Key questions and answers from the third quarter fiscal 2008 earnings call conducted by Nordstrom on November 13, 2008.

Neely J.N. Tamminga (Piper Jaffray): Can you talk about any potential trend you may be seeing in terms of returns for the direct business?

Michael G. Koppel: As far as the direct business, we do track all activities between both channels, direct and the stores and know the return levels. Overall in the company both in the stores and direct, we have seen an increase in return levels.

Deborah Weinswig (Citigroup): Concerning the additional marketing events, how should we think about planning of the marketing calendar for 2009 especially in light of the fact that the competition has been so aggressive?

Erik B. Nordstrom: The changes that we have made so far have been with our rewards program. We have some enhanced that’s the triple rewards twice a year and those have been very successful for us. We’re in double points right now. We are not planning on repeating that for next year but it is something that we can roll out quickly if need be and clearly these are uncertain times and we need to be responsive to what is going on and we will do that. Currently, the only additional marketing events we have are the two triple rewards points.

Deborah Weinswig (Citigroup): With regard to the specifics around the store openings in 2009 and 2010; the 5 down to 3 and the 8 down to 4 to 5, how many of those stores have been permanently put off versus just delayed into the out years?

Erik B. Nordstrom: We haven’t announced any of those yet but we are still in constant conversations with our developers and as you can imagine, their plans are changing rapidly so we don’t have anything to announce on that yet. We are confident that at least a number of stores will slide but it’s safe to assume that a portion of those will go away.

Deborah Weinswig (Citigroup): Can you go through some of the initiatives that are driving the significant performance of the Rack division?

Peter E. Nordstrom: Our focus for the last several years has really been trying to leverage the brands that customers would expect to see in a full line store and offer it at a discounted environment. We’ve got great vendor relationships and so we are able to get their distressed goods and sell it there on the racks. When we made that transition to the type of brands you would see in the full line stores, we noticed our business started to improve. It’s driven largely by our ability to be able to buy these clearance distressed goods from the vendor directly and then we also are trying to move merchandise through the full line stores as quickly as possible and having to keep inventories fresh in the full line which means they’ve got a good supply of goods coming from that channel as well.

Dana Cohen (Banc of America Securities): In terms of bringing down prices through lower IMU, how do you convey the value to the customer in a manner which seems very different than the way you would normally convey it?

Peter E. Nordstrom: We have a few different ways. In some cases, the price has just been changed and our experience is the customers are smart, savvy and they know what they are looking for and they can recognize a good value on a good item and we have been able to lower the mark-up on some items that were really outstanding sellers for us in the first place. We have a tissue eight cashmere scarf as an example. It’s been a great ongoing item for us and we were able to significantly lower the mark-up on that and increase the value and it didn’t require a big campaign. It sold and the big part of that is our sales people recognize it as a good thing. There are some places where we have some black line prices and there is some signing that goes with that but most of it is making sure our sales people are well-informed as to what is going on to give them some great talking points to the customers.

Dana Cohen (Banc of America Securities): Can you talk more in terms of any new information that you might have on the card as to whether you think you are adequately reserved at this point?

Michael G. Koppel: We had booked additional levels to our reserve at the end of Q3 and in the guidance we share for Q4, it also contemplates increased levels as well. It’s very clear that we know over time that the write-offs trend consistently with expectations over unemployment. Based on some of the more recent news that we are reading, we felt it was appropriate to include in our Q4 outlook addition to that provision. We continue to learn like everybody else but on a month-to-month, quarter-to-quarter basis, we believe we are reserved appropriately.

Dana Cohen (Banc of America Securities): Could just talk a little bit more about the expense initiatives?

Michael G. Koppel: If you look at where we finished and where we are going to finish in 2008, our sales per square foot is going to come down in roughly the $350 per square foot range, which is probably around where we were roughly 2004. What we have been trying to do as a company and overall is to right-size the business based on those levels of productivity. Ours is a model that is definitely driven by productivity on sales per square foot basis and so we have been going back and adjusting our investments and our expenses to align with those levels of business and that’s been consistent in 2008. When we come in February to talk about our plans for 2009, we will share more specifics on that at that time.

Dana Cohen (Banc of America Securities): Are you talking $100 million at this point?

Michael G. Koppel: Yes, once again for 2009.

Jennifer Black (Jennifer Black & Associates): With business being tough, do you feel that your FTEs are in alignment with your business strategies?

Erik B. Nordstrom: The quick answer is yes. Our FTEs are aligned and really have been aligned all year. This has been a tough year but our expense management has been one of the positives and of our stores, our biggest grouping of employees are our sales people and our selling costs have been well-managed throughout this year and even as the top line has been very unstable, our stores have the discipline and the tools to adjust their staffing really naturally to the flow of business. Hence we are in good shape on FTEs.

Jennifer Black (Jennifer Black & Associates): How are you ensuring your customer service will be at the top and what kind of coaching are you giving your employees at this time?

Erik B. Nordstrom: We rank all of our sales people based on their capabilities, their performance and we need to ensure we have our best people here as much as possible. We need to be an employer of choice for great sales people, the people that provide the best service to our customers.
We have better people in our stores. The productivity of our sales people is about even with what it was last year. Our average sales person is making about as much as they made last year and that’s important for us again to be an employer of choice for great sales people.