<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-6074
Nordstrom, Inc.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Washington 91-0515058
_______________________________ __________________
(State or other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
1501 Fifth Avenue, Seattle, Washington 98101
______________________________________________________
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 206-628-2111
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, without par value
____________________________________
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. / /
1 of 15
<PAGE>
On March 20, 1998, 74,303,996 shares of common stock were outstanding, and
the aggregate market value of those shares (based upon the closing price as
reported by NASDAQ) held by non-affiliates was approximately $2.8 billion.
Documents Incorporated by Reference:
Portions of Nordstrom, Inc. 1997 Annual Report to Shareholders
(Parts I, II and IV)
Portions of Proxy Statement for 1998 Annual Meeting of Shareholders
(Part III)
2 of 15
<PAGE>
PART I
Item 1. Business.
- ------------------
Nordstrom, Inc. (the "Company") was incorporated in the State of Washington in
1946 as successor to a retail shoe business started in 1901. As of January 31,
1998, the Company operated 65 large specialty stores in Alaska, California,
Colorado, Connecticut, Illinois, Indiana, Maryland, Michigan, Minnesota, New
Jersey, New York, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and
Washington, selling a wide selection of apparel, shoes and accessories for
women, men and children.
The Company also operates 21 stores under the name "Nordstrom Rack" and
one clearance store which serve as outlets for clearance merchandise from the
Company's large specialty stores. The Racks also purchase merchandise
directly from manufacturers. The Racks are located in California, Illinois,
Maryland, New York, Oregon, Pennsylvania, Utah, Virginia, and Washington.
The Company also operates three specialty boutiques in New York and California
under the name "Faconnable", and two free-standing shoe stores located in
Hawaii. In addition, the Company operates a Direct Sales Division which
commenced operations in January 1994 with the mailing of its first catalog.
In February 1998, the Company opened a large specialty store in Atlanta,
Georgia. In March 1998, the Company opened a large specialty store in
Overland Park, Kansas and a new Rack store in Hillsboro, Oregon. In August
1998, the Company will open a new flagship store in downtown Seattle,
Washington, and in September 1998, a large specialty store in Scottsdale,
Arizona. In addition, the Company will open new Racks in Bloomington,
Minnesota, in May 1998, in San Jose, California, in July 1998 and in Littleton,
Colorado, in September 1998. In 1999, four new large specialty stores are
planned to open in Norfolk, Virginia, Providence, Rhode Island, Mission Viejo,
California, and Columbia, Maryland. The Company also plans to replace an
existing store in Spokane, Washington and complete the expansion and remodeling
of a store in San Diego, California in 1999.
The Company regularly employs on a full or part-time basis an average of
approximately 41,000 employees. Due to the seasonal nature of the Company's
business, the number increased to approximately 49,000 employees in July for
the Company's anniversary sale, and in December for the Christmas selling
season.
The Company's business is highly competitive. Its stores compete with other
national, regional and local retail establishments within its operating areas
which carry similar lines of merchandise, including department stores,
specialty stores, boutiques, and mail order businesses. The Company believes
the principal methods of competing in its industry include customer service,
value, fashion, advertising, store location and depth of selection.
Certain other information required under Item 1 is contained within the
following sections of the Company's 1997 Annual Report to Shareholders, which
sections are incorporated by reference herein from Exhibit 13.1 of this
report:
Management Discussion and Analysis
Note 1 in Notes to Consolidated Financial Statements
Note 13 in Notes to Consolidated Financial Statements
Retail Store Facilities
3 of 15
<PAGE>
Executive Officers of the Registrant
- ------------------------------------
<TABLE>
<CAPTION>
Officer
Name Age Title Since Family Relationship
- -------------------- --- ------------------ ------- -------------------
<S> <C> <C> <C> <C>
Jammie Baugh 44 Executive Vice 1990 None
President
Gail A. Cottle 46 Executive Vice 1985 None
President
John A. Goesling 52 Executive Vice 1980 None
President and Treasurer
Jack F. Irving 53 Executive Vice 1980 None
President
Robert J. Middlemas 41 Executive Vice 1993 None
President
Blake W. Nordstrom 37 Co-President 1991 Brother of Erik B. and
Peter E. Nordstrom
Erik B. Nordstrom 34 Co-President 1995 Brother of Blake W. and
Peter E. Nordstrom
J. Daniel Nordstrom 35 Co-President 1995 Brother of William E.
Nordstrom and cousin
of James A. Nordstrom
James A. Nordstrom 36 Co-President 1991 Cousin of J. Daniel and
William E. Nordstrom
Peter E. Nordstrom 35 Co-President 1995 Brother of Blake W. and
Erik B. Nordstrom
William E. Nordstrom 34 Co-President 1995 Brother of J. Daniel
Nordstrom and cousin
of James A. Nordstrom
James R. O'Neal 39 Executive Vice 1997 None
President
John J. Whitacre 45 Chairman of the 1989 None
Board of Directors
Martha S. Wikstrom 41 Executive Vice 1991 None
President
<FN>
All of the above people that have not been officers for the past five years
have been full-time employees of the Company during that period. The officers
are re-elected annually by the Board of Directors following each year's Annual
Meeting of Shareholders. Officers serve at the discretion of the Board of
Directors.
</TABLE>
4 of 15
<PAGE>
Item 2. Properties.
- --------------------
<TABLE>
The following table summarizes at January 31, 1998 the number of stores owned
or operated by the Company and the percentage of total store area represented
by each listed category:
<CAPTION>
Number of % of total store
stores square footage
--------- ----------------
<S> <C> <C>
Owned Stores 21 24%
Leased Stores 39 24
Owned on leased land 29 48
Partly owned & partly leased 3 4
--------- ----------------
92 100%
========= ================
</TABLE>
The Company also operates seven merchandise distribution centers, five
which are owned, one which is leased, and one which is owned on leased
land. The Company leases its principal offices in Seattle, Washington, and
owns an office building in the Denver, Colorado metropolitan area which serves
as the principal offices of Nordstrom Credit, Inc. and Nordstrom National
Credit Bank.
Certain other information required under this item is included in the
following sections of the Company's 1997 Annual Report to Shareholders, which
sections are incorporated by reference herein from Exhibit 13.1 of this
report:
Note 7 in Notes to Consolidated Financial Statements
Retail Store Facilities
Item 3. Legal Proceedings.
- ---------------------------
The Company is not involved in any material pending legal proceedings, other
than routine litigation in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
None
5 of 15
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
- ----------------------------------------------------------------------
The Company's Common Stock, without par value, is traded on the NASDAQ
National Market under the symbol "NOBE." The approximate number of
holders of Common Stock as of March 20, 1998 was 61,300.
Certain other information required under this item with respect to stock
prices and dividends is included in the following sections of the Company's
1997 Annual Report to Shareholders, which sections are incorporated by
reference herein from Exhibit 13.1 of this report:
Financial Highlights
Stock Trading
Consolidated Statements of Shareholders' Equity
Note 9 in Notes to Consolidated Financial Statements
Note 14 in Notes to Consolidated Financial Statements
Item 6. Selected Financial Data.
- ---------------------------------
The information required under this item is included in the following section
of the Company's 1997 Annual Report to Shareholders, which section is
incorporated by reference herein from Exhibit 13.1 of this report:
Ten-Year Statistical Summary
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- ------------------------------------------------------------------------
The information required under this item is included in the following sections
of the Company's 1997 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Management Discussion and Analysis
Note 6 in Notes to Consolidated Financial Statements
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- ---------------------------------------------------------------------
The Company is subject to the risk of fluctuating interest rates in the normal
course of business. The Company's major market risk relates to a portion of
its customer accounts receivable, which have a stated, as opposed to a
floating, rate of interest. These receivables are financed through a
combination of fixed and floating rate debt. The relationship between fixed
and floating rate debt varies depending on market conditions.
A portion of the Company's accounts receivable has been securitized through a
trust. The rate on these receivables varies with changes in the published
prime rate and the funding of the trust varies with changes in commercial paper
rates. The interest rate risk on these receivables is therefore relatively
small.
6 of 15
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
(continued)
- --------------------------------------------------------------------
The Company does not enter into speculative derivative transactions or
leveraged swap agreements. The derivative instruments that the Company owns
are not held as investments, and it is the Company's intent to hold such
instruments for their respective terms. Therefore, changes in their fair
values will not have a significant effect on the Company's operations, cash
flows or financial position.
The Company has no international operations. The Company imports for its own
account merchandise for sale in its stores which amounted to approximately $467
million in 1997. Most of this merchandise is imported under letters of credit
denominated in U.S. dollars. A portion of letters of credit denominated
in foreign currencies are hedged under foreign exchange forward contracts.
The table below presents principal (or notional) amounts and related weighted
average interest rates by year of maturity. All items described in the table
are non-trading and are stated in U.S. dollars.
<TABLE>
<CAPTION>
Fair Value
January 31,
In thousands 1998 1999 2000 2001 2002 Thereafter Total 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE RISK
ASSETS
Short-term
investments $ 15,690 $ 15,690 $ 15,690
Average interest
rate 5.6% 5.6%
LIABILITIES
Notes payable &
commercial paper 263,767 263,767 263,767
Average interest
rate 5.5% 5.5%
Long-term debt - Fixed 100,505 $58,552 $58,211 $11,000 $76,750 103,975 408,993 419,027
Average interest
rate 9.2% 6.9% 7.6% 8.7% 7.3% 6.7% 7.6%
Interest rate swaps -
Variable to Fixed
(notional amount) 50,000 1,621
Average pay rate 5.7%
Average receive rate 9.6%
Interest rate lock
agreement (notional
amount) 175,000 932
Average interest rates 5.8%
FOREIGN EXCHANGE RATE RISK
FORWARD CONTRACTS
Contract notional amounts -
Italian lira purchased 401 384
Average contractual
exchange rate 1.737
</TABLE>
7 of 15
<PAGE>
Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------
The information required under this item is included in the following sections
of the Company's 1997 Annual Report to Shareholders, which sections are
incorporated by reference herein from Exhibit 13.1 of this report:
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ------------------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------
The information required under this item with respect to the Company's
Directors and compliance with Section 16(a) of the Exchange Act is included in
the following sections of the Company's Proxy Statement for its 1998 Annual
Meeting of Shareholders, which sections are incorporated by reference herein
and will be filed within 120 days after the end of the Company's fiscal year:
Election of Directors
Compliance with Section 16(a) of the Exchange Act of 1934
The information required under this item with respect to the Company's
Executive Officers is incorporated by reference from Part I, Item 1 of this
report under "Executive Officers of the Registrant".
Item 11. Executive Compensation.
- --------------------------------
The information required under this item is included in the following sections
of the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders,
which sections are incorporated by reference herein and will be filed within
120 days after the end of the Company's fiscal year:
Compensation of Executive Officers in the Year Ended
January 31, 1998
Compensation and Stock Option Committee Report on Fiscal Year
1997 Executive Compensation
Compensation of the Chief Executive Officer
Stock Price Performance
Compensation of Directors
Compensation Committee Interlocks and Insider Participation
8 of 15
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
The information required under this item is included in the following section
of the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders,
which section is incorporated by reference herein and will be filed within 120
days after the end of the Company's fiscal year:
Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions.
- --------------------------------------------------------
The information required under this item is included in the following sections
of the Company's Proxy Statement for its 1998 Annual Meeting of Shareholders,
which sections are incorporated by reference herein and will be filed within
120 days after the end of the Company's fiscal year:
Election of Directors
Compensation Committee Interlocks and Insider Participation
Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- --------------------------------------------------------------------------
(a)1. Financial Statements
--------------------
The following consolidated financial information and statements of
Nordstrom, Inc. and its subsidiaries and the Independent Auditors' Report are
incorporated by reference herein from Exhibit 13.1 of this report:
Consolidated Statements of Earnings
Consolidated Balance Sheets
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a)2. Financial Statement Schedules
-----------------------------
Page
----
Independent Auditors' Consent and Report on Schedule 14
II - Valuation and Qualifying Accounts 15
Other schedules for which provision is made in Regulation S-X are not
required, are inapplicable, or the information is included in the
Company's 1997 Annual Report to Shareholders as incorporated by
reference herein from Exhibit 13.1 of this report.
9 of 15
<PAGE>
(a)3. Exhibits
--------
(3.1) Articles of Incorporation of the Registrant are hereby
incorporated by reference from the Registrant's Form 10-K for the
year ended January 31, 1989, Exhibit A.
(3.2) By-laws of the Registrant, as amended, are filed herein as an
Exhibit.
(4.1) Trustee Resignation of Wells Fargo Bank (Colorado), N.A., (as
successor to First Interstate Bank of Denver, N.A.), dated
March 20, 1997 is hereby incorporated by reference from the
Registrant's Form 10-K for the year ended January 31, 1997,
Exhibit 4.2.
(4.2) Trustee Acceptance of Norwest Bank Colorado, N.A., dated
March 20, 1997 is hereby incorporated by reference from the
Registrant's Form 10-K for the year ended January 31, 1997,
Exhibit 4.3.
(10.1) Operating Agreement dated August 30, 1991 between Nordstrom
Credit, Inc. and Nordstrom National Credit Bank is hereby
incorporated by reference from the Nordstrom Credit, Inc.
Quarterly Report on Form 10-Q (SEC File No. 0-12994) for the
quarter ended July 31, 1991, Exhibit 10.1, as amended.
(10.2) Merchant Agreement dated August 30, 1991 between Registrant and
Nordstrom National Credit Bank is hereby incorporated by reference
from the Registrant's Quarterly Report on Form 10-Q for the
quarter ended July 31, 1991, Exhibit 10.1.
(10.3) The Nordstrom Supplemental Retirement Plan is hereby incorporated
by reference from the Registrant's Form 10-K for the year ended
January 31, 1993, Exhibit 10.3.
(10.4) The 1993 Non-Employee Director Stock Incentive Plan is hereby
incorporated by reference from the Registrant's Form 10-K for the
year ended January 31, 1994, Exhibit 10.4.
(10.5) Investment Agreement dated October 8, 1984 between the Registrant
and Nordstrom Credit, Inc. is hereby incorporated by reference
from the Nordstrom Credit, Inc. Form 10, Exhibit 10.1.
(10.6) Operating Agreement for VISA Accounts and Receivables dated May 1,
1994 between Nordstrom Credit, Inc. and Nordstrom National Credit
Bank is hereby incorporated by reference from Registration No.
33-55905, Exhibit 10.1.
(10.7) Agreement to terminate the Operating Agreement for VISA Accounts
and Receivables dated May 1, 1994 between Nordstrom Credit, Inc.
and Nordstrom National Credit Bank, dated August 14, 1996 is
hereby incorporated by reference from the Nordstrom Credit, Inc.
Quarterly Report on Form 10-Q for the quarter ended October 31,
1996, Exhibit 10.1.
