensation. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. Certain Relationships and Related Transactions, and Director Independence. Principal Accounting Fees and Services. 65 65 65 65 65 PART IV Item 15. Exhibits and Financial Statement...

  • Page 4
    ... customers used third-party cards. For more information about our business and our reportable segments, see Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 16: Segment Reporting in Item 8: Financial Statements and Supplementary Data. FISCAL YEAR...

  • Page 5
    ...defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties, including, but not limited to, anticipated financial outlook for the fiscal year ending January 31, 2015, anticipated annual same-store sales rate, anticipated Return on Invested Capital and trends...

  • Page 6
    ...our business and increased costs in order to bring our systems up to date. We are continuing our plan to accelerate the number of new Nordstrom Rack store openings. New store openings both at the Rack and in our full-line stores involve certain risks, including the availability of suitable locations...

  • Page 7
    ... finance our operations, make capital expenditures and acquisitions, manage our debt levels and return value to our shareholders through dividends and share repurchases. If our access to capital is restricted or our cost of capital increases, our operations and financial condition could be adversely...

  • Page 8
    ... associated loyalty programs, large banks and other credit card companies, some of which have substantial financial resources. If we do not effectively anticipate or respond to the competitive banking and credit card environments, we could lose market share to our competitors. Our sales and customer...

  • Page 9
    ... of year Stores opened Stores closed Number of stores, end of year Nordstrom Nordstrom Rack and Other 2013 240 22 (2) 260 117 143 2012 225 16 (1) 240 117 123 2011 204 22 (1) 225 117 108 In 2013, we opened 22 Nordstrom Rack stores (Boston, Massachusetts; Upland, California; Washington, D.C.; Ann...

  • Page 10
    ...1,061 611 374 700 34 895 466 244 145 1,707 378 1,095 1,739 75 26,017 includes one Last Chance clearance store and two Jeffrey boutiques. 2 California, Washington and Florida had the highest square footage, with a combined 10,331 square feet, representing 40% of the total company square footage. 10

  • Page 11
    ... statements are adequate in light of the probable and estimable liabilities. As of the date of this report, we do not believe any currently identified claim, proceeding or litigation, either alone or in the aggregate, will have a material impact on our results of operations, financial position...

  • Page 12
    ..., as well as the number of employee shareholders in the Nordstrom 401(k) Plan and Profit Sharing Plan. On this date we had 189,692,666 shares of common stock outstanding. The high and low prices of our common stock and dividends declared for each quarter of 2013 and 2012 are presented in the table...

  • Page 13
    ... on the Nordstrom common stock as well as the S&P Retail and S&P 500 Indexes. End of fiscal year Nordstrom common stock Standard & Poor's Retail Standard & Poor's 500 2008 100 100 100 2009 280 156 133 2010 338 198 161 2011 409 224 170 2012 473 285 200 2013 503 357 240 Nordstrom, Inc. and...

  • Page 14
    ... statements and related notes included in Item 8: Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Fiscal year Earnings Results Net sales Credit card revenues Gross profit1 Selling, general and administrative ("SG&A") expenses Earnings before interest and income taxes...

  • Page 15
    ... "Nordstrom Rack" off-price stores, "Last Chance" clearance store, "HauteLook" online private sale website and our "Jeffrey" boutiques. Our stores are located in 35 states throughout the United States. In addition, we offer our customers a loyalty program along with a variety of payment products and...

  • Page 16
    ... table summarizes the results of our Retail Business for the past three years: Fiscal year 2013 Amount Net sales Cost of sales and related buying and occupancy costs Gross profit Selling, general and administrative expenses Earnings before interest and income taxes 1 Subtotals 2012 % of net sales1...

  • Page 17
    ... channel was partially offset by sales decreases at our full-line stores. Both the average selling price and number of items sold increased on a same-store basis in 2013 compared with 2012. Category highlights included Cosmetics, Men's Shoes and Women's Apparel. Nordstrom, Inc. and subsidiaries 17

  • Page 18
    ...PROFIT - 2013 VS 2012 Our gross profit rate decreased 41 basis points compared with 2012 primarily due to higher expenses associated with the growth in the Nordstrom Rewards customer loyalty program and higher occupancy costs related to our Nordstrom Rack's accelerated store expansion. The Nordstrom...

