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.
Jennifer Black (Jennifer Black & Associates): Bank cards are raising rates with delinquency rates going up. Will you be raising your rates on your credit cards?
Michael G. Koppel: We had a mailing that went out at the end of October that communicated to our card holders that we were raising the ATRs. That increase is effective November 15th and we should see that start to flow through to our results some time toward the middle of December and beyond.
Lorraine Maikis (Merrill Lynch): Can you talk about inventory in terms of how you are planning your 2009 receipts and if there is any opportunity to adjust these levels to reflect the current environment?
Peter E. Nordstrom: We’ve been working hard for the last couple of years to reconcile our inventory levels with our sales trends and we’ve got a good process to be able to do that. When you have some precipitous drops like we had a couple of months back, it’s difficult to get caught up on that because a lot of what we are buying we are buying so far in advance but once things settle down, and at least they have settled down in terms of they are a little more consistent, we are able to manage that well. The challenge for us gets to be if we are running mid-teen type double-digit comps or worse, then you start to run into this place where we want to make sure we have at least a good minimum representation of merchandise on the floor and so we don’t just use the sales as an indicator of how much inventory we sell. We also have the ability to look at the units that we own and contrast that over previous years per square foot and everything. Thus we have some view around what a minimum standard would be and we are able to actually manage that by store and by department and we don’t do it perfectly but it is something that we are aware of and working on. We think we’ve got a chance to do that in inventory as long as we stay on top of it.
Lorraine Maikis (Merrill Lynch): Are you planning 2009 down at this point?
Peter E. Nordstrom: Yes.
Michelle Clark (Morgan Stanley): In the press release, you detail for fiscal year 2008 outlook a finance charge increase of $30 million to $40 million. What is your underlying assumption on net charge-offs and delinquency rates for Q4?
Michael G. Koppel: We haven’t broken out specifically before about our assumptions. We are going to make adjustments to our provision. We included it in the outlook and it is based on much what we are reading in terms of unemployment expectation. A way to think about it is for every roughly 1% change in charge-offs that we book, it’s roughly 3 cents to 4 cents to the company.
Chris Holloway: Bad debt expense doesn’t hit that line item but the SG&A. The finance charge line item is just gross revenue.
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