10 of 15
<PAGE>
(a)3. Exhibits
--------
(10.8) Master Pooling and Servicing Agreement dated August 14, 1996
between Nordstrom National Credit Bank and Norwest Bank Colorado,
N.A., as trustee, is hereby incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1996, Exhibit 10.1.
(10.9) Series 1996-A Supplement to Master Pooling and Servicing Agreement
dated August 14, 1996 between Nordstrom National Credit Bank,
Nordstrom Credit, Inc. and Norwest Bank Colorado, N.A., as
trustee, is hereby incorporated by reference from the Registrant's
Quarterly Report on Form 10-Q for the quarter ended October 31,
1996, Exhibit 10.2.
(10.10) Transfer and Administration Agreement dated August 14, 1996
between Nordstrom National Credit Bank, Enterprise Funding
Corporation and Nationsbank, N.A. is hereby incorporated by
reference from the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1996, Exhibit 10.3.
(10.11) Receivables Purchase Agreement dated August 14, 1996 between
Registrant and Nordstrom Credit, Inc. is hereby incorporated
by reference from the Registrant's Form 10-K for the year ended
January 31, 1997, Exhibit 10.12.
(10.12) The Nordstrom, Inc. 1997 Stock Option Plan is hereby incorporated
by reference from the Registrant's Proxy Statement for the 1997
Annual Meeting of Shareholders.
(10.13) Credit Agreement dated July 24, 1997 between Registrant and a group
of commercial banks is hereby incorporated by reference from the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
July 31, 1997, Exhibit 10.1.
(10.14) Credit Agreement dated July 24, 1997 between Nordstrom Credit, Inc.
and a group of commercial banks is hereby incorporated by reference
from the Nordstrom Credit, Inc. Quarterly Report on Form 10-Q for
the quarter ended July 31, 1997, Exhibit 10.1.
(10.15) Commercial Paper Dealer Agreement dated October 2, 1997 between
Registrant and Bancamerica Securities, Inc. is hereby incorporated
by reference from the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997, Exhibit 10.1.
(10.16) Commercial Paper Agreement dated October 2, 1997 between Registrant
and Credit Suisse First Boston Corporation is hereby incorporated
by reference from the Registrant's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1997, Exhibit 10.2.
(10.17) Issuing and Paying Agency Agreement dated October 2, 1997 between
Registrant and First Trust of New York, N.A. is hereby incorporated
by reference from the Registrant's Quarterly Report on Form 10-Q
for the quarter ended October 31, 1997, Exhibit 10.3.
11 of 15
<PAGE>
(a)3. Exhibits
--------
(10.18) Amendment to the Series 1996-A Supplement to Master Pooling and
Servicing Agreement dated August 14, 1996 between Nordstrom
National Credit Bank, Nordstrom Credit, Inc. and Norwest Bank
Colorado, N.A., as trustee, dated December 10, 1997 is hereby
incorporated by reference from the Nordstrom Credit, Inc. Form
10-K for the year ended January 31, 1998, Exhibit 10.13.
(13.1) The Company's 1997 Annual Report to Shareholders is filed herein
as an Exhibit.
(21.1) List of the Registrant's Subsidiaries is filed herein as an
Exhibit.
(23.1) Independent Auditors' Consent and Report on Schedule is on page 14
of this report.
(27.1) Financial Data Schedule is filed herein as an Exhibit.
(27.2) Restated Financial Data Schedule for the year ended January
31, 1996 is filed herein as an Exhibit.
(27.3) Restated Financial Data Schedule for the year ended January
31, 1995 is filed herein as an Exhibit.
All other exhibits are omitted because they are not applicable, not
required, or because the required information is included in the
Company's 1997 Annual Report to Shareholders.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the last quarter of the period
for which this report is filed.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NORDSTROM, INC.
(Registrant)
Date March 31, 1998 by /s/ John A. Goesling
-------------- ------------------------------------------
John A. Goesling
Executive Vice President and Treasurer
(Principal Accounting and Financial Officer)
12 of 15
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Principal Accounting and Principal Executive Officer:
Financial Officer:
/s/ John A. Goesling /s/ John J. Whitacre
- ------------------------------- --------------------------------
John A. Goesling John J. Whitacre
Executive Vice President Chairman and Director
and Treasurer
Directors:
/s/ D. Wayne Gittinger /s/ John N. Nordstrom
- ------------------------------- --------------------------------
D. Wayne Gittinger John N. Nordstrom
Director Director
/s/ Enrique Hernandez, Jr. /s/ Alfred E. Osborne, Jr.
- ------------------------------- --------------------------------
Enrique Hernandez, Jr. Alfred E. Osborne, Jr.
Director Director
/s/ Charles A. Lynch /s/ William D. Ruckelshaus
- ------------------------------- --------------------------------
Charles A. Lynch William D. Ruckelshaus
Director Director
/s/ Ann D. McLaughlin /s/ Elizabeth Crownhart Vaughan
- ------------------------------- --------------------------------
Ann D. McLaughlin Elizabeth Crownhart Vaughan
Director Director
/s/ John A. McMillan /s/ John J. Whitacre
- ------------------------------- ---------------------------------
John A. McMillan John J. Whitacre
Director Chairman of the Board of Directors
/s/ Bruce A. Nordstrom
- -------------------------------
Bruce A. Nordstrom
Director
Date March 31, 1998
------------------------
13 of 15
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
Shareholders and Board of Directors
Nordstrom, Inc.
We consent to the incorporation by reference in Registration Statements Nos.
33-18321 and 33-28882 of Nordstrom, Inc. on Form S-8 of our reports dated
March 17, 1998 appearing in and incorporated by reference in this Annual
Report on Form 10-K of Nordstrom, Inc. and subsidiaries for the year ended
January 31, 1998.
We have audited the consolidated financial statements of Nordstrom, Inc. and
subsidiaries as of January 31, 1998 and 1997, and for each of the three years
in the period ended January 31, 1998, and have issued our report thereon dated
March 17, 1998; such financial statements and report are included in your 1997
Annual Report to Shareholders and are incorporated herein by reference. Our
audits also included the consolidated financial statement schedule of
Nordstrom, Inc. and subsidiaries, listed in Item 14(a)2. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
March 31, 1998
Seattle, Washington
14 of 15
<PAGE>
NORDSTROM, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- ---------- ---------- ---------- ---------
Additions Deductions
---------- ----------
Account
Balance at Charged to write-offs Balance
beginning costs and net of at end of
Description of period expenses recoveries period
- ----------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended:
January 31, 1996 $22,958 $39,589 $33,154 $29,393
January 31, 1997 $29,393 $51,352 $53,952 $26,793
January 31, 1998 $26,793 $40,440 $36,849 $30,384
</TABLE>
15 of 15
<PAGE>
NORDSTROM INC. AND SUBSIDIARIES
<TABLE>
Exhibit Index
<CAPTION>
Exhibit Method of Filing
- ------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation Incorporated by reference
from the Registrant's Form
10-K for the year ended
January 31, 1989,
Exhibit A.
3.2 By-laws, as amended Filed herewith electronically
4.1 Trustee Resignation of Wells Fargo Incorporated by reference
Bank (Colorado), N.A., dated from the Registrant's Form
March 20, 1997 10-K for the year ended
January 31, 1997, Exhibit
4.2.
4.2 Trustee Acceptance of Norwest Bank Incorporated by reference
Colorado, N.A., dated March 20, from the Registrant's Form
1997 10-K for the year ended
January 31, 1997, Exhibit
4.3.
10.1 Operating Agreement dated August 30, 1991 Incorporated by reference
between Nordstrom Credit, Inc. and from the Nordstrom Credit,
Nordstrom National Credit Bank Inc. Quarterly Report on
Form 10-Q (SEC File No.
0-12994) for the quarter
ended July 31, 1991,
Exhibit 10.1, as amended.
10.2 Merchant Agreement dated August 30, 1991 Incorporated by reference
between Registrant and Nordstrom from the Registrant's
National Credit Bank Quarterly Report on Form
10-Q for the quarter ended
July 31, 1991, Exhibit 10.1.
10.3 Nordstrom Supplemental Retirement Plan Incorporated by reference
from the Registrant's Form
10-K for the year ended
January 31, 1993, Exhibit
10.3.
10.4 1993 Non-Employee Director Stock Incorporated by reference
Incentive Plan from the Registrant's Form
10-K for the year ended
January 31, 1994, Exhibit
10.4.
10.5 Investment Agreement dated October 8, Incorporated by reference
1984 between the Registrant and from the Nordstrom Credit,
Nordstrom Credit, Inc. Inc. Form 10, Exhibit 10.1.
10.6 Operating Agreement for VISA Accounts Incorporated by reference
and Receivables dated May 1, 1994 from Registration No. 33-
between Nordstrom Credit, Inc. and 55905, Exhibit 10.1.
Nordstrom National Credit Bank
Exhibit Index (continued)
- -------------------------
10.7 Agreement to terminate the Operating Incorporated by reference
Agreement for VISA Accounts and from the Nordstrom Credit,
Receivables dated May 1, 1994 Inc. Quarterly Report on
between Nordstrom Credit, Inc. Form 10-Q for the quarter
and Nordstrom National Credit ended October 31, 1996,
Bank, dated August 14, 1996 Exhibit 10.1
10.8 Master Pooling and Servicing Incorporated by reference
Agreement dated August 14, 1996 from the Registrant's
between Nordstrom National Credit Quarterly Report on Form
Bank and Norwest Bank Colorado, 10-Q for the quarter ended
N.A., as trustee October 31, 1996, Exhibit
10.1.
10.9 Series 1996-A Supplement to Master Incorporated by reference
Pooling and Servicing Agreement from the Registrant's
dated August 14, 1996 between Quarterly Report on Form
Nordstrom National Credit Bank, 10-Q for the quarter ended
Nordstrom Credit, Inc. and Norwest October 31, 1996, Exhibit
Bank Colorado, N.A., as trustee 10.2.
10.10 Transfer and Administration Agreement Incorporated by reference
dated August 14, 1996 between from the Registrant's
Nordstrom National Credit Bank, Quarterly Report on Form
Enterprise Funding Corporation and 10-Q for the quarter ended
Nationsbank, N.A. October 31, 1996, Exhibit
10.3.
10.11 Receivables Purchase Agreement Incorporated by reference
dated August 14, 1996 between from the Registrant's Form
Registrant and Nordstrom Credit, 10-K for the year ended
Inc. January 31, 1997, Exhibit
10.12.
10.12 1997 Nordstrom Stock Option Plan Incorporated by reference
from the Registrant's Proxy
Statement for the 1997
Annual Meeting of
Shareholders.
10.13 Credit Agreement dated July 24, Incorporated by reference
between Registrant and a group from the Registrant's
of commercial banks Quarterly Report on Form
Q for the quarter ended July
31, 1997, Exhibit 10.1.
10.14 Credit Agreement dated July 24, Incorporated by reference
between Nordstrom Credit, Inc. from the Nordstrom Credit,
and a group of commercial banks Inc. Quarterly Report on
Form 10-Q for the quarter
ended July 31, 1997, Exhibit
10.1.
10.15 Commercial Paper Dealer Agreement Incorporated by reference
dated October 2, 1997 between from the Registrant's
Registrant and Bancamerica Quarterly Report on form
Securities, Inc. 10-Q for the quarter ended
October 31, 1997, Exhibit
10.1.
Exhibit Index (continued)
- -------------------------
10.16 Commercial Paper Agreement dated Incorporated by reference
October 2, 1997 between Registrant from the Registrant's
and Credit Suisse First Boston Quarterly Report on Form
Corporation 10-Q for the quarter ended
October 31, 1997, Exhibit
10.2.
10.17 Issuing and Paying Agency Agreement Incorporated by reference
dated October 2, 1997 between from the Registrant's
Registrant and First Trust of New Quarterly Report on Form
York, N.A. 10-Q for the quarter ended
October 31, 1997, Exhibit
10.3.
10.18 Amendment to the Series 1996-A Incorporated by reference
Supplement to Master Pooling and from the Nordstrom Credit, Inc.
Servicing Agreement dated August Form 10-K for the year ended
14, 1996 between Nordstrom National January 31, 1998, Exhibit
Credit Bank, Nordstrom Credit, Inc. 10.13.
and Norwest Bank Colorado, N.A., as
trustee, dated December 10, 1997
13.1 1997 Annual Report to Shareholders Filed herewith electronically
21.1 Subsidiaries of the Registrant Filed herewith electronically
23.1 Independent Auditors' Consent
and Report on Schedule Filed herewith electronically
27.1 Financial Data Schedule Filed herewith electronically
27.2 Restated Financial Data Schedule Filed herewith electronically
for the year ended January 31,
1996
27.3 Restated Financial Data Schedule Filed herewith electronically
for the year ended January 31,
1995
</TABLE>
<PAGE>
BYLAWS
OF
NORDSTROM, INC.
(Amended and Restated as of February 28, 1998)
ARTICLE I
Offices
The principal office of the corporation in the state of Washington shall
be located in the city of Seattle. The corporation may have such other
offices, either within or without the state of Washington, as the Board of
Directors may designate or as the business of the corporation may require from
time to time.
The registered office of the corporation required by the Washington
Business Corporation Act to be maintained in the state of Washington may be,
but need not be, identical with the principal office in the state of
Washington and the address of the registered office may be changed from time
to time by the Board of Directors or by officers designated by the Board of
Directors.
ARTICLE II
Shareholders
Section 1. Annual Meetings. The annual meeting of the shareholders
shall be held on the third Tuesday in the month of May each year, at the hour
of 11:00 a.m., unless the Board of Directors shall have designated a different
hour and day in the month of May to hold said meeting. The meeting shall be
for the purpose of electing directors and the transaction of such other
business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday in the state of Washington and if the Board
of Directors has not designated some other day in the month of May for such
meeting, such meeting shall be held at the same hour and place on the next
succeeding business day not a holiday. The failure to hold an annual meeting
at the time stated in these Bylaws does not affect the validity of any
corporate action. If the election of directors shall not be held on the day
designated herein or by the Board of Directors for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as conveniently may be.
Section 2. Special Meetings. Special meetings of the shareholders may
be called for any purpose or purposes, unless otherwise prescribed by statute,
at any time by the Chairman (or any Co-Chairman) of the Board of Directors, by
the President (or any Co-President), or by the Board of Directors and shall be
called by the Chairman (or any Co-Chairman) of the Board of Directors or the
President (or any Co-President) at the request of holders of not less than 10%
of all outstanding shares of the corporation entitled to vote on any issue
proposed to be considered at the meeting. Only business within the purpose or
purposes described in the meeting notice may be conducted at a special
shareholder's meeting.
<PAGE>
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the state of Washington, as the place of
meeting for any annual meeting or for any special meeting of the corporation.