  • Page 19
    ... with higher sales volume and the opening of 22 new Nordstrom Rack stores in 2013. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - 2012 VS 2011 Our Retail SG&A rate increased 23 basis points in 2012 compared with 2011 due to the investments we made to improve the customer experience across all...

  • Page 20
    ... receive Nordstrom Notes®, which can be redeemed for goods or services at Nordstrom full-line stores, Nordstrom Rack and online at Nordstrom.com. Nordstrom Rewards customers receive reimbursement for alterations, get Personal Triple Points days and have early access to sales events. With increased...

  • Page 21
    ... fees. CREDIT CARD REVENUES - 2013 VS 2012 Credit card revenues were flat compared with 2012. This was due to growth in total volume that was offset by continued improvements in cardholder payment rates. CREDIT CARD REVENUES - 2012 VS 2011 Credit card revenues increased $9 in 2012 compared with 2011...

  • Page 22
    ... an increase in capitalized interest resulting primarily from planned capital investments related to our Manhattan store and accelerated Nordstrom Rack growth. See further discussion of our debt retirement and exchange transaction at Note 8: Debt and Credit Facilities in Item 8: Financial Statements...

  • Page 23
    .... INCOME TAX EXPENSE - 2012 VS 2011 The decrease in the effective tax rate for 2012 compared with 2011 was primarily due to the impact of non-taxable HauteLook acquisitionrelated expenses in 2011, including a goodwill impairment. Fourth Quarter Results Quarter ended Net sales Credit card revenues...

  • Page 24
    ...customer experience. Nordstrom Rack net sales for the quarter increased $71, or 10.2%, reflecting 22 new Nordstrom Rack store openings in 2013, while samestore sales increased 3.6% compared with the fourth quarter of 2012. Both the number of items sold and the average selling price of Nordstrom Rack...

  • Page 25
    ... 2014 are as follows: Total sales Same-store sales Credit card revenues Gross profit rate1 Selling, general and administrative expenses (% of net sales) Interest expense, net Effective tax rate Earnings per diluted 1 Gross 2 This 5.5 to 7.5 percent increase 2 to 4 percent increase $0 to $5 increase...

  • Page 26
    ... months ended February 2, 2013. Our ROIC decreased compared with the prior year primarily due to an increase in our invested capital as a result of expansion into Manhattan and accelerated Nordstrom Rack store growth. ROIC is not a measure of financial performance under generally accepted accounting...

  • Page 27
    ... Nordstrom Rack stores and three full-line stores in 2014. In February 2014, we announced our plans to close our full-line stores in Vancouver, Washington, and in Portland, Oregon, at the Lloyd Center, in January 2015. The planned net store openings are expected to increase our retail square footage...

  • Page 28
    ... stores and accumulate points for our Nordstrom Rewards program. In 2013, the change in credit card receivables from customers' third-party purchases using their Nordstrom VISA credit cards decreased to $6, compared with $42 in 2012, as payment rates slightly increased in 2013, and VISA credit card...

  • Page 29
    ...aggregate purchase price of $523. As of February 1, 2014, we had $670 remaining in share repurchase capacity. The actual number and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission rules. DIVIDENDS In 2013...

  • Page 30
    ... letter of credit, with $2 outstanding at the end of the year. As of February 1, 2014, we had approximately $125 of fee interest in our Manhattan full-line store subject to lien. We have committed to make future installment payments based on the developer of the property meeting construction and...

  • Page 31
    ... using this measure. Our goal is to manage debt levels to maintain an investment-grade credit rating and operate with an efficient capital structure. In evaluating our debt levels, this measure provides a reflection of our credit worthiness that could impact our credit rating and cost of capital...

