Nordstrom 2014 Annual Report Download - page 7

Table of Contents
Nordstrom, Inc. and subsidiaries 7
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, constructing, furnishing and supplying a store in a timely
and cost-effective manner and properly balancing our capital investments between new stores, remodels, technology and ecommerce. In
addition, we may not accurately assess the demographic or retail environment for a particular location and sales at new, relocated or
remodeled stores may not meet our projections, particularly in light of the changing trends between online and brick-and-mortar shopping
channels, which could adversely affect our return on investment. We also intend to open stores in new and international markets, such as
Canada, Puerto Rico and Manhattan, and expansion will require additional management attention and resources and may distract us from
executing our core operations. In addition, competition from strong local competitors, compliance with foreign and local laws and regulatory
requirements and potentially unfavorable tax consequences may cause our business to be adversely impacted.
As we execute our plans and continue to evolve and transform our strategy, we may not adequately manage the related organizational
changes to align with our strategy or appropriately monitor, report or communicate the changes in an effective manner. In addition, we may
not gather accurate and relevant data or effectively utilize that data, which may impact our strategic planning and decision making.
Our stores located in shopping malls may be adversely affected if the consumer traffic of malls decline.
Many of our stores are located in desirable locations within shopping malls and benefit from the abilities that we and other anchor tenants
have to generate consumer traffic. A substantial decline in mall traffic, the development of new shopping malls, the availability of locations
within existing or new shopping malls, the success of individual shopping malls and the success of other anchor tenants may negatively
impact our ability to maintain or grow our sales in existing stores, as well as our ability to open new stores, which could have an adverse
effect on our financial condition or results of operations.
Improvements to our merchandise buying processes and systems could adversely affect our business if not successfully
executed.
We are making investments to improve our merchandise planning, procurement and allocation capabilities through changes in personnel,
processes and technology over a period of several years. If we encounter challenges associated with change management, the ability to hire
and retain key personnel involved in these efforts, implementation of associated information technology or adoption of new processes, our
ability to continue to successfully execute our strategy or evolve our strategy as the retail environment changes could be adversely affected.
As a result, we may not derive the expected benefits to our sales and profitability, or we may incur increased costs relative to our current
expectations.
If we do not effectively design and implement our strategic and business planning processes to attract, retain, train and develop
talent and future leaders, our business may suffer.
We rely on the experience of our senior management, who have specific knowledge relating to us and our industry that is difficult to replace,
and the talents of our workforce to execute our business strategies and objectives. If unexpected turnover occurs without adequate
succession plans, the loss of the services of any of these individuals, or any resulting negative perceptions of our business, could damage
our reputation and our business.
Even if we take appropriate measures to safeguard our information security and privacy environment from security breaches, our
customers and our business could still be exposed to risk.
Our Retail and Credit segments involve the collection, storage and transmission of customers’ personal information, consumer preferences
and credit card information. In addition, our operations involve the collection, storage and transmission of employee information and company
financial and strategic data. Any measures we implement to prevent a security or cybersecurity threat may not be totally effective and may
have the potential to harm relations with our customers or decrease activity on our websites by making them more difficult to use. In addition,
the regulatory environment surrounding information security, cybersecurity and privacy is increasingly demanding, with new and constantly
changing requirements. Security breaches and cyber incidents and their remediation, whether at our company, our third-party providers or
other retailers, could expose us to a risk of loss or misappropriation of this information, litigation, potential liability, reputation damage and
loss of customers’ trust and business, which could adversely impact our sales. Any such breaches or incidents could subject us to
investigation, notification and remediation costs, and if there is additional information that is later discovered related to such security breach
or incident, there could be further loss of customers’ trust and business, based upon their reactions to this additional information. Additionally,
as a credit card issuer, we could be subject to credit card fraud losses due to external credit card fraud.
If we fail to appropriately manage our capital, we may negatively impact our operations and shareholder return.
We utilize capital to 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 borrowing costs increase, our operations
and financial condition could be adversely impacted. Further, if we do not properly allocate our capital to maximize returns, our operations,
cash flows and returns to shareholders could be adversely affected.