If no such designation is made, the place of meeting shall be the principal
offices of the corporation in the state of Washington.
Section 4. Notice of Meetings. Written notice of annual or special
meetings of shareholders stating the place, day and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given by the Secretary, or persons authorized to
call the meeting, to each shareholder of record entitled to vote at the
meeting, not less than ten (10) nor more than sixty (60) days prior to the
date of the meeting, unless otherwise prescribed by statute.
Section 5. Waiver of Notice. Notice of the time, place and purpose of
any meeting may be waived in writing (either before or after such meeting) and
will be waived by any shareholder by attendance of the shareholder in person
or by proxy, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting. Any shareholder
waiving notice of a meeting shall be bound by the proceedings of the meeting
in all respects as if due notice thereof had been given.
Section 6. Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or shareholders entitled to receive payment of any
dividend, or to make a determination of shareholders for any other proper
purpose, the Board of Directors may fix in advance a record date for any such
determination of shareholders, such date to be not more than seventy (70) days
and, in the case of a meeting of shareholders, not less than ten (10) days,
prior to the date on which the particular action requiring such determination
of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
day before the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section, the
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date, which it must do if the meeting is
adjourned more than one hundred twenty (120) days after the date fixed for the
original meeting.
Section 7. Voting Lists. After fixing a record date for a shareholders'
meeting, the corporation shall prepare an alphabetical list of the names of
all shareholders on the record date who are entitled to notice of the
shareholders' meeting. The list shall show the address of and number of
shares held by each shareholder. A shareholder, shareholder's agent, or a
shareholder's attorney may inspect the shareholder list, at the shareholder's
expense, beginning ten days prior to the shareholders' meeting and continuing
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<PAGE>
through the meeting, at the corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held
during regular business hours. The shareholder list shall be kept open for
inspection at the time and place of such meeting or any adjournment.
Section 8. Quorum and Adjourned Meetings. Unless the Articles of
Incorporation or applicable law provide otherwise, a majority of the
outstanding shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. Once a
share is represented at a meeting, other than to object to holding the meeting
or transacting business, it is deemed to be present for the remainder of the
meeting and any adjournment thereof unless a new record date is set or is
required to be set for the adjourned meeting. A majority of the shares
represented at a meeting, even if less than a quorum, may adjourn the meeting
from time to time without further notice. At a reconvened meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the original meeting. Business may continue to
be conducted at a duly organized meeting and at any adjournment of such
meeting (unless a new record date is or must be set for the adjourned
meeting), notwithstanding the withdrawal of enough shares from either meeting
to leave less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by the shareholder's
duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the corporation before or at the time of the meeting. No proxy
shall be valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
Section 10. Voting of Shares. Every shareholder of record shall have
the right at every shareholders' meeting to one vote for every share standing
in the shareholder's name on the books of the corporation. If a quorum
exists, action on a matter, other than election of directors, is approved by
the shareholders if the votes cast favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation or applicable law
require a greater number of affirmative votes. Notwithstanding the foregoing,
shares of the corporation may not be voted if they are owned, directly or
indirectly, by another corporation and the corporation owns, directly or
indirectly, a majority of shares of the other corporation entitled to vote for
directors of the other corporation.
Section 11. Acceptance of Votes. If the name signed on a vote, consent,
waiver or proxy appointment does not correspond to the name of a shareholder
of the corporation, the corporation may accept the vote, consent, waiver or
proxy appointment and give effect to it as the act of the shareholder if: (i)
the shareholder is an entity and the name signed purports to be that of an
officer, partner or agent of the entity; (ii) the name signed purports to be
that of an administrator, executor, guardian or conservator representing the
shareholder; (iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder; (iv) the name signed purports to be
that of a pledgee, beneficial owner or attorney-in-fact of the shareholder; or
(v) two or more persons are the shareholder as co-tenants or fiduciaries and
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<PAGE>
the name signed purports to be the name of at least one of the co-owners and
the person signing appears to be acting on behalf of all co-owners.
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs of the corporation
shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of directors
of the corporation shall be eleven (11). Each director shall hold office
until the next annual meeting of shareholders and until his successors shall
have been elected and qualified. Directors need not be residents of the state
of Washington or shareholders of the corporation.
Section 3. Regular Meeting. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after and at
the same place as, the annual meeting of shareholders. Regular meetings of
the Board of Directors shall be held at such place and on such day and hour as
shall from time to time be fixed by the Chairman (or any Co-Chairman) of the
Board of Directors, the President (or any Co-President) or the Board of
Directors. No other notice of regular meeting of the Board of Directors shall
be necessary.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman (or any Co-Chairman) of the
Board of Directors, the President (or any Co-President) or any two directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the state of Washington,
as the place for holding any special meeting of the Board of Directors called
by them.
Section 5. Notice. Notice of any special meeting shall be given at
least two days previously thereto by either oral or written notice. Any
director may waive notice of any meeting. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 6. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
Section 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors.
4
<PAGE>
Section 8. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. A vacancy on the Board of Directors created by reason of an increase
in the number of directors may be filled by election by the Board of Directors
for a term of the office continuing only until the next election of directors
by the shareholders.
Section 9. Compensation. By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of
the Board of Directors and at each meeting of a committee of the Board of
Directors and may be paid a stated salary as director, a fixed sum for
attendance at each such meeting, or both. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting, or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof, or shall
forward such dissent by registered mail to the Secretary of the corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
ARTICLE IV
Special Measures Applying to Both
Shareholder and Director Meetings
Section 1. Actions by Written Consent. Any corporate action required or
permitted by the Articles of Incorporation, Bylaws, or the laws under which
the corporation is formed, to be voted upon or approved at a duly called
meeting of the directors, committee of directors, or shareholders may be
accomplished without a meeting if one or more unanimous written consents of
the respective directors or shareholders, setting forth the actions so taken,
shall be signed, either before or after the action taken, by all the
directors, committee members or shareholders, as the case may be. Action
taken by unanimous written consent of the directors or a committee of the
Board of Directors is effective when the last director or committee
member signs the consent, unless the consent specifies a later effective date.
Action taken by unanimous written consent of the shareholders is effective
when all consents have been delivered to the corporation, unless the consent
specifies a later effective date.
Section 2. Meetings by Conference Telephone. Members of the Board of
Directors, members of a committee of directors, or shareholders may
participate in their respective meetings by means of a conference telephone or
similar communications equipment by means of which all persons participating
5
<PAGE>
in the meeting can hear each other at the same time; participation in a
meeting by such means shall constitute presence in person at such meeting.
Section 3. Written or Oral Notice. Oral notice may be communicated in
person, or by telephone, wire or wireless equipment, which does not transmit a
facsimile of the notice. Oral notice is effective when communicated. Written
notice may be transmitted by mail, private carrier, or personal delivery;
telegraph or teletype; or telephone, wire or wireless equipment which
transmits a facsimile of the notice. Written notice to a shareholder is
effective when mailed, if mailed with first class postage prepaid and
correctly addressed to the shareholder's address shown in the corporation's
current record of shareholders. In all other instances, written notice is
effective on the earliest of the following: (a) when dispatched to the
person's address, telephone number, or other number appearing on the records
of the corporation by telegraph, teletype or facsimile equipment; (b) when
received; (c) five days after deposit in the United States mail, as evidenced
by the postmark, if mailed with first class postage, prepaid and correctly
addressed; or (d) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested and the receipt is
signed by or on behalf of the addressee. In addition, notice may be given in
any manner not inconsistent with the foregoing provisions and applicable law.
ARTICLE V
Officers
Section 1. Number. The offices and officers of the corporation shall be
as designated from time to time by the Board of Directors. Such offices may
include a Chairman or two or more Co-Chairmen of the Board of Directors, a
President or two or more Co-Presidents, one or more Vice Presidents, a
Secretary, a Treasurer and a Controller. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board
of Directors. Any two or more offices may be held by the same persons.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until a successor shall have been duly elected and
qualified, or until the officer's death or resignation, or the officer has
been removed in the manner hereinafter provided.
Section 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
6
<PAGE>
Section 5. Chairman of the Board of Directors. The Chairman or
Co-Chairmen of the Board of Directors, subject to the authority of the Board
of Directors, shall preside at meetings of shareholders and directors and,
together with the President and Co-Presidents, shall have general supervision
and control over the business and affairs of the corporation. The Chairman or
a Co-Chairman of the Board of Directors may sign any and all documents, deeds,
mortgages, bonds, contracts, leases, or other instruments in the ordinary
course of business with or without the signature of a second corporate
officer, may sign certificates for shares of the corporation with the
Secretary or Assistant Secretary of the corporation and may sign any documents
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed;
and in general may perform all duties which are normally incident to the
office of Chairman of the Board of Directors or President and such other
duties, authority and responsibilities as may be prescribed by the Board of
Directors from time to time.
Section 6. President. The President or Co-Presidents, together with the
Chairman or Co-Chairmen of the Board of Directors, shall have general
supervision and control over the business and affairs of the corporation
subject to the authority of the Chairman or Co-Chairmen of the Board of
Directors and the Board of Directors. If the Board of Directors appoint two
or more Co-Presidents, the Co-Presidents shall, without further action or
appointment by the Board of Directors, occupy the Office of the President, the
members of which shall each have the authority and duties as set forth in this
Section. The President or a Co-President may sign any and all documents,
mortgages, bonds, contracts, leases, or other instruments in the ordinary
course of business with or without the signature of a second corporate
officer, may sign certificates for shares of the corporation with the
Secretary or Assistant Secretary of the corporation and may sign any documents
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
corporation, or shall be required by law to be otherwise signed or executed;
and in general shall perform all duties incident to the office of President
and such other duties, authority and responsibilities as may be prescribed by
the Chairman or Co-Chairmen of the Board of Directors or the Board of
Directors from time to time.
Section 7. The Vice President. In the absence of the President and all
Co-Presidents, or in the event of their death, inability or refusal to act,
the Executive Vice President, if one is designated and otherwise the Vice
Presidents in the order designated at the time of their election or in the
absence of any designation, then in the order of their election, shall perform
the duties of the President and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President. Any Vice President
may sign, with the Secretary or an Assistant Secretary, certificates for
shares of the corporation; and shall perform such other duties as from time to
time may be assigned to the Vice President by the Chairman or Co-Chairmen of
7
<PAGE>
the Board of Directors, President or any Co-President, or by the Board of
Directors.
Section 8. The Secretary. The Secretary shall: (a) keep the minutes of
the proceedings of the shareholders and of the Board of Directors in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c)
be custodian of the corporate records and of the seal of the corporation and
see that the seal of the corporation is affixed to all documents and the
execution of which on behalf of the corporation under its seal is duly
authorized; (d) keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholders; (e) sign with
the Chairman or Co-Chairmen of the Board of Directors, President or a Co-
President, or with a Vice President, certificates for shares of the
corporation, or contracts, deeds or mortgages the issuance or execution of
which shall have been authorized by resolution of the Board of Directors; (f)
have general charge of the stock transfer books of the corporation subject to
the authority delegated to a transfer agent or registrar if appointed; and (g)
in general perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to the Secretary by the
Chairman or Co-Chairmen of the Board of Directors, President or any Co-
President, or by the Board of Directors.
Section 9. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the corporation;
(b) receive and give receipts for monies due and payable to the corporation
from any source whatsoever and deposit all such monies in the name of the
corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Article VII of these Bylaws; and
(c) in general perform all of the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to the Treasurer by
the Chairman or Co-Chairmen of the Board of Directors, President or any Co-
President, or by the Board of Directors. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine.
Section 10. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign
with the Chairman or Co-Chairmen of the Board of Directors, President or a Co-
President, or with a Vice President, certificates for shares of the
corporation or contracts, deeds or mortgages, the issuance or execution of
which shall have been authorized by a resolution of the Board of Directors.
The Assistant Treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the Chairman or Co-Chairmen of the Board of Directors,
President or any Co-President, or by the Board of Directors.
Section 11. The Controller. The Controller shall report to the
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<PAGE>
Treasurer and shall supervise and be responsible for daily operations of the
Financial Department, accounts and account books of the corporation, all in
the ordinary course of business. The Controller shall also perform such other
duties as may from time to time be assigned by the Treasurer, by the Chairman
or Co-Chairmen of the Board of Directors, by the President or any Co-
President, or by the Board of Directors.
ARTICLE VI
Executive Committee
Section 1. Appointment. The Board of Directors by resolution adopted by
a majority of the full Board, may designate two or more of its members to
constitute an Executive Committee. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
Section 2. Authority. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee and
except also that the Executive Committee shall not have the authority of the
Board of Directors in reference to amending the Articles of Incorporation,
adopting a plan of merger or consolidation, recommending to the shareholders
the sale, lease or other disposition of all or substantially all of the
property and assets of the corporation otherwise than in the usual and regular
course of its business, recommending to the shareholders voluntary dissolution
of the corporation or a revocation thereof, amending the Bylaws of the
corporation or any other action prohibited by applicable law.
Section 3. Tenure and Qualifications. Each member of the Executive
Committee shall hold office until the next regular annual meeting of the Board
of Directors following his designation and until his successor is designated
as a member of the Executive Committee and is elected and qualified.
Section 4. Meetings. Regular meetings of the Executive Committee may be
held without notice at such times and places as the Executive Committee may
fix from time to time by resolution. Special meetings of the Executive
Committee may be called by any member thereof upon not less than one day's
notice stating the place, date and hour of the meeting, which notice may be
written or oral. Any member of the Executive Committee may waive notice of
any meeting and no notice of any meeting need be given to any member thereof
who attends in person. The notice of a meeting of the Executive Committee
need not state the business proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the Executive Committee
shall constitute a quorum for the transaction of business at any meeting
thereof and action of the Executive Committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
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Section 6. Vacancies. Any vacancy in the Executive Committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 7. Resignations and Removal. Any member of the Executive
Committee may be removed at any time with or without cause by resolution
adopted by a majority of the full Board of Directors. Any member of the
Executive Committee may resign from the Executive Committee at any time by
giving written notice to the Chairman (or any Co-Chairman) of the Board of
Directors, the President (or any Co-President), or to the Secretary, of the
corporation and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 8. Procedure. The Executive Committee shall elect a Chairman of
the Executive Committee or two or more Co-Chairmen of the Executive Committee
from its members and may fix its own rules of procedure which shall not be
inconsistent with these Bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information
at the meeting thereof held next after the proceedings shall have been taken.
ARTICLE VII
Contracts, Loans, Checks and Deposits
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the corporation and
such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by the Board of Directors. Such authority may be general or
confined to specific instances.
