Nordstrom 2015 Annual Report Download - page 21

Selling, General and Administrative Expenses (2015 vs. 2014)
Our Retail SG&A rate increased 112 basis points in 2015 compared with 2014 due to growth initiatives related to Trunk Club and Canada,
higher fulfillment costs supporting online growth and asset impairment charges (see Note 1: Nature of Operations and Summary of
Significant Accounting Policies in Item 8). Our Retail SG&A increased $428 in 2015 due primarily to increased sales and growth initiatives
related to Canada and Trunk Club.
Selling, General and Administrative Expenses (2014 vs. 2013)
Our Retail SG&A rate increased 48 basis points in 2014 compared with 2013 due to expenses related to the acquisition of Trunk Club and
ongoing fulfillment and technology investments. Our Retail SG&A expenses increased $316 in 2014 compared with 2013 due primarily to
growth-related investments in fulfillment and technology.
CREDIT SEGMENT
The Nordstrom credit and debit card products are designed to strengthen customer relationships and grow retail sales by providing loyalty
benefits, valuable services and payment products. We believe our credit business allows us to build deeper relationships with our customers
by fully integrating the Nordstrom Rewards program with our retail stores and providing better service, which in turn fosters greater customer
loyalty. Nordstrom cardholders tend to visit our stores more frequently and spend more with us than non-cardholders. Nordstrom private label
credit and debit cards can be used only at our Nordstrom full-line stores in the U.S., Nordstrom Rack stores and online at Nordstrom.com and
Nordstromrack.com/HauteLook (‚inside volumeƒ), while Nordstrom Visa credit cards also may be used for purchases outside of Nordstrom
(‚outside volumeƒ). Cardholders participate in the Nordstrom Rewards program through which cardholders accumulate points based on their
level of spending. Upon reaching a certain points threshold, cardholders receive Nordstrom Notesˆ, which can be redeemed for goods or
services at Nordstrom full-line stores in the U.S. and Canada, Nordstrom Rack stores and at Nordstrom.com. Nordstrom Rewards customers
receive reimbursements for alterations, get Personal Triple Points days and have early access to sales events. With increased spending,
they can receive additional amounts of these benefits as well as access to exclusive fashion and shopping events.
On•October•1, 2015, we completed the sale of a substantial majority of our U.S. Visa and private label credit card portfolio to TD (see Note 2:
Credit Card Receivable Transaction in Item•8).
Summary
The table below provides a detailed view of the operational results of our Credit segment, consistent with Note 17: Segment Reporting in
Item•8. In order to better reflect the economic contribution of our credit and debit card program, intercompany merchant fees are also
included in the table below, which represent the estimated costs that would be incurred if cardholders used non-Nordstrom-branded cards
instead of our cards in store and online.
Prior to•October•1, 2015, interest expense at the Credit segment was equal to the amount of interest related to securitized debt plus an
amount assigned to the Credit segment in proportion to the estimated debt and equity needed to fund our credit card receivables. Based on
our research, debt as a percentage of credit card receivables for other credit card companies ranges from 70% to 90%. As such, we
considered a mix of 80% debt and 20% equity to be appropriate, and therefore assigned interest expense to the Credit segment as if it
carried debt of up to 80% of the credit card receivables. Subsequent to the sale, we no longer allocate interest expense to the Credit
segment as we do not fund the accounts receivable now owned by TD.
Fiscal year 2015 2014 2013
Credit card revenues, net $342 $396 $374
Credit expenses (159)(194)(186)
Earnings before interest and income taxes 183 202 188
Interest expense (13)(18)(24)
Intercompany merchant fees 118 108 97
Credit segment contribution, before income taxes $288 $292 $261
Credit and debit card volume1:
Outside $4,309 $4,331 $4,273
Inside 5,953 5,475 4,935
Total volume $10,262 $9,806 $9,208
1 Volume represents sales plus applicable taxes.
Table of Contents
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