Key questions and answers from the fourth quarter fiscal 2007 earnings call conducted by Nordstrom Inc. on February 25, 2008.

Christine Augustine (Bear Stearns): Can you talk about the expenses going forward and in particularly, could you describe on the net service charge income? Why do you expect that to be up so much in 2008 with the credit card trends?

Mike Koppel: Going into next year, we've had multiple years of improvement in margin and model leverage is well at a low single-digit comp. Going into next year, obviously, we're seeing about half of the deleverage coming from a lower sales plan, and the other half mostly coming from the impact of new stores and the related pre-opening expenses. In terms of the service charge income, a portion of that growth relates to the one-time expenses related to the change in accounting in 2007, and we're getting some benefits from that plus in addition a normal growth of the AR.

Christine Augustine (Bear Stearns): Was the one-time charge approximately $20 million?

Mike Koppel: It was roughly $20 to $25 million in finance charge income.

Deborah Weinswig (Citigroup): Women’s has been an area of weakness for you. Is there anything that there specifically where we could also expect to see improvement in the back half of the year?

Pete Nordstrom: We continue to focus down on our targeted customers and making sure that we are delivering some fine products. In second half of 2007, we got ourselves to a position where we got overbought. We had to cancel orders. We did a lot of scrambling and work that didn’t apply itself to selling and getting after the best new product. We believe that we have a good opportunity to improve our situation mostly by both our targeted customer and keeping discipline in place, and not get ourselves overbought. That should help us there.

Deborah Weinswig (Citigroup): The designer wear has been a win for you. Is there anything specifically you will be doing in 2008 and also can you update on your penetration as it ended 2007?

Pete Nordstrom: Designers are growing part of our business and relatively as a subset it continued to grow faster than any category we have and that’s across all merchandize categories. You will see that continue to grow to meet the demands of our target customer base.

Adrianne Shapira (Goldman Sachs): Can you shed some light in the fourth quarter in terms of how much of the gross margin contraction is due to the higher markdowns and deleverage in terms of occupancy and buying? When you talk about 2008, the 30 to 60 basis point of contraction is expected. How much will you expect from occupancy leverage versus merchandize margins?

Mike Koppel: In the fourth quarter, the majority of the deterioration in gross profit was from merchandized margin and primarily due to increased markdowns as we saw continued slowing business trends and we were clearing our inventory. In terms of 2008, it's a little bit of a different story. We expect overall for the year a somewhat flat performance in gross margin. Most of the deterioration in gross profit is from the additional occupancy costs, partially from the new stores in 2007 from all eight stores in 2008 and the fact that we have a slight amount of deleverage there.

Adrianne Shapira (Goldman Sachs): In the first quarter, what do you expect to see on traffic versus tickets?

Mike Koppel: In terms of a point of view on traffic versus ticket, we don't have specifics on that. But what the first quarter does reflect is a trend that we continue to see following the month of January and wanting to be prudent in terms of planning our inventories and expenses coming out of the beginning of the year.

Adrianne Shapira (Goldman Sachs): On the bad debt provisions, could you quantify how much that cost you in the quarter?

Mike Koppel: During the quarter, the increase over last year was roughly 4 cents.

Charles Grom (JPMorgan): Could you quantify the impact or the benefit in SG&A from the lower incentive costs, not only in the fourth quarter, but also could you remind what it was in the third quarter?

Mike Koppel: In terms of the fourth quarter, the majority of the positive leverage we got was from the benefit. It was a combination of the fourth quarter last year, which was very robust where we saw very high comp sales and we saw a steep appreciation in the stock price. This year, obviously, with the softening business, we didn't have the same costs, and compared to last year, it was a fairly significantly spread. Hence, most of the leverage partially offset by the bad debt was a result of that benefit cost.

Jennifer Black (Jennifer Black & Associates): How you're doing as far as fixing brass plum, petites and cosmetics and what we should expect throughout this next year?

Pete Nordstrom: Our brass plum business started to improve some what relatively from where it was at. In the past 18 months or so, it's been relatively challenged. We've made some progress there, and I give a lot of credit to our merchandising team who have added to do a real sharp job editing the buy to the most compelling stuff. It seems obvious, but when business is tough like that, they were forced to take a good hard look at the business. Relatively that has started to improve some petites. Cosmetics has been performing right near the company average as well. I wouldn't say it's done relatively poorly. I mean it's kind of riding the same wave that the entire company is.

Jennifer Black (Jennifer Black & Associates): Can you talk about what your gift card trends were over this last year?