Section 3. Checks. Drafts. etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation, shall be signed by such officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VIII
Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman (or any Co-
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Chairman) of the Board of Directors, the President (or any Co-President) or a
Vice President and by the Secretary or an Assistant Secretary and sealed with
the corporate seal or a facsimile thereof. The signatures of such officers
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation
itself or one of its employees. If any officer who signed a certificate,
either manually or in facsimile, no longer holds such office when the
certificate is issued, the certificate is nevertheless valid. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except that in case of a
lost, destroyed or mutilated certificate a new one may be issued therefor upon
such terms and indemnity to the corporation as the Board of Directors may
prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the corporation, or with its transfer agent, if any, and on surrender for
cancellation of the certificate for such shares. The person in whose name
shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
ARTICLE IX
Fiscal Year
The fiscal year of the corporation shall begin on the first day of
February and end on the thirty-first day of January in each year.
ARTICLE X
Dividends
The Board of Directors may, from time to time, declare and the
corporation may pay dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its articles of incorporation.
ARTICLE XI
Corporate Seal
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal."
11
<PAGE>
ARTICLE XII
Indemnification of Directors, Officers and Others
Section 1. Right to Indemnification. Each person (including a person's
personal representative) who was or is made a party or is threatened to be
made a party to or is otherwise involved (including, without limitation, as a
witness) in any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or by or in the right
of the corporation, or otherwise (hereinafter a "proceeding") by reason of the
fact that he or she (or a person of whom he or she is a personal
representative) is or was a director or officer of the corporation or, being
or having been such a director or officer, is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, agent or
in any other relationship or capacity whatsoever, of any other foreign or
domestic corporation, partnership, joint venture, employee benefit plan or
trust or other trust, enterprise or other private or governmental entity,
agency, board, commission, body or other unit whatsoever (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action or
inaction in an official capacity as a director, officer, partner, trustee,
employee, agent or in any other relationship or capacity whatsoever, shall be
indemnified and held harmless by the corporation to the fullest extent not
prohibited by the Washington Business Corporation Act, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment does not prohibit the corporation from providing
broader indemnification rights than prior to the amendment), against all
expenses, liabilities and losses (including but not limited to attorneys'
fees, judgments, claims, fines, ERISA and other excise and other taxes and
penalties and other adverse effects and amounts paid in settlement),
reasonably incurred or suffered by the indemnitee; provided, however, that no
such indemnity shall indemnify any person from or on account of acts or
omissions of such person finally adjudged to be intentional misconduct or
a knowing violation of law, or from or on account of conduct of a director
finally adjudged to be in violation of RCW 23B.08.310, or from or on account
of any transaction with respect to which it was finally adjudged that such
person personally received a benefit in money, property, or services to which
the person was not legally entitled; and further provided, however, that
except as provided in Section 2 of this Article with respect to suits relating
to rights to indemnification, the corporation shall indemnify any indemnitee
in connection with a proceeding (or part thereof) initiated by the indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the corporation.
The right to indemnification granted in this Article is a contract right
and includes the right to payment by, and the right to receive reimbursement
from, the corporation of all expenses as they are incurred in connection with
any proceeding in advance of its final disposition (hereinafter an "advance of
expenses"); provided, however, that an advance of expenses received by an
indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee unless
12
<PAGE>
required by the Board of Directors) shall be made only upon (i) receipt by the
corporation of a written undertaking (hereinafter an "undertaking") by or on
behalf of such indemnitee, to repay advances of expenses if and to the extent
it shall ultimately be determined by order of a court having jurisdiction
(which determination shall become final upon expiration of all rights to
appeal), hereinafter a "final adjudication", that the indemnitee is not
entitled to be indemnified for such expenses under this Article, and
(ii) receipt by the corporation of written affirmation by the indemnitee of
his or her good faith belief that he or she has met the standard of conduct
applicable (if any) under the Washington Business Corporation Act necessary
for indemnification by the corporation under this Article.
Section 2. Right of Indemnitee to Bring Suit. If any claim for
indemnification under Section 1 of this Article is not paid in full by the
corporation within sixty days after a written claim has been received by the
corporation, except in the case of a claim for an advance of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at
any time thereafter bring suit against the corporation to recover the unpaid
amount of the claim. If the indemnitee is successful in whole or in part in
any such suit, or in any suit in which the corporation seeks to recover an
advance of expenses, the corporation shall also pay to the indemnitee all the
indemnitee's expenses in connection with such suit. The indemnitee shall be
presumed to be entitled to indemnification under this Article upon the
corporation's receipt of indemnitee's written claim (and in any suits relating
to rights to indemnification where the required undertaking and affirmation
have been received by the corporation) and thereafter the corporation shall
have the burden of proof to overcome that presumption. Neither the failure of
the corporation (including its Board of Directors, independent legal counsel,
or shareholders) to have made a determination prior to other commencement of
such suit that the indemnitee is entitled to indemnification, nor an actual
determination by the corporation (including its Board of Directors,
independent legal counsel or shareholders) that the indemnitee is not entitled
to indemnification, shall be a defense to the suit or create a presumption
that the indemnitee is not so entitled. It shall be a defense to a claim for
an amount of indemnification under this Article (other than a claim for
advances of expenses prior to final disposition of a proceeding where the
required undertaking and affirmation have been received by the corporation)
that the claimant has not met the standards of conduct applicable (if any)
under the Washington Business Corporation Act to entitle the claimant to the
amount claimed, but the corporation shall have the burden of proving such
defense. If requested by the indemnitee, determination of the right to
indemnity and amount of indemnity shall be made by final adjudication (as
defined above) and such final adjudication shall supersede any determination
made in accordance with RCW 23B.08.550.
Section 3. Non-Exclusivity of Rights. The rights to indemnification
(including, but not limited to, payment, reimbursement and advances of
expenses) granted in this Article shall not be exclusive of any other powers
or obligations of the corporation or of any other rights which any person may
have or hereafter acquire under any statute, the common law, the corporation's
13
<PAGE>
Articles of Incorporation or Bylaws, agreement, vote of shareholders or
disinterested directors, or otherwise. Notwithstanding any amendment to or
repeal of this Article, any indemnitee shall be entitled to indemnification in
accordance with the provisions hereof with respect to any acts or omissions of
such indemnitee occurring prior to such amendment or repeal.
Section 4. Insurance, Contracts and Funding. The corporation may
purchase and maintain insurance, at its expense, to protect itself and any
person (including a person's personal representative) who is or was a
director, officer, employee or agent of the corporation or who is or was a
director, officer, partner, trustee, employee, agent, or in any other
relationship or capacity whatsoever, of any other foreign or domestic
corporation, partnership, joint venture, employee benefit plan or trust or
other trust, enterprise or other private or governmental entity, agency,
board, commission, body or other unit whatsoever, against any expense,
liability or loss, whether or not the power to indemnify such person against
such expense, liability or loss is now or hereafter granted to the corporation
under the Washington Business Corporation Act. The corporation may enter into
contracts granting indemnity, to any such person whether or not in furtherance
of the provisions of this Article and may create trust funds, grant security
interests and use other means (including, without limitation, letters of
credit) to secure and ensure the payment of indemnification amounts.
Section 5. Indemnification of Employees and Agents. The corporation
may, by action of the Board of Directors, provide indemnification and pay
expenses in advance of the final disposition of a proceeding to employees and
agent of the corporation with the same scope and effect as the provisions of
this Article with respect to the indemnification and advancement of expenses
of directors and officers of the corporation or pursuant to rights granted
under, or provided by, the Washington Business Corporation Act or otherwise.
Section 6. Separability of Provisions. If any provision or provisions
of this Article shall be held to be invalid, illegal or unenforceable for any
reason whatsoever (i) the validity, legality and enforceability of the
remaining provisions of this Article (including without limitation, all
portions of any sections of this Article containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall not in any way be affected or impaired thereby, and
(ii) to the fullest extent possible, the provisions of this Article
(including, without limitation, all portions of any paragraph of this Article
containing any such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall be construed
so as to give effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
Section 7. Partial Indemnification. If an indemnitee is entitled to
indemnification by the corporation for some or a portion of expenses,
liabilities or losses, but not for the total amount thereof, the corporation
shall nevertheless indemnify the indemnitee for the portion of such expenses,
liabilities and losses to which the indemnitee is entitled.
Section 8. Successors and Assigns. All obligations of the corporation
14
<PAGE>
to indemnify any indemnitee: (i) shall be binding upon all successors and
assigns of the corporation (including any transferee of all or substantially
all of its assets and any successor by merger or otherwise by operation of
law), (ii) shall be binding on and inure to the benefit of the spouse, heirs,
personal representatives and estate of the indemnitee, and (iii) shall
continue as to any indemnitee who has ceased to be a director, officer,
partner, trustee, employee or agent (or other relationship or capacity).
ARTICLE XIII
Books and Records
Section 1. Books of Accounts, Minutes and Share Register. The
corporation shall keep as permanent records minutes of all meetings of its
shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting and a record of all
actions taken by a committee of the Board of Directors exercising the
authority of the Board of Directors on behalf of the corporation. The
corporation shall maintain appropriate accounting records. The corporation or
its agent shall maintain a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders, in
alphabetical order showing the number and class of shares held by each. The
corporation shall keep a copy of the following records at its principal
office: the Articles or Restated Articles of Incorporation and all amendments
currently in effect; the Bylaws or Restated Bylaws and all amendments
currently in effect; the minutes of all shareholders' meetings and records of
all actions taken by shareholders without a meeting, for the past three years;
its financial statements for the past three years, including balance sheets
showing in reasonable detail the financial condition of the corporation as of
the close of each fiscal year and an income statement showing the results of
its operations during each fiscal year prepared on the basis of generally
accepted accounting principles or, if not, prepared on a basis explained
therein; all written communications to shareholders generally within the past
three years; a list of the names and business addresses of its current
directors and officers; and its most recent annual report delivered to the
Secretary of State of the State of Washington.
Section 2. Copies of Resolutions. Any person dealing with the
corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when
certified by the Chairman (or any Co-Chairman) of the Board of Directors,
President (or any Co-President) or Secretary.
ARTICLE XIV
Amendment of Bylaws
These Bylaws may be amended, altered, or repealed by the affirmative vote
of a majority of the full Board of Directors at any regular or special meeting
of the Board of Directors.
15
<PAGE>
EXHIBIT 21.1
NORDSTROM, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
<S> <C>
Nordstrom Credit, Inc. Colorado
Nordstrom National Credit Bank Colorado
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 24,794
<SECURITIES> 0
<RECEIVABLES> 694,832
<ALLOWANCES> 30,384
<INVENTORY> 826,045
<CURRENT-ASSETS> 1,594,997
<PP&E> 2,340,029
<DEPRECIATION> 1,087,516
<TOTAL-ASSETS> 2,865,163
<CURRENT-LIABILITIES> 942,606
<BONDS> 319,736
0
0
<COMMON> 201,050
<OTHER-SE> 1,274,008
<TOTAL-LIABILITY-AND-EQUITY> 2,865,163
<SALES> 4,851,624
<TOTAL-REVENUES> 4,851,624
<CGS> 3,295,813
<TOTAL-COSTS> 4,544,411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 40,440
<INTEREST-EXPENSE> 34,250
<INCOME-PRETAX> 307,213
<INCOME-TAX> 121,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,213
<EPS-PRIMARY> 2.40
<EPS-DILUTED> 2.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 24,517
<SECURITIES> 0
<RECEIVABLES> 923,320
<ALLOWANCES> 29,393
<INVENTORY> 626,303
<CURRENT-ASSETS> 1,612,776
<PP&E> 1,942,110
<DEPRECIATION> 838,812
<TOTAL-ASSETS> 2,732,619
<CURRENT-LIABILITIES> 832,313
<BONDS> 365,733
0
0
<COMMON> 168,440
<OTHER-SE> 1,254,532
<TOTAL-LIABILITY-AND-EQUITY> 2,732,619
<SALES> 4,113,517
<TOTAL-REVENUES> 4,113,517
<CGS> 2,806,250
<TOTAL-COSTS> 3,841,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 39,589
<INTEREST-EXPENSE> 39,295
<INCOME-PRETAX> 272,312
<INCOME-TAX> 107,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,112
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 32,497
<SECURITIES> 0
<RECEIVABLES> 698,849
<ALLOWANCES> 22,958
<INVENTORY> 627,930
<CURRENT-ASSETS> 1,397,713
<PP&E> 1,730,907
<DEPRECIATION> 746,712
<TOTAL-ASSETS> 2,396,783
<CURRENT-LIABILITIES> 690,454
<BONDS> 297,943
0
0
<COMMON> 163,334
<OTHER-SE> 1,180,466
<TOTAL-LIABILITY-AND-EQUITY> 2,396,783
<SALES> 3,894,478
<TOTAL-REVENUES> 3,894,478
<CGS> 2,599,553
<TOTAL-COSTS> 3,558,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 20,219
<INTEREST-EXPENSE> 30,664
<INCOME-PRETAX> 335,558
<INCOME-TAX> 132,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,958
<EPS-PRIMARY> 2.47
<EPS-DILUTED> 2.46
</TABLE>
<PAGE>
Exhibit 13.1
Portions of the 1997 Annual Report to Shareholders
1997 Annual Report
Financial Highlights
<TABLE>
Dollars in thousands except per share amounts
<CAPTION>
Fiscal Year 1997 1996 % Change
<S> <C> <C> <C>
Net sales $4,851,624 $4,453,063 +8.9
Earnings before income taxes 307,213 243,505 +26.2
Net earnings 186,213 147,505 +26.2
Basic earnings per share 2.40 1.82 +31.9
Diluted earnings per share 2.40 1.82 +31.9
Cash dividends paid per share .53 .50 +6.0
</TABLE>
Stock trading
<TABLE>
<CAPTION>
Fiscal Year 1997 1996
high low high low
<S> <C> <C> <C> <C>
First Quarter 39 3/4 33 7/8 50 7/8 39 1/4
Second Quarter 59 5/8 39 1/4 52 7/8 39 1/4
Third Quarter 68 3/16 52 3/8 42 3/8 35 1/2
Fourth Quarter 65 3/4 42 55/64 44 35 7/16
</TABLE>
Nordstrom, Inc. common stock is traded over-the-counter
and quoted daily in leading financial publications. NASDAQ Symbol-NOBE.
Graph - Net Sales
The vertical bar graph compares net sales for the past ten years. Beginning
with the oldest fiscal year on the left, net sales (dollars are in millions)
were as follows: 1988-$2,328; 1989-$2,671; 1990-$2,894; 1991-$3,180;
1992-$3,422; 1993-$3,590; 1994-$3,894; 1995-$4,114; 1996-$4,453; 1997-$4,852;
Graph - Net Earnings
The vertical bar graph compares net earnings for the past ten years. Beginning
with the oldest fiscal year on the left, net earnings (dollars are in millions)
were as follows: 1988-$123.3; 1989-$114.9; 1990-$115.8; 1991-$135.8;
1992-$136.6; 1993-$140.4; 1994-$203.0; 1995-$165.1; 1996-$147.5; 1997-$186.2;
Page 2 Nordstrom Annual Report 1997
<PAGE>
Message To Our Shareowners:
In 1997, Nordstrom achieved a marked improvement in financial performance.