  • Page 32
    ..., was $14 in 2013, $14 in 2012 and $12 in 2011. Purchase obligations primarily consist of purchase orders for unreceived goods or services and capital expenditure commitments, including our Manhattan store. Other long-term liabilities consist of workers' compensation and general liability insurance...

  • Page 33
    ... 2012. A 10% change in the fair value of any of our reporting units would not have had an impact on our net earnings for the fiscal year ended February 1, 2014. Income Taxes We regularly evaluate the likelihood of realizing the benefit for income tax positions we have taken in various federal, state...

  • Page 34
    ... rates. Interest rate fluctuations can affect our interest income, credit card revenues and interest expense. See Note 3: Accounts Receivable in Item 8: Financial Statements and Supplementary Data for additional information. We use sensitivity analyses to measure and assess our interest rate risk...

  • Page 35
    ... ACCOUNTING FIRM To the Board of Directors and Shareholders of Nordstrom, Inc. Seattle, Washington We have audited the accompanying consolidated balance sheets of Nordstrom, Inc. and subsidiaries (the "Company") as of February 1, 2014 and February 2, 2013, and the related consolidated statements...

  • Page 36
    ..., Inc. Consolidated Statements of Earnings In millions except per share amounts Fiscal year Net sales Credit card revenues Total revenues Cost of sales and related buying and occupancy costs Selling, general and administrative expenses Earnings before interest and income taxes Interest expense, net...

  • Page 37
    ...: Accounts payable Accrued salaries, wages and related benefits Other current liabilities Current portion of long-term debt Total current liabilities Long-term debt, net Deferred property incentives, net Other liabilities Commitments and contingencies Shareholders' equity: Common stock, no par value...

  • Page 38
    ...common stock for HauteLook acquisition Issuance of common stock under stock compensation plans Stock-based compensation Repurchase of common stock Balance at January 28, 2012 Net earnings Other comprehensive earnings Dividends ($1.08 per share) Issuance of common stock under stock compensation plans...

  • Page 39
    ...long-term borrowings, net of discounts Principal payments on long-term borrowings Proceeds from sale of interest rate swap Increase (decrease) in cash book overdrafts Cash dividends paid Payments for repurchase of common stock Proceeds from issuances under stock compensation plans Excess tax benefit...

  • Page 40
    ...-price "Nordstrom Rack" stores, our "HauteLook" online private sale subsidiary, two "Jeffrey" boutiques and one "Last Chance" clearance store. Our stores are located in 35 states throughout the U.S. Through our Credit segment, we provide our customers with a variety of payment products and services...

  • Page 41
    ... Notes, which can be redeemed for goods or services at Nordstrom full-line stores, Nordstrom Rack stores and online at Nordstrom.com. Nordstrom Rewards customers receive reimbursements for alterations and personal triple points days, in addition to early access to sales events. With increased...

  • Page 42
    ... related to HauteLook stock compensation based on the grant date fair value, along with performance share units and our Employee Stock Purchase Plan, which are based on their fair values as of the end of each reporting period. New Store Opening Costs Non-capital expenditures associated with opening...

  • Page 43
    ... and services, as well as for purchases outside of Nordstrom. Cash flows from the use of both the private label and Nordstrom VISA credit cards for sales originating at our stores and our website are treated as an operating activity within the Consolidated Statements of Cash Flows, as they relate to...

  • Page 44
    ... Long-Lived Assets Goodwill represents the excess of acquisition cost over the fair value of the related net assets acquired, and is not subject to amortization. As of February 1, 2014, we had HauteLook goodwill of $121 and Nordstrom.com and Jeffrey goodwill of $53. We review our goodwill annually...

  • Page 45
    ... Financial Statements Dollar and share amounts in millions except per share, per option and unit amounts NOTE 2: HAUTELOOK In 2011, we acquired 100% of the outstanding equity of HauteLook, Inc., an online private sale retailer offering limited-time sale events on fashion and lifestyle brands...

  • Page 46
    ..., we may make modifications to payment terms for a customer experiencing financial difficulties in an effort to help the customer avoid a charge-off or bankruptcy, and to maximize our recovery of the outstanding balance. These modifications, which meet the accounting definition of troubled debt...

