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Nordstrom Earnings Call, Second Quarter 2008
Author: Godwin Gwetu
Last Update: 8:29 AM ET August 19 2008


The leading fashion specialty retailer generated second quarter total sales of $2.29 billion compared with $2.39 billion during the same period in fiscal 2007. The second quarter same-store sales decreased by 6%. The management reported quarterly net earnings of $143 million versus net earnings of $180 million in the year ago quarter. The company expects full year EPS to be in the range of $2.55 to $2.65, a decrease from the previously announced range of $2.65 to $2.80.

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This summary is based on the second quarter fiscal 2008 earnings call conducted by Nordstrom Inc. (JWN) on August 14, 2008.


President, Director: Blake W. Nordstrom
CFO and EVP: Michael G. Koppel
EVP and President Merchandising, Director: Peter E. Nordstrom
EVP and President Stores, Director: Erik B. Nordstrom
Director, IR: Chris Holloway

Key Investor Issues:

- The second quarter total sales dipped 4.3% to $2.29 billion from the year ago quarter.
- Quarterly EPS decreased from 71 cents to 65 cents.
- The company repurchased 1.5 million common shares for a total value of $50 million.

Second-Quarter Financial Highlights:

The ended quarter is the second largest of the year for the company.

- Three of the company’s five annual sales events were held during the quarter.
- The Q2 EPS eased by 8.5% mainly due to lower sales and higher levels of discounts.

The quarterly same-store sales decreased 6%.

- This was within the company’s planned 5% to 7% same-store sales decline.
- The results in full-line stores continued to be challenging with same-store sales down 9% during the quarter.
- Nordstrom Rack continued its multi-year run of strong sales growth with same-store sales increasing 6.3% in the quarter.
- The sales for Nordstrom Direct were also strong, increasing 14.6% in the quarter.

[The gross profit, as a percentage of sales, decreased 168 basis points compared with last year’s second quarter.

- Inventories were reportedly in line with plans.
- The management reported a challenging operating environment amidst intense promotional activity.
- The quarter-end inventory per square foot was down 12.8% from the prior year.
- An estimated 3% of the decline was due to the company’s sale of Faconnable in Q3 of 2007.

The quarterly finance charges and other income increased $4 million, with growth in receivables offsetting lower interest rates.

- The receivables at the end of the quarter were 13% higher than Q2 of 2007.
- This was due to the continued success of the fashion rewards program, which drove a higher penetration of card usage in stores and increased spending on Nordstrom Visa cards.

- The quarterly delinquency rate was 2.5%, consistent with first quarter rates.
- However, this represents an increase of 53 basis points from Q2 last year.
- The write-offs increased 38 basis points versus the first quarter to 4.3%. This represents an increase of 134 basis points versus the year ago quarter.

The net interest expense of $34 million was $17 million higher than last year.

- This was due to changes in the capital structure made in the fourth quarter of last year.
- The company finished the quarter with an adjusted debt-to-EBITDA ratio of 1.9 times.
- This is consistent with the capital structure goal of 2 times.
- Cash flow from operations remained strong in the quarter at $218 million.

The SG&A expenses decreased 5% or $32 million compared with last year’s Q2.

- The company continues to execute against the revised expense plan shared in Q1.
- The decrease in expense from last year was driven by the continued focus on controlling expenses and reduced incentives tied to company performance.

During the quarter, the repurchased 1.5 million shares of stock.
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Sources: Data collected by and from company press releases, filings and corporate websites.
Market data: BATS Exchange. Inc.

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