Store expansion, better comparable-store sales, improved merchandise margins
and operating refinements contributed to higher earnings and increased
shareowner wealth. The management team also initiated a broad-based program to
increase value for shareowners, customers, employees and the communities we
serve. During the year:
Market capitalization expanded 31 percent to $3.9 billion,
with 3.3 million fewer shares outstanding.
Net earnings rose 26 percent to $186.2 million.
Basic and diluted earnings per share increased to $2.40, up 32 percent.
Net sales were a record $4.9 billion, up 9 percent.
An Expanding National Presence
In 1997, Nordstrom strengthened its presence as a national retailer, opening
three new full-line stores in shopping centers at Roosevelt Field on
Long Island, New York; at Westfarms in West Hartford, Connecticut; and at
Beachwood Place in Cleveland, Ohio.
We added two new Nordstrom Racks: at Factoria in Bellevue, Washington, and at
The Mall at The Source on Long Island, New York. Plus, in Orange County and
San Diego, we expanded two of our original and most productive Racks. Southern
California is also where we located our second and third Faconnable boutiques.
Overall, we increased retail space by more than 800,000 square feet, a
7 percent increase over 1996.
Nordstrom now operates stores in every region of the country. This February, we
entered the Southeast, opening our first full-line store at Perimeter Mall in
Atlanta, Georgia. Three additional stores are planned for Georgia and Florida
through 2001. Our plan is to add new stores with an 8 to10 percent annual
increase in total square feet. Most importantly, significant expansion
opportunities exist in primary locations across the country.
Page 5 Nordstrom Annual Report 1997
<PAGE>
Our full-line stores are now organized into four geographic groups: Northwest,
California, Midwest and East. Racks, Direct Sales, Faconnable boutiques,
Nordstrom Product Group and Nordstrom National Credit Bank also operate as
distinct and self-contained units. Company growth is managed through these
clearly focused autonomous teams with more direct lines of reporting to a
specific Co-President.
Value creation is the primary focus of each group. These teams are designed to
develop strategies and plans based on market conditions unique to each
business. Performance will be measured against previous years and compared
with the results of key peer-industry competitors. Over time we expect our
teams to become more efficient, focused and knowledgeable. Each unit will be
more flexible and responsive, allowing business decisions to be made more
quickly and closer to individual customers.
Growing Merchandise Sales
This year's improved growth in comparable-store sales was due in large part to
an enhanced and refined merchandise selection, especially in women's apparel.
Merchandise realignments and staffing changes made in 1996 paid dividends in
1997. In particular, customers were better served with a balanced selection of
Nordstrom brands and leading national brands.
As a result of refinements initiated these past few years, each group
merchandise team has fewer, more experienced people in jobs with expanded
responsibilities. These significant changes are increasing buying leverage and
improving supplier communication and participation. Our goal is to generate
quality sales growth with a better merchandise
mix and more efficient investment of inventory dollars.
Our expanding use of information systems technology is providing greater
flexibility in merchandising and responding to customers. Detailed sales
floor information is now available, including individual SKUs (stock
keeping units) in all full-line stores. Automatic merchandise replenishment
systems, linked directly to vendors, will be in place for approximately 16
percent of our business by year end. Also, the coordinated merger
of various internal database systems will focus resources on improving
customer service. The next important use of technology-Internet shopping-will
begin later this year.
The Catalog
Also benefiting from advanced technology, the four-year-old Direct Sales
Division posted sharp sales and earnings increases. Annual results continue
to exceed prior direct marketing
Page 8 Nordstrom Annual Report 1997
<PAGE>
industry performance rates-our sales grew over 50 percent this last year alone.
By the year 2000, we expect this division to be as large as some of our retail
regions today.
In mid-year, we moved from a 119,000 square-foot manual fulfillment center into
a 375,000 square-foot computerized facility in Cedar Rapids, Iowa. Its five-
fold increase in capacity and state-of-the-art systems for order fulfillment
cuts the processing cost per item by about 25 percent. And, more importantly,
it enables us to offer our customers many more styles and an expanded range of
sizes. Anticipating future needs, we have obtained the rights to purchase the
land surrounding our new center so we can easily expand our operations.
Increased capacity at the fulfillment center level necessitated other changes
as well. To help us maintain current levels of service and growth, we added a
235-seat call center in February of this year. Our call centers continue to
increase service standards, with a current abandon rate of only 1.86 percent.
Direct mail makes up approximately 10 percent of the $90 billion women's
apparel industry. That's a $9 billion market we have only just begun to
penetrate. Catalog sales have a positive impact at the store level,
as well. A 1997 study shows that customers receiving The Catalog spent 15
percent more in-store than those who didn't receive The Catalog. The evolution
of this product delivery vehicle will be an increasingly critical link to
existing and future Nordstrom customers.
Nordstrom Product Group
We also expect Nordstrom Product Group (NPG), our manufacturing arm, to play
an important role in building future value. With more than 30 years of
experience and growth, NPG designs, manufactures and markets apparel, footwear
and accessories especially suited to our customers' preferences. These items
are distinguished by superior craftsmanship, materials, fit, size selection,
and style. They provide a real point of difference for Nordstrom and give our
customers products they can't find anywhere else.
Our exclusive brands include Classiques Entier, Evergreen, Callaway Golf by
Nordstrom, and the Greta Garbo Collection. We also feature a collection of
foundation brands-such as Preview Collection, Career Essentials, Tesori, BP.
Wear, N Kids and Baby N-designed to deliver superior products at the lowest
possible price. With all of these brands, our goal is the same: to provide
exclusive world-class products that strengthen Nordstrom's position
Page 11 Nordstrom Annual Report 1997
<PAGE>
as a shopping destination. Our Nordstrom brand men's dress shirt collection is
a perfect example of our success in this area-it accounts for more than 75
percent of the volume of dress shirts in our Men's Furnishings department.
By any measure, NPG is a success story. Now accounting for more than 20
percent of our sales, Nordstrom Product Group is approximately the 20th largest
apparel importer in the United States, and the 49th largest importer of
footwear. We look forward to continued growth, as we develop NPG to become more
streamlined and responsive in our ongoing efforts to improve quality while
reducing costs and production lead times.
Company Values
While many aspects of our business must adapt to a highly competitive and
constantly changing marketplace, faith in good people continues to be our
primary focus. From the days of John W. Nordstrom's first store in 1901, each
employee has functioned as an extended member of the Nordstrom family.
Nordstrom standards of service, quality, value and selection are translated
through a diverse blend of energetic and talented managers and front-line
employees.
Company-wide, our singular intent is to improve service every day through the
personal contacts of 37,000 employees-one customer at a time. Our inverted
pyramid style of management, where leaders are promoted from within the
organization, helps create a people-oriented, customer-focused company. We
empower employees to use good judgment and "just take care of the customer."
As Nordstrom's national presence grows, success will rest upon our ability to
sustain these fundamental values. Wherever we conduct business, our objective is
to attract sincere, friendly, career-oriented people. Through customer-focused
teams, our goal is to generate a "home town store" mentality, with the heart
and flexibility of a small, locally based company, while building on the natural
advantages of a large corporation.
Managing for Value
During 1997, the Company initiated a long-term program to assure that we
increase value for shareowners. With this subtle clarification of the company's
management approach, we have begun a journey that will take several years of
patience and persistence.
In managing for value creation, we have set in motion a process to carefully
review our existing business practices. We must determine how our priorities
and goals align with
Page 12 Nordstrom Annual Report 1997
<PAGE>
those of the future. Our ambition is to be ranked as a top-tier national
company by enhancing elements that work well now, and changing those needing
improvement.
Besides improving performance and other value initiatives, your Company took
two additional actions to increase shareowner wealth in 1997. The Board of
Directors declared a 12 percent dividend increase, and continued to authorize
share repurchases. In April 1997, the $100 million share repurchase authorized
in November 1996 was completed. Another $100 million program authorized in
February of 1997 was concluded early this year. And in February of this year,
repurchase of an additional $400 million of shares was approved.
Resource Allocation
Going forward, decisions concerning the allocation of human and financial
resources will be based on the anticipated return to shareowners. Decisions
that trigger new site selection, new full-line store, Rack and Faconnable
boutique strategies, or the evolution of Direct Sales and eventually Internet
commerce will be value based.
We are taking steps to strengthen our management structure by more clearly
defining roles and lines of reporting. Management will concentrate on resource
allocation based on a rigorous business-unit process of strategy and planning.
During the years ahead we will continue to streamline merchandise management
and support functions. Our goal is to eliminate redundancies and provide better
leadership through improved planning and preparation. Process clarity and
increased efficiencies will appropriately focus business resources and
execution.
Performance Management
By creating better ways to recognize performance, we hope to measure and
improve individual productivity. As we've said, managing human capital has
always been essential at Nordstrom. Our way of doing business defines each
employee as an entrepreneur-each individual is an "agent" for our customers.
Coupled with our promote-from-within policy, the Company has worked to foster
a climate of trust and honesty.
We believe managing for value will enhance our entrepreneurial culture and
remove barriers for employee responsibility. In time, we hope to develop what
we like to call "Ph.D." selling. Such a structure will encourage employees to
further develop their customer relationships. Economic and other performance
measures will play a greater role in compensation
Page 14 Nordstrom Annual Report 1997
<PAGE>
systems in the years ahead. We expect all individuals, from senior management
to front-line employees, to make a contribution to value creation, based upon
their roles and responsibilities to the team. Eventually we intend to enhance
our performance-based measures, tying them more closely to the Company's
economic performance.
Other benchmarks indicate our progress. In 1997, while in the early phase of an
emerging national presence, Nordstrom was ranked first in Fortune Magazine's
annual survey of customer satisfaction in the department store and discount
store category. We were honored in another Fortune Magazine survey as one of
the top 100 places to work in America. And for the last four years, Hispanic
Magazine has placed Nordstrom among the top 100 U.S. companies offering the
most opportunities to Hispanics. We were also recognized in the 1997 Catalyst
Census of Women Corporate Officers and Earners-Nordstrom was one of only seven
companies that have two top-earning women among their five top-earning
corporate officers.
Looking Ahead
Interestingly, it is noteworthy that Nordstrom will recognize its centennial
year in 2001. We certainly intend to celebrate this accomplishment and our
tremendous growth from a single Seattle shoe store in 1901. We are also
preparing today for the next 100 years that will begin February 1, 2002.
Speaking for our management team, we are optimistic about Nordstrom's numerous
avenues for growth. We are poised to penetrate new markets and increase sales
from Nordstrom brands. We also plan to grow sales from new retail channels such
as The Catalog and the Internet. With our new management approach, we are
working to maximize the profitability and value of those opportunities. You
will learn more of our progress as we reach milestones along the way. As we
approach our second century in 2002, we are committed to increasing value for
all our stakeholders.
John J. Whitacre
Chairman and Chief Executive Officer
March 15, 1998
<PAGE>
Management Discussion and Analysis
The following discussion and analysis gives a more detailed review
of the past three years, as well as additional information
on future commitments and trends. Some of the information in this
annual report, including anticipated store openings, strategies and goals,
planned capital expenditures and trends in company operations, are forward
looking statements which are subject to risks and uncertainties. Actual
future results and trends may differ materially depending upon a
variety of factors, including but not limited to, the Company's
ability to predict fashion trends, consumer apparel buying patterns,
the Company's ability to control costs and expenses, trends in
personal bankruptcies and bad debt write-offs, employee relations,
adverse weather conditions and other hazards of nature such as
earthquakes and floods, the Company's ability to continue its
expansion plans, and the impact of ongoing competitive market
factors. This discussion and analysis should be read in conjunction
with the basic consolidated financial statements and
the Ten-Year Statistical Summary.
Sales
Sales have increased to record levels in each of the past three years.
The components of the percentage change by year are as follows:
<TABLE>
<CAPTION>
Fiscal Year 1997 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Sales in comparable stores
(open at least fourteen months) 3.8% 0.6% (0.7%)
Sales in new stores 3.9% 7.0% 5.2%
Direct sales catalog 1.2% 0.7% 1.1%
----- ----- -----
Total percentage increase 8.9% 8.3% 5.6%
===== ===== =====
</TABLE>
The Company experienced a healthy rate of comparable store sales
growth in 1997 after two years of stagnation.
In 1995, the Company experienced declining demand for apparel as
well as sales decreases at several stores in the Company's Chicago
and New Jersey markets reflecting the effect of sales
cannibalization resulting from new store
openings in these markets. In mid-1996, the Company changed the
merchandise mix in most of its women's apparel departments in
response to changing customer profiles and vendor product offerings.
While management believed that these changes would better position
our women's apparel departments for future growth, they resulted in
sales decreases in many of the departments. These decreases offset
increases in other areas of business. In addition, in the fourth
quarter, portions of the Company's holiday merchandising strategy
were not executed as well as planned. In 1997, a strong economic
environment and a positive reaction to the changes implemented in
the women's apparel departments pushed
up the growth in comparable store sales.
The Company has continued to expand its store base over the past
several years with new store openings. Sales in new stores includes
sales from these stores until they have been open fourteen months.
Starting at that time, sales from these stores then are included in
the comparable stores calculation. A new store is generally not as
productive as the Company's average store because the customer
base and traffic patterns of each store are developed over time. As a
result, sales growth from these new stores does not match the 8%
increase in average square footage over the past several years.
The direct sales catalog division continues to grow rapidly, with
sales of $156 million in 1997. The division opened
a new and larger fulfillment center in August of 1997, and this
facility provides capacity for even more sales growth
in the future.
Although the Company's average price point has increased over the
past several years, this has been due to
changes in the merchandise mix. There has been little, if any,
inflation in overall merchandise prices during the past several
years.
Page 21 Nordstrom, Inc. and Subsidiaries
<PAGE>
Management Discussion and Analysis
Graph - Percentage of 1997 Sales by Merchandise Category
The pie chart depicts each merchandise category and its percent of total
sales. Clockwise: Shoes - 20%; Men's Apparel and Furnishings - 18%; Women's
Accessories - 20%; Children's Apparel and Accessories - 4%; Women's Apparel -
36%; and Other - 2%. The caption below the graph reads ,"Sales by major
merchandise category have changed only slightly over the past several years."
Costs and Expenses
As a result of increased sales, the total amount of costs and
expenses has increased in each year. The operating
margin improved in 1997 after declining the two previous years. As
a percentage of sales, total costs and expenses
were 93.4% in 1995, 94.5% in 1996 and 93.7% for 1997. Unless
otherwise indicated, the changes discussed below are stated as a
percentage of sales as shown on page 26.