  • Page 47
    ...064) $2,579 The total cost of buildings and equipment held under capital lease obligations was $28 at the end of both 2013 and 2012, with related accumulated amortization of $25 in 2013 and $24 in 2012. Depreciation expense was $444 in 2013, $410 in 2012 and $355 in 2011. NOTE 5: SELF-INSURANCE Our...

  • Page 48
    ...2014 Change in benefit obligation: Benefit obligation at beginning of year Participant service cost Interest cost Benefits paid Actuarial (gain) loss Benefit obligation at end of year Change in plan assets: Fair value of plan assets at beginning of year Employer contribution Benefits paid Fair value...

  • Page 49
    ...: Discount rate Rate of compensation increase Assumptions used to determine SERP expense: Discount rate Rate of compensation increase 4.30% 3.00% 4.50% 3.00% 5.60% 3.00% 4.60% 3.00% 4.30% 3.00% 4.50% 3.00% 2013 2012 2011 Future Benefit Payments and Contributions As of February 1, 2014, the...

  • Page 50
    ... year ended February 1, 2014. Our mortgage payable is secured by an office building that had a net book value of $67 at the end of 2013. Other secured debt as of February 1, 2014 consisted primarily of capital lease obligations. In 2011, we received proceeds of $72 from the sale of our interest rate...

  • Page 51
    Table of Contents Nordstrom, Inc. Notes to Consolidated Financial Statements Dollar and share amounts in millions except per share, per option and unit amounts Required principal payments on long-term debt, excluding capital lease obligations, are as follows: Fiscal year 2014 2015 2016 2017 2018 ...

  • Page 52
    ... taxes and other executory costs, and some leases require additional payments based on sales, referred to as "percentage rent." Future minimum lease payments as of February 1, 2014 are as follows: Fiscal year 2014 2015 2016 2017 2018 Thereafter Total minimum lease payments Less: amount representing...

  • Page 53
    ..., we have outstanding trade letters of credit totaling $3 as of February 1, 2014. As of February 1, 2014, we had approximately $125 of fee interest in our Manhattan full-line store subject to lien. We have committed to make future installment payments based on the developer of the property meeting...

  • Page 54
    ... of Earnings as follows: Fiscal year Cost of sales and related buying and occupancy costs Selling, general and administrative expenses Total stock-based compensation expense, before income tax benefit 2013 $15 43 $58 2012 $14 39 $53 2011 $12 38 $50 The benefits of tax deductions in excess of the...

  • Page 55
    ... fair value per option at the grant date was $14, $15 and $15 in 2013, 2012 and 2011. In 2013, 2012 and 2011, stock option awards to employees were approved by the Compensation Committee of our Board of Directors and their exercise price was set at $54, $53 and $45, the closing price of our common...

  • Page 56
    ... at each fiscal quarter-end during the performance cycle. The performance share unit liability is remeasured using the estimated percentage of units earned multiplied by the closing market price of our common stock on the current period-end date and is pro-rated based on the amount of time passed in...

  • Page 57
    ... for credit losses Merchandise inventories Gift cards and gift certificates Gain on sale of interest rate swap Loyalty reward certificates Federal benefit of state taxes Other Total deferred tax assets Land, buildings and equipment basis and depreciation differences Debt exchange premium Total...

  • Page 58
    ... amounts paid for a state tax matter and to close our 2008 IRS audit. At the end of 2013, 2012 and 2011, $7, $7 and $11 of the ending gross unrecognized tax benefit related to items which, if recognized, would affect the effective tax rate. Our income tax expense included an increase to expense of...

  • Page 59
    ..., we provide our customers with a variety of payment products and services, including a Nordstrom private label card, two Nordstrom VISA credit cards and a debit card for Nordstrom purchases. Our credit and debit card products also include a loyalty program that provides benefits to our cardholders...