Cost of sales and related buying and occupancy costs fluctuate as a
percentage of sales primarily because of changes
in the cost of sales component. With changes in merchandise styles
and selections, cost of sales, and therefore the merchandise gross
margin, can fluctuate up and down from year to year. In 1995, the
merchandise gross margin decreased because excess inventory
levels led to higher markdowns as sales did not meet expectations.
Merchandise margins decreased further in 1996 as a result of the
merchandise changes in the Company's women's apparel departments
discussed earlier and lower initial markups designed to stimulate
sales. The merchandise gross margin improved in 1997. Initial
markups were higher and markdowns were lower, reflecting the
stronger growth in sales and recovery from the impact of the
changes in the women's apparel departments.
Buying costs increased each year. Factors contributing to this trend
include spending on the development and implementation of
merchandise inventory systems, greater investment in development
of the Company's own merchandise brands and additional
merchandising personnel in the Company's newer regions. Occupancy
costs increased in 1995 and 1996 as a result of new store openings and
remodeling of older stores. Occupancy costs decreased in 1997 as the impact
of new store openings and remodeling projects tapered off.
Selling, general and administrative expenses increased in both 1995
and 1996 for several reasons. In 1995, expenses
in comparable stores continued to increase while sales declined. In
addition, bad debts increased as a result of the
growth of the Company's VISA credit card program, and the direct
sales catalog division continued to incur high operating costs. In
1996, selling, general and administrative expenses increased
primarily because of higher bad debts. Rising consumer debt levels
led to higher charge-offs on the Company's credit card balances,
particularly from personal bankruptcies. Improvements in the
operating costs of the direct sales catalog division were offset by
rising expenses in stores.
Page 22 Nordstrom, Inc. and Subsidiaries
<PAGE>
Management Discussion and Analysis
Costs and Expenses (continued)
Interest expense increased in 1995 because of higher borrowings to
finance the Company's customer accounts receivable balances.
Interest expense decreased in 1997 primarily because of the impact
of securitization of the Company's VISA
credit card receivables, as described more fully in Notes 6 and 13 to
the accompanying financial statements.
Service charge income and other, net includes income from our
credit card operation as well as other miscellaneous income and
expenses. In 1995, other income increased primarily due to an
increase in service charge income from higher levels of customer
accounts receivable outstanding during the year. Other income
decreased in 1997 primarily because of the impact
of the securitization of the Company's VISA credit card receivables
and because of losses on the closing of our Hawaii leased shoe
departments.
Liquidity and Capital Resources
Net cash used in investing activities exceeded net cash provided by
operating activities in 1995 as the Company
increased its spending on new store construction and its investment
in customer accounts receivable. In 1996 and 1997 net cash provided
exceeded net cash used as the growth trend of credit card receivables
reversed.
The Company believes that operating working capital (net working
capital less short-term investments plus notes payable and the
current portion of long-term debt) is a more appropriate measure of
the Company's on-going working capital requirements than net
working capital because it eliminates the effect of changes in the
levels of short-term investments and borrowings. These levels can
vary each year depending on financing activities. The Company's
operating working capital has fluctuated as shown below:
<TABLE>
<CAPTION>
Fiscal Year 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Operating working capital (in thousands) $1,001,597 $957,194 $1,082,714
Percentage change from prior year 4.6% (11.6%) 26.7%
Net sales/average operating working capital 5.0 4.4 4.2
</TABLE>
In 1995, the Company increased its investment in customer accounts
receivable through continuing promotion of its VISA credit card program and by
reducing the minimum payment on its proprietary credit card. This caused
operating working capital to increase at a significantly greater rate than
sales.
During 1996, the Company's proprietary credit card balances did not
continue to increase because of competition
from third-party cards. The Company also reduced its efforts to
promote its VISA credit card because of concerns about rising
charge-offs. In addition, in 1996 the Company securitized its VISA
credit card portfolio. These factors together resulted in a decrease
in operating working capital for the year.
During 1997, the growth in merchandise inventories more than
offset the decline in customer accounts receivable.
As the buyers responded to higher sales gains, they became more
aggressive in their merchandise commitments. Management is taking
actions to reduce the rate of growth in merchandise inventories.
Much of the Company's debt is utilized to finance the Company's
accounts receivable as shown in Note 13 to the accompanying
financial statements. At January 31, 1998 the Company also had
$106 million in outstanding commercial paper and $50 million of
long-term debt maturing in February of 1998 that was not related to
the financing of accounts receivable. This debt was refinanced with
the issuance of fixed rate long-term debt in March of 1998.
Page 23 Nordstrom, Inc. and Subsidiaries
<PAGE>
Management Discussion and Analysis
Liquidity and Capital Resources (continued)
Graph - Investing and Operating Cash Flows
The vertical bar graph compares cash provided by operating activities
and cash used in investing activities for each year, for the past ten years.
Dollars in millions.
<TABLE>
<CAPTION>
Cash used Cash provided
in investing by operating
Year activities activities
- ---- ------------ ------------
<S> <C> <C>
1988 $153.4 $ 46.0
1989 $168.7 $122.2
1990 $200.7 $148.1
1991 $147.2 $154.0
1992 $ 71.9 $235.6
1993 $132.7 $262.1
1994 $246.9 $231.8
1995 $254.0 $121.9
1996 $206.1 $248.9
1997 $260.0 $300.4
</TABLE>
The Company has spent approximately $750 million during the last
three years to add new stores and facilities and to improve existing
stores and facilities. Over 2.6 million square feet of selling space
has been added during this time period, representing an increase of
26%. Most of the new stores have been constructed by the Company
on land that it owns or leases under long-term agreements, thus
providing a strong basis for future operations.
The Company plans to spend approximately $850 million on capital
projects during the next three years, with approximately $200
million allocated to the refurbishment of existing stores. Although
the Company has made commitments for stores to be opening in
1998 and beyond, it is possible that some stores may not be opened
as scheduled because of environmental and land use regulations.
Management believes that the Company's current financial strength
and cash flows from operations provide the resources necessary to
maintain its existing stores and the flexibility to take advantage of
these new store opportunities.
The Company recognizes that its operations may be negatively
affected by Year 2000 software issues, either from
its own computer systems or its interactions with outside vendors.
The Company is addressing the Year 2000 impact by establishing
processes for evaluating and managing the risks associated with
this issue. Starting in 1996, the Company developed a plan to replace
or upgrade nearly all of its computer systems to make them Year
2000 compliant. Through 1999, the total cost of this effort is
estimated to be $19 million. Other software systems embedded in
operating equipment such as elevators are also being replaced or
upgraded. While the Company believes all necessary work will be
completed in a timely fashion, there can be no guarantee that all
systems will be compliant by the year 2000 within the estimated
cost or that the systems of other companies and government
agencies on which the Company relies will be converted timely.
Page 24 Nordstrom, Inc. and Subsidiaries
<PAGE>
Management Discussion and Analysis
Liquidity and Capital Resources (continued)
In view of the decrease in the Company's debt to capital ratio that
occurred over time, the Board of Directors approved
$100 million common stock repurchase programs in May of 1995,
November of 1996 and again in February of 1997.
The Company has repurchased 7,304,335 outstanding shares of its
common stock under these programs.
Management and the Board of Directors continue to evaluate the
Company's capital structure as a method to create value for the
Company's shareholders. At the Board of Directors meeting in
February, the Board approved an additional $400 million share
repurchase program. Much of this share repurchase program will be
financed through additional debt, which will increase the Company's
debt to capital ratio. With strong cash flows and favorable interest
rates, management believes that this program does not significantly
increase the financial risk of the Company.
Graph - Square Footage by Market Area at End of 1997
The pie chart shows the percent of total square feet in each region and also
gives the number of square feet for that region. Clockwise: California, 33.8%,
4,258,000; Northwest, 21.3%, 2,692,000; Midwest, 14.8%, 1,867,000; East Coast,
22.9%, 2,883,000; Rack, 6.8% 857,000; Other, .4%, 57,000;
Page 25 Nordstrom, Inc. and Subsidiaries
<PAGE>
Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
% of % of % of
Year ended January 31, 1998 sales 1997 sales 1996 sales
<S> <C> <C> <C> <C> <C> <C>
Net sales $4,851,624 100.0 $4,453,063 100.0 $4,113,517 100.0
----------------- ----------------- -----------------
Costs and expenses:
Cost of sales and related
buying and occupancy 3,295,813 67.9 3,082,037 69.2 2,806,250 68.2
Selling, general and
administrative 1,322,929 27.3 1,217,590 27.3 1,120,790 27.2
Interest, net 34,250 0.7 39,400 0.9 39,295 1.0
Service charge income and
other, net (108,581) (2.2) (129,469) (2.9) (125,130) (3.0)
----------------- ----------------- -----------------
Total costs and expenses 4,544,411 93.7 4,209,558 94.5 3,841,205 93.4
----------------- ----------------- -----------------
Earnings before income taxes 307,213 6.3 243,505 5.5 272,312 6.6
Income taxes 121,000 2.5 96,000 2.2 107,200 2.6
----------------- ----------------- -----------------
Net earnings $ 186,213 3.8 $ 147,505 3.3 $ 165,112 4.0
================= ================= =================
Basic earnings per share $2.40 $1.82 $2.02
================= ================= =================
Diluted earnings per share $2.40 $1.82 $2.01
================= ================= =================
Cash dividends paid per share $.53 $.50 $.50
================= ================= =================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Page 26 Nordstrom, Inc. and Subsidiaries
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dollars in thousands
January 31, 1998 1997
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 24,794 $ 28,284
Accounts receivable, net 664,448 714,589
Merchandise inventories 826,045 719,919
Prepaid income taxes and other 79,710 69,607
---------- ----------
Total current assets 1,594,997 1,532,399
Property, buildings and equipment, net 1,252,513 1,152,454
Other assets 17,653 17,654
---------- ----------
Total assets $2,865,163 $2,702,507
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 263,767 $ 163,770
Accounts payable 321,311 310,430
Accrued salaries, wages and taxes 205,273 189,697
Accrued expenses 37,884 41,143
Accrued income taxes 13,242 13,045
Current portion of long-term debt 101,129 51,302
---------- ----------
Total current liabilities 942,606 769,387
Long-term debt 319,736 329,330
Deferred lease credits and other liabilities 127,763 130,598
Shareholders' equity 1,475,058 1,473,192
---------- ----------
Total liabilities and shareholders' equity $2,865,163 $2,702,507
========== ==========
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
Page 27 Nordstrom, Inc. and Subsidiaries
<PAGE>
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Dollars in thousands except per share amounts
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Common Stock
Authorized 250,000,000 shares, no par;
issued and outstanding 76,259,052,
79,634,977, and 81,113,144 shares
Balance at beginning of year $ 183,398 $ 168,440 $ 163,334
Issuance of common stock 17,652 14,958 5,106
----------- ---------- ----------
Balance at end of year 201,050 183,398 168,440
----------- ---------- ----------
Retained Earnings
Balance at beginning of year 1,289,794 1,254,532 1,180,466
Net earnings 186,213 147,505 165,112
Cash dividends paid ($.53, $.50 and $.50
per share) (41,168) (40,472) (41,001)
Purchase and retirement of common stock (160,831) (71,771) (50,045)
----------- ----------- -----------
Balance at end of year 1,274,008 1,289,794 1,254,532
----------- ----------- -----------
Total shareholders' equity $1,475,058 $1,473,192 $1,422,972
=========== =========== ===========
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
Page 28 Nordstrom, Inc. and Subsidiaries
<PAGE>
Consolidated Statements of Cash Flows
[CAPTION]
<TABLE>
Dollars in thousands
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Operating Activities
Net earnings $186,213 $147,505 $165,112
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 159,725 156,122 134,347
Change in:
Accounts receivable, net 50,141 (7,262) (218,036)
Merchandise inventories (106,126) (93,616) 1,627
Prepaid income taxes and other (10,103) (1,578) (6,634)
Accounts payable 10,881 32,846 4,500
Accrued salaries, wages and taxes 15,576 6,132 (6,526)
Accrued expenses (3,259) 5,124 5,422
Income tax liabilities (2,091) (12,216) (12,621)
Deferred lease credits and other liabilities (547) 15,824 54,743
--------- -------- ---------
Net cash provided by operating activities 300,410 248,881 121,934
--------- --------- ---------
Investing Activities
Additions to property, buildings
and equipment, net (259,935) (204,278) (252,876)
Other, net (49) (1,838) (1,103)
--------- --------- ---------
Net cash used in investing activities (259,984) (206,116) (253,979)
--------- --------- ---------
Financing Activities
Proceeds from accounts receivable securitization - 186,600 -
Increase (decrease) in notes payable 99,997 (68,731) 145,113
Proceeds from issuance of long-term debt 91,644 57,729 140,859
Principal payments on long-term debt (51,210) (117,311) (75,967)
Proceeds from issuance of common stock 17,652 14,958 5,106
Cash dividends paid (41,168) (40,472) (41,001)
Purchase and retirement of common stock (160,831) (71,771) (50,045)
--------- --------- ---------
Net cash (used in) provided by financing
activities (43,916) (38,998) 124,065
--------- --------- ---------
Net (decrease) increase in cash
and cash equivalents (3,490) 3,767 (7,980)
Cash and cash equivalents at beginning of year 28,284 24,517 32,497
--------- --------- ---------
Cash and cash equivalents at end of year $ 24,794 $ 28,284 $ 24,517
========= ========= =========
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
Page 29 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Dollars in thousands except per share amounts
Note 1: Summary of Significant Accounting Policies
The Company: Nordstrom, Inc. is a fashion specialty retailer offering
a wide selection of high quality apparel, shoes and accessories for
women, men and children, principally through 65 large specialty
stores and 22 clearance stores. All of the Company's stores are
located in the United States, with approximately 36% of its retail
square footage located in the state of California.
The Company purchases a significant percentage of its merchandise
from foreign countries, principally from the Far East. An event
causing a disruption in imports from the Far East could have a
material adverse impact on the Company's operations. In connection
with the purchase of foreign merchandise, the Company has
outstanding letters of credit totaling $77,397 at January 31, 1998.
Basis of Presentation: The Consolidated Financial Statements
include the accounts of Nordstrom, Inc. and its subsidiaries. All
significant intercompany transactions and accounts are eliminated
in consolidation. The presentation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses in the
accompanying financial statements. Actual results could differ from
those estimates.
Merchandise Inventories: Merchandise inventories are stated at the
lower of cost (first-in, first-out basis) or market, using the retail
method.
(Note 1 continued)
Advertising: Costs for newspaper, television, radio and
other media are generally expensed as incurred. Direct response
advertising costs consisting primarily of catalog book production
and printing costs are capitalized and amortized
over the expected life of the catalog, not to exceed 6 months. Direct
response advertising costs reported as prepaid assets are $3,648 at
January 31, 1998. Total advertising expenses were $115,272,
$97,216 and $90,616 in 1997, 1996 and 1995.
Property, Buildings and Equipment: Straight-line
and accelerated methods are applied in the calculation
of depreciation and amortization. Lives used for calculating
depreciation and amortization rates for the principal asset
classifications are as follows: buildings, 10 to 40 years; store
fixtures and equipment, three to 15 years; leasehold improvements,
life of lease or applicable shorter period.
Store Preopening Costs: Store opening and preopening costs are
charged to expense when incurred.
Capitalization of Interest: The interest carrying costs
of facilities being constructed are capitalized during their
construction period based on the Company's weighted average
borrowing rate.
Cash Equivalents: The Company considers all short-term investments
with a maturity at date of purchase of three months or less to be
cash equivalents.
Page 30 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
(Note 1 continued)
Customer Accounts Receivable: In accordance with industry
practices, installments maturing in more than one year or deferred
payment accounts receivable are included in current assets.
Cash Management: The Company's cash management system provides
for the reimbursement of all major bank disbursement accounts on a
daily basis. Accounts payable at January 31, 1998 and 1997 include
$4,361 and $14,414 of checks drawn
in excess of cash balances not yet presented for payment.
Deferred Lease Credits: Deferred lease credits are amortized on a
straight-line basis over the life of the applicable lease.
Derivatives Policy: The Company limits its use of derivative
financial instruments to the management of well-defined foreign
currency and interest rate risks. Gains and losses related to hedges
of anticipated transactions are deferred and recognized in operating
results, or included in balance sheet amounts when the transaction
occurs. The effect of these activities is not material to the
Company's financial condition or results of operations. The Company
has no off-balance sheet credit risk, and the fair value of derivative
financial instruments at January 31, 1998 and 1997 is not material.
Fair Value of Financial Instruments: The carrying amount of cash
equivalents and notes payable approximates fair value because of
the short maturity of these instruments. The fair value of long-term
debt, estimated using quoted market prices of the same or similar
issues with the same remaining maturity, is approximately
$419,000 and $374,000 at January 31, 1998 and 1997.
Reclassifications: Certain reclassifications of prior year balances
have been made for consistent presentation with
the current year.
Note 2: Employee Benefits
The Company provides a profit sharing plan for employees. The plan
is fully funded by the Company and is non-contributory except for
employee contributions made under Section 401(k) of the Internal
Revenue Code. Under this provision of the plan, the Company provides
matching contributions up to a stipulated percentage of employee
contributions. Company contributions to the profit sharing portion of
the plan vest over a seven year period. The Company contribution is
established each year by the Board of Directors and totaled $45,000,
$36,000 and $40,000 in 1997, 1996 and 1995.
Note 3: Interest Expense
The components of interest expense are as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Nordstrom, Inc.
Short-term debt $ 3,847 $ 432 $ 69
Long-term debt 4,263 4,247 8,635
Nordstrom Credit, Inc.
Short-term debt 7,084 12,703 10,184
Long-term debt 28,624 28,236 27,788
-------- -------- --------
Total interest incurred 43,818 45,618 46,676
Less: Interest income (1,221) (1,395) (2,204)
Capitalized interest (8,347) (4,823) (5,177)
-------- -------- --------
Interest, net $34,250 $39,400 $39,295
======== ======== ========
</TABLE>
Page 31 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 4: Income Taxes
Income taxes consist of the following:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Current income taxes:
Federal $ 98,464 $ 88,414 $ 94,855
State and local 18,679 18,150 19,649
--------- --------- ---------
Total current
income taxes 117,143 106,564 114,504
--------- --------- ---------
Deferred income taxes:
Current (4,614) (1,471) (3,339)
Non-current 8,471 (9,093) (3,965)
--------- --------- ---------
Total deferred
income taxes 3,857 (10,564) (7,304)
--------- --------- ---------
Total income taxes $121,000 $ 96,000 $107,200
======== ======== =========
</TABLE>
A reconciliation of the statutory Federal income tax rate with the
effective tax rate is as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Statutory rate 35.00% 35.00% 35.00%
State and local
income taxes, net of
Federal income taxes 4.17 4.32 4.39
Other, net 0.21 0.10 (0.03)
------ ------ ------
Effective tax rate 39.38% 39.42% 39.36%
====== ====== ======
</TABLE>
(Note 4 continued)
Deferred income taxes result from temporary differences in
the timing of recognition of revenue and expenses for tax and
financial statement reporting as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Tax basis depreciation $ 281 ($ 6,018) ($2,620)
Accrued expenses (4,255) (3,084) (4,833)
Employee benefits 10,278 - -
Other (2,447) (1,462) 149
------- --------- --------
Total deferred
income taxes $3,857 ($10,564) ($7,304)
======= ========= ========
</TABLE>
These items comprise substantially all of the deferred tax asset and
liability balances.
Note 5: Earnings Per Share
In 1997 the Company adopted Statement of Financial Accounting
Standards No. 128 which requires disclosure of Basic and Diluted
Earnings Per Share. All prior period earnings per share data has been
restated to comply with this Statement.
Basic earnings per share are computed on the basis of the weighted
average number of common shares outstanding
during the year. Average shares outstanding were 77,486,280,
80,848,984, and 81,919,625 in 1997, 1996 and 1995.
Diluted earnings per share are computed on the basis of the weighted
average number of common shares outstanding during the year plus
dilutive common stock equivalents consisting of shares subject to
stock options. Average shares outstanding including dilutive shares
were 77,675,148, 80,962,379, and 82,058,767 in 1997, 1996 and
1995.
Options with an exercise price greater than the average market price
were not included in the computation of diluted earnings per share.
These options totaled 151,811, 357,082 and 204,225 in 1997, 1996
and 1995.
Page 32 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 6: Accounts Receivable
The components of accounts receivable are as follows:
<TABLE>
<CAPTION>
January 31, 1998 1997
<S> <C> <C>
Customers $672,246 $719,916
Other 22,586 21,466
Allowance for doubtful accounts (30,384) (26,793)
--------- ---------
Accounts receivable, net $664,448 $714,589
========= =========
</TABLE>
Credit risk with respect to accounts receivable is concentrated in
the geographic regions in which the Company operates stores. At
January 31, 1998 and 1997, approximately 40%
and 43% of the Company's receivables were concentrated
in California. Concentration of the remaining receivables is
considered to be limited due to their geographical dispersion.
Bad debt expense totaled $40,440, $51,352 and $39,589
in 1997, 1996 and 1995.
In August 1996, the Company transferred substantially all
of its VISA credit card receivables (approximately $203,000)
to a trust in exchange for certificates representing undivided
interests in the trust. A Class A certificate with a market value of
$186,600 was sold to a third party, and a Class B certificate, which
is subordinated to the Class A certificate, was retained
by the Company. The Company owns the remaining undivided
interests in the trust not represented by the Class A and Class B
certificates (the "Seller's Interest"). These transactions had no
significant impact on the Company's earnings in 1996.
Cash flows generated from the receivables in the trust are,
to the extent allocable to the investors, applied to the payment of
interest on the Class A and Class B certificates, absorption
of credit losses, and payment of servicing fees to the Company,
which will continue to service the receivables for the trust. Excess
cash flows revert to the Company. The Company's investment in the
Class B certificate and the Seller's Interest totals $20,407 and
$32,516 at January 31, 1998 and 1997,and is included in customer
accounts receivable.
Pursuant to the terms of operative documents of the trust,
in certain events the Company may be required to fund certain
amounts pursuant to a recourse obligation for credit losses. Based
on current cash flow projections, the Company does not believe any
additional funding will be required.
Note 7: Property, Buildings and Equipment
Property, buildings and equipment consist of the following
(at cost):
<TABLE>
<CAPTION>
January 31, 1998 1997
<S> <C> <C>
Land and land improvements $ 52,339 $ 50,542
Buildings 460,284 450,227
Leasehold improvements 825,950 740,802
Store fixtures and equipment 836,041 746,152
----------- -----------
$2,174,614 $1,987,723
Less accumulated depreciation
and amortization (1,087,516) (944,470)
----------- -----------
1,087,098 1,043,253
Construction in progress 165,415 109,201
----------- -----------
Property, buildings and
equipment, net $1,252,513 $1,152,454
=========== ===========
</TABLE>
At January 31, 1998, the Company has contractual commitments of
approximately $95,000 for construction of new stores.
At January 31, 1998, the net book value of property located
in California is approximately $295,000. The Company does not carry
earthquake insurance in California because of its high cost.
Page 33 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 8: Notes Payable
A summary of notes payable is as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Average daily short-
term borrowings $193,811 $242,033 $173,343
Maximum amount
outstanding 278,471 345,738 303,072
Weighted average
interest rate:
During the year 5.6% 5.4% 5.9%
At year-end 5.5% 5.3% 5.5%
</TABLE>
At January 31, 1998, the Company has unsecured lines of credit with
a group of commercial banks totaling $500,000 which are available
as liquidity support for short-term debt, and expire
in July 2002. The lines of credit agreements contain restrictive
covenants which, among other things, require the Company to
maintain a certain minimum level of net worth and a coverage ratio
of no less than 2 to 1. The Company pays commitment fees for the
lines in lieu of compensating balance requirements.
Note 9: Long-Term Debt
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
January 31, 1998 1997
<S> <C> <C>
Senior notes, 8.875%, due 1998 $ 50,000 $ 50,000
Medium-term notes,
Nordstrom Credit, Inc.,
6.875%-9.6%, due 1998-2002 253,350 211,000
Notes payable,
Nordstrom Credit, Inc.,
6.7%, due 2005 100,000 100,000
Other 17,515 19,632
--------- ---------
Total long-term debt 420,865 380,632
Less current portion (101,129) (51,302)
--------- ---------
Total due beyond one year $319,736 $329,330
========= =========
</TABLE>
The senior note agreement contains restrictive covenants which,
among other things, restrict dividends to shareholders to a formula
amount. At January 31, 1998, approximately $856,388 of retained
earnings is not restricted.
Aggregate principal payments on long-term debt are as follows:
1998-$101,129; 1999-$58,931; 2000-$58,626;
2001-$11,454; and 2002-$77,247.
In March of 1998 the Company issued $300,000 of fixed rate long-term debt.
Page 34 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 10: Leases
The Company leases land, buildings and equipment under
noncancelable lease agreements with expiration dates ranging from
1998 to 2080. Certain of the leases include renewal provisions at
the Company's option. Most of the leases provide for additional
rentals based upon specific percentages of sales and require the
Company to pay for certain other costs.
Future minimum lease payments as of January 31, 1998 are
as follows: 1998-$39,269; 1999-$36,611; 2000-$32,977;
2001-$30,505; 2002-$23,318; and thereafter-$199,284.
The following is a schedule of rent expense:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Minimum rent:
Store locations $16,869 $15,468 $15,864
Offices, warehouses
and equipment 17,811 17,815 17,309
Contingent rent:
Store location
percentage rent 12,542 13,673 13,741
Common area costs,
taxes and other 9,839 9,504 9,831
------- ------- -------
Total rent expense $57,061 $56,460 $56,745
======= ======= =======
</TABLE>
Note 11: Stock Options
The Company provides a non-qualified stock option
plan for certain key employees. Options are issued at market value
at the date of grant and become exercisable over a four-year period.
The number of shares reserved for future stock option grants is
4,848,189 at January 31, 1998.
The Company has elected to follow the measurement provisions of
Accounting Principles Board (APB) Opinion No. 25, under which no
recognition of expense is required in accounting for its stock
options. If the Company had elected to follow the measurement
provisions of Statement of Financial Accounting Standards No. 123
("SFAS 123") in accounting for its stock options, compensation
expense would be recognized based on the fair value of the options
at the date of grant. To estimate compensation expense which would
be recognized under SFAS 123, the Company used the modified
Black-Scholes option-pricing model with the following weighted-
average assumptions for options granted in 1997, 1996 and 1995,
respectively: risk-free interest rates of 5.4%, 6.4% and 5.5%;
expected volatility factors of .32, .33 and .34; expected dividend
yield of 1% for all years; and expected life of 5 years for 1997 and 7
years for 1996 and 1995. The weighted-average fair value of stock
options granted was $18, $20 and $17 per share in 1997, 1996 and 1995.
If SFAS 123 were used to account for the Company's stock option
plan, the pro forma effect on net earnings and earnings per share
would be as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Pro forma net earnings $183,618 $145,603 $164,078
Pro forma basic
earnings per share $2.37 $1.80 $2.00
Pro forma diluted
earnings per share $2.36 $1.80 $2.00
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are
not indicative of future amounts as awards prior to 1995 are not
included, and additional awards in future years are anticipated.
Page 35 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
(Note 11 continued)
A summary of stock option activity follows:
<TABLE>
<CAPTION>
Weighted-
Average
Shares Exercise Price
<S> <C> <C>
Outstanding, February 1, 1995 1,878,250 $35
Granted 419,080 41
Exercised (154,366) 28
Forfeited (41,625) 39
---------- --------------
Outstanding, January 31, 1996 2,101,339 36
Granted 372,122 46
Exercised (429,419) 31
Forfeited (184,289) 40
---------- --------------
Outstanding, January 31, 1997 1,859,753 39
Granted 346,382 53
Exercised (419,239) 34
Forfeited (86,095) 44
---------- --------------
Outstanding, January 31, 1998 1,700,801 $43
========= ==============
</TABLE>
There were 879,732, 995,372 and 1,139,638 shares exercisable as
of January 31, 1998, 1997 and 1996 with weighted-average exercise
prices of $38, $36 and $33, respectively.
(Note 11 continued)
The following table summarizes information about stock options
outstanding at January 31, 1998:
<TABLE>
<CAPTION>
Weighted- Weighted-
Average Average
Range of Remaining Exercise Prices
Exercise Prices Shares Contractual Life
<S> <C> <C> <C>
$22-$36 472,346 4 $33
$39-$48 939,385 8 43
$51-$61 289,070 9 57
--------- ---------------- ---------------
1,700,801 7 $43
========= ================ ===============
</TABLE>
The following table summarizes information about stock options
exercisable at January 31, 1998:
<TABLE>
Caption>
Weighted-
Range of Average
Exercise Prices Shares Exercise Price
<S> <C> <C>
$22-$36 472,346 $33
$39-$48 377,928 44
$51-$61 29,458 55
------- --------------
879,732 $38
======= ==============
</TABLE>
Note 12: Supplementary Cash Flow Information
Supplementary cash flow information includes the following:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Cash paid during
the year for:
Interest (net
of capitalized
interest) $ 35,351 $ 43,356 $ 42,248
Income taxes 126,606 106,982 121,212
</TABLE>
Page 36 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 13: Credit Card and Financing Subsidiaries
Nordstrom National Credit Bank (the "Bank"), a wholly
owned subsidiary of the Company, issues a credit card for use
in Company stores, and in 1994 introduced a VISA card. Nordstrom
Credit, Inc., also a wholly owned subsidiary, finances all receivables
generated through the use of the proprietary card, and until August
1996, the VISA card. In August 1996, substantially all of the
outstanding VISA receivables were transferred to a trust in
connection with a securitization of the receivables. As a result of
this transaction, Nordstrom Credit, Inc. no longer purchases and
finances receivables generated through the use of the Bank's VISA
card except to the extent that it maintains its interests in the Class
B certificate and the Seller's Interest. The Bank securitizes all new
VISA receivables through the trust.