  • Page 60
    ...except per share, per option and unit amounts The following table sets forth information for our reportable segments: Retail Fiscal year 2013 Net sales Credit card revenues Earnings (loss) before interest and income taxes Interest expense, net Earnings (loss) before income taxes Capital expenditures...

  • Page 61
    ... following table summarizes net sales within our reportable segments: Fiscal year Nordstrom full-line stores Direct Nordstrom Nordstrom Rack HauteLook and Jeffrey Total Retail segment Corporate/Other Total net sales 2013 $7,705 1,622 9,327 2,738 330 12,395 (229) $12,166 2012 $7,964 1,269 9,233 2,445...

  • Page 62
    ... Quarter Fiscal year 2013 Net sales Same-store sales percentage change1 Credit card revenues Gross profit2 Selling, general and administrative expenses Earnings before income taxes Net earnings Earnings per basic share Earnings per diluted share Fiscal year 2012 Net sales Same-store sales percentage...

  • Page 63
    ... Commission. Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of February 1, 2014. Deloitte & Touche LLP, an independent registered public accounting firm, is retained to audit Nordstrom's consolidated financial statements...

  • Page 64
    ... Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended February 1, 2014 of the Company and our report dated March 17, 2014 expressed an unqualified opinion on those financial statements. /s/ Deloitte & Touche LLP Seattle, Washington...

  • Page 65
    ...our 2014 Annual Meeting of Shareholders, the sections of which are incorporated by reference herein and will be filed within 120 days after the end of our fiscal year: Security Ownership of Certain Beneficial Owners and Management Equity Compensation Plans Item 13. Certain Relationships and Related...

  • Page 66
    ... Public Accounting Firm Consolidated Statements of Earnings Consolidated Statements of Comprehensive Earnings Consolidated Balance Sheets Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Management's Report on Internal Control Over Financial Reporting Report of...

  • Page 67
    ... G. Koppel Michael G. Koppel Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: March 17, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the...

  • Page 68
    ...reports dated March 17, 2014, relating to the consolidated financial statements of Nordstrom, Inc. and subsidiaries, and the effectiveness of Nordstrom, Inc. and subsidiaries' internal control over financial reporting, appearing in the Annual Report on Form 10-K of Nordstrom, Inc. for the year ended...

  • Page 69
    ... Credit Card Receivables II LLC, Nordstrom fsb, Nordstrom Credit, Inc., RBS Securities Inc. and J.P. Morgan Securities LLC Form of 6.25% Note due January 2018 Form of 6.75% Note due June 2014 Form of 4.75% Note due May 1, 2020 Form of 4.00% Note due 2021 Nordstrom 401(k) Plan & Profit Sharing...

  • Page 70
    ... the Participant Loan Program of the Nordstrom 401(k) Plan & Profit Sharing Nordstrom, Inc. Executive Management Group Bonus Plan Nordstrom, Inc. Executive Management Bonus Plan Amended and Restated Nordstrom, Inc. Executive Management Bonus Plan Nordstrom Executive Deferred Compensation Plan (2007...

  • Page 71
    ... Option Award Agreement Nordstrom, Inc. 2010 Equity Incentive Plan Nordstrom, Inc. 2010 Equity Incentive Plan as amended February 27, 2013 Nordstrom, Inc. 2010 Equity Incentive Plan as amended and restated February 26, 2014 Form of 2011 Stock Option Award Agreement Form of 2012 Nonqualified Stock...

  • Page 72
    ... between Registrant and Bank One, N.A. Servicing Agreement, dated as of May 1, 2007, by and between Nordstrom fsb, and Nordstrom Credit, Inc. 10.65 10.66 10.67 10.68 10.69 10.70 10.71 Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended January 31, 2002...

  • Page 73
    ... Press release dated December 12, 2013 announcing the closing of the private offering of 2044 Notes Press release dated December 17, 2013 relating to the expiration of the early participation period Press release dated January 2, 2014 relating to the closing of the private exchange offer Method of...

  • Page 74
    ... Certification of President and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 XBRL Instance Document Method of Filing Filed herewith electronically Filed as page 68 of this report Filed herewith electronically Filed herewith...