Condensed combined financial information of these subsidiaries is
as follows:
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996
<S> <C> <C> <C>
Service charge income $108,582 $128,240 $122,973
Other income 18,449 17,823 14,799
-------- -------- --------
Total revenue $127,031 $146,063 $137,772
-------- -------- --------
Net earnings $ 27,944 $ 31,518 $ 23,835
======== ======== ========
</TABLE>
(Note 13 continued)
<TABLE>
<CAPTION>
January 31, 1998 1997
<S> <C> <C>
Assets:
Cash and cash equivalents $ 20,184 $ 24,374
Accounts receivable, net 641,761 693,124
Other assets 7,434 7,846
-------- --------
Total assets $669,379 $725,344
======== ========
Liabilities and investment of
Nordstrom, Inc.:
Notes payable:
Nordstrom, Inc. - $ 54,000
Other $158,020 163,770
Accounts payable and
accrued liabilities 24,068 65,576
Long-term debt 353,350 311,000
Investment of
Nordstrom, Inc. 133,941 130,998
-------- --------
Total liabilities and investment
of Nordstrom, Inc. $669,379 $725,344
======== ========
</TABLE>
Page 37 Nordstrom, Inc. and Subsidiaries
<PAGE>
Notes to Consolidated Financial Statements
Note 14: Selected Quarterly Data (unaudited)
<TABLE>
<CAPTION>
Year ended January 31, 1998 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
<S> <C> <C> <C> <C> <C>
Net sales $953,747 $1,353,345 $1,089,784 $1,454,748 $4,851,624
Gross profit 307,235 428,991 365,703 453,882 1,555,811
Earnings before income taxes 53,349 96,686 59,645 97,533 307,213
Net earnings 32,349 58,586 36,145 59,133 186,213
Basic and diluted
earnings per share .41 .76 .47 .76 2.40
Dividends per share .125 .125 .14 .14 .53
Year ended January 31, 1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Net sales $905,962 $1,241,464 $984,440 $1,321,197 $4,453,063
Gross profit 288,850 379,576 319,062 383,538 1,371,026
Earnings before income taxes 42,897 74,081 55,736 70,791 243,505
Net earnings 25,897 44,781 34,036 42,791 147,505
Basic and diluted
earnings per share .32 .55 .42 .53 1.82
Dividends per share .125 .125 .125 .125 .50
</TABLE>
Page 38 Nordstrom, Inc. and Subsidiaries
<PAGE>
Management and Independent Auditors' Report
Report of Management
The accompanying consolidated financial statements,
including the notes thereto, and the other financial information
presented in this Annual Report have been prepared by management.
The financial statements have been prepared in accordance with
generally accepted accounting principles and include amounts that
are based upon our best estimates and judgments. Management is
responsible for the consolidated financial statements, as well as
the other financial information in this Annual Report.
The Company maintains an effective system of internal accounting
control. We believe that this system provides reasonable assurance
that transactions are executed in accordance with management
authorization, and that they
are appropriately recorded, in order to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to adequately safeguard, verify and
maintain accountability of assets. The concept of reasonable
assurance is based on the recognition that the cost of a system of
internal control should not exceed the benefits derived.
The consolidated financial statements and related notes have been
audited by Deloitte & Touche LLP, independent certified public
accountants. The accompanying auditors' report expresses an
independent professional opinion on the fairness of presentation of
management's financial statements.
The Audit Committee of the Board of Directors is composed
of the outside directors, and is responsible for recommending the
independent certified public accounting firm to be retained for the
coming year, subject to shareholder approval. The Audit Committee
meets periodically with the independent auditors,
as well as with management and internal auditors, to review
accounting, auditing, internal accounting controls and financial
reporting matters. The independent auditors and the internal
auditors also meet privately with the Audit Committee.
John A. Goesling
Executive Vice President and Chief Financial Officer
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of
Nordstrom, Inc. and subsidiaries as of January 31, 1998
and 1997, and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the three years in
the period ended January 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial position
of Nordstrom, Inc. and subsidiaries as of January 31, 1998
and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended January
31, 1998, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Seattle, Washington; March 17, 1998
Page 39 Nordstrom, Inc. and Subsidiaries
<PAGE>
Ten Year Statistical Summary
Dollars in thousands except square footage and per share amounts
<TABLE>
<CAPTION>
Year ended January 31, 1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Financial Position
Customer accounts
receivable, net $641,862 $693,123 $874,103 $655,715 $565,151 $584,379
Merchandise inventories 826,045 719,919 626,303 627,930 585,602 536,739
Current assets 1,594,997 1,532,399 1,612,776 1,397,713 1,314,914 1,219,844
Current liabilities 942,606 769,387 818,523 679,652 618,154 503,015
Working capital 652,391 763,012 794,253 718,061 696,760 716,829
Working capital ratio 1.69 1.99 1.97 2.06 2.13 2.43
Property, buildings and
equipment, net 1,252,513 1,152,454 1,103,298 984,195 845,596 824,142
Long-term debt 420,865 380,632 439,943 373,910 438,574 481,945
Debt/capital ratio 31.70 26.98 32.09 25.56 29.11 33.09
Shareholders' equity 1,475,058 1,473,192 1,422,972 1,343,800 1,166,504 1,052,031
Shares outstanding 76,259,052 79,634,977 81,113,144 82,244,098 82,059,128 81,974,797
Book value per share 19.34 18.50 17.54 16.34 14.22 12.83
Total assets 2,865,163 2,702,507 2,732,619 2,396,783 2,177,481 2,053,170
Operations
Net sales 4,851,624 4,453,063 4,113,517 3,894,478 3,589,938 3,421,979
Costs and expenses:
Cost of sales and
related buying and
occupancy 3,295,813 3,082,037 2,806,250 2,599,553 2,469,304 2,339,107
Selling, general and
administrative 1,322,929 1,217,590 1,120,790 1,023,347 940,579 902,083
Interest, net 34,250 39,400 39,295 30,664 37,646 44,810
Service charge income
and other, net (108,581) (129,469) (125,130) (94,644) (88,509) (86,140)
Total costs and expenses 4,544,411 4,209,558 3,841,205 3,558,920 3,359,020 3,199,860
Earnings before income
taxes 307,213 243,505 272,312 335,558 230,918 222,119
Income taxes 121,000 96,000 107,200 132,600 90,500 85,500
Net earnings 186,213 147,505 165,112 202,958 140,418 136,619
Basic earnings per share 2.40 1.82 2.02 2.47 1.71 1.67
Diluted earnings per share 2.40 1.82 2.01 2.46 1.71 1.67
Dividends per share .53 .50 .50 .385 .34 .32
Net earnings as a percent
of net sales 3.84% 3.31% 4.01% 5.21% 3.91% 3.99%
Return on average
shareholders' equity 12.63% 10.19% 11.94% 16.17% 12.66% 13.72%
Sales per square foot
for Company-operated
stores 384 377 382 395 383 381
Stores and Facilities
Company-operated stores 92 83 78 76 74 72
Total square footage 12,614,000 11,754,000 10,713,000 9,998,000 9,282,000 9,224,000
</TABLE>
Page 40 Nordstrom, Inc. and Subsidiaries
<PAGE>
Dollars in thousands except square footage and per share amounts
<TABLE>
<CAPTION>
Year ended January 31, 1992 1991 1990 1989
<S> <C> <C> <C> <C>
Financial Position
Customer accounts
receivable, net $585,490 $558,573 $519,656 $465,929
Merchandise inventories 506,632 448,344 419,976 403,795
Current assets 1,177,638 1,090,379 1,011,148 913,986
Current liabilities 547,002 546,084 485,883 445,620
Working capital 630,636 544,295 525,265 468,366
Working capital ratio 2.15 2.00 2.08 2.05
Property, buildings and
equipment, net 856,404 806,191 691,937 594,038
Long-term debt 511,000 489,172 468,412 389,216
Debt/capital ratio 40.74 43.59 43.78 43.12
Shareholders' equity 939,231 826,410 733,250 639,941
Shares outstanding 81,844,227 81,737,910 81,584,710 81,465,027
Book value per share 11.48 10.11 8.99 7.86
Total assets 2,041,875 1,902,589 1,707,420 1,511,703
Operations
Net sales 3,179,820 2,893,904 2,671,114 2,327,946
Costs and expenses:
Cost of sales and
related buying and
occupancy 2,169,437 2,000,250 1,829,383 1,563,832
Selling, general and
administrative 831,505 747,770 669,159 582,973
Interest, net 49,106 52,228 49,121 39,977
Service charge income
and other, net (87,443) (84,660) (55,958) (57,268)
Total costs and expenses 2,962,605 2,715,588 2,491,705 2,129,514
Earnings before income
taxes 217,215 178,316 179,409 198,432
Income taxes 81,400 62,500 64,500 75,100
Net earnings 135,815 115,816 114,909 123,332
Basic earnings per share 1.66 1.42 1.41 1.51
Diluted earnings per share 1.66 1.42 1.40 1.51
Dividends per share .31 .30 .28 .22
Net earnings as a percent
of net sales 4.27% 4.00% 4.30% 5.30%
Return on average
shareholders' equity 15.38% 14.85% 16.74% 21.03%
Sales per square foot
for Company-operated
stores 388 391 398 380
Stores and Facilities
Company-operated stores 68 63 59 58
Total square footage 8,590,000 7,655,000 6,898,000 6,374,000
</TABLE>
Page 41 Nordstrom, Inc. and Subsidiaries
<PAGE>
Officers, Directors and Committees
Chairman
John J. Whitacre
45, Chairman of the Board of Directors
Co-Presidents
Blake W. Nordstrom
37, Co-President
Erik B. Nordstrom
34, Co-President
J. Daniel Nordstrom
35, Co-President
James A. Nordstrom
36, Co-President
Peter E. Nordstrom
35, Co-President
William E. Nordstrom
34, Co-President
Executive Vice Presidents
Jammie Baugh
44, Executive Vice President
Northwest General Manager
Gail A. Cottle
46, Executive Vice President
Product Development
John A. Goesling
52, Executive Vice President and Treasurer
Jack F. Irving
53, Executive Vice President
Faconnable
Robert J. Middlemas
41, Executive Vice President
Midwest General Manager
James R. O'Neal
39, Executive Vice President
California General Manager
Martha S. Wikstrom
41, Executive Vice President
East Coast General Manager
Vice Presidents
Laurie M. Black
38, Vice President
Women's Specialized Apparel Divisional Merchandise Manager
Northwest and California Group
Dale C. Crichton
49, Vice President
Cosmetics Corporate Merchandise Manager
Joseph V. Demarte
46, Vice President
Human Resources
Annette S. Dresser
37, Vice President
Bridge Apparel Divisional Merchandise Manager
Northwest Group
Tamela J. Hickel
37, Vice President
Southeast Regional Manager of Stores
Darrel J. Hume
50, Vice President
Midwest Regional Manager of Stores
David P. Lindsey
48, Vice President
Store Planning
David L. Mackie
49, Vice President
Legal and Real Estate
Jack H. Minuk
43, Vice President
Women's Shoes Corporate Merchandise Manager
Charles T. Mitchell
50, Vice President
Information Services
Suzanne R. Patneaude
51, Vice President
Designer Apparel Corporate Merchandise Manager
Joel T. Stinson
48, Vice President
Operations
Susan A. Wilson Tabor
52, Vice President
The Rack
Karen E. Purpur
54, Secretary
Page 42 Nordstrom, Inc. and Subsidiaries
<PAGE>
Directors
Philip M. Condit
56, Director; Chairman and CEO, The Boeing Company
Seattle, WA
D. Wayne Gittinger
65, Director; Partner, Lane Powell Spears Lubersky
Seattle, WA
Enrique Hernandez, Jr.
42, Director; President and CEO,
Inter-Con Security Systems, Inc.
Pasadena, CA
Charles A. Lynch
70, Director; Chairman, Fresh Choice, Inc.
Santa Clara, CA
Ann D. McLaughlin
56, Director; Chairman, The Aspen Institute
Aspen, CO
John A. McMillan
66, Director
Bruce A. Nordstrom
64, Director
John N. Nordstrom
60, Director
Alfred E. Osborne, Jr.
53, Director; Director of the Harold Price Center
for Entrepreneurial Studies and Associate
Professor of Business Economics,
The Anderson School at UCLA
Los Angeles, CA
William D. Ruckelshaus
65, Director; A Principal in Madrona Investment
Group, LLC
Seattle, WA
Elizabeth Crownhart Vaughan
69, Director; President, Salar Enterprises
Portland, OR
John J. Whitacre
45, Chairman of the Board of Directors
Committees
Executive
John A. McMillan
Bruce A. Nordstrom
John N. Nordstrom
Audit
Philip M. Condit
Enrique Hernandez, Jr.
Charles A. Lynch
Ann D. McLaughlin
Alfred E. Osborne, Jr., Chair
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Compensation and Stock Option
D. Wayne Gittinger
Ann D. McLaughlin
John A. McMillan
Alfred E. Osborne, Jr.
William D. Ruckelshaus, Chair
Elizabeth Crownhart Vaughan
Finance
Philip M. Condit, Chair
John A. Goesling - ex officio
Enrique Hernandez, Jr.
Charles A. Lynch
John N. Nordstrom
Alfred E. Osborne, Jr.
Corporate Governance and Nominating
D. Wayne Gittinger, Chair
Charles A. Lynch
Ann D. McLaughlin
William D. Ruckelshaus
Elizabeth Crownhart Vaughan
Profit Sharing and Benefits
Joseph V. Demarte, Chair
D. Wayne Gittinger
J. Daniel Nordstrom
Peter E. Nordstrom
John J. Whitacre
Page 43 Nordstrom, Inc. and Subsidiaries
<PAGE>
Retail Store Facilities
The following table sets forth certain information with respect to
each of the stores operated by the Company.
The Company also operates seven distribution centers and leases
other space for administrative functions.
<TABLE>
<CAPTION>
Present
Year opened total store
Location or acquired area/sq. ft
<S> <C> <C>
California Group
South Coast Plaza 1978 235,000
Brea Mall 1979 195,000
Los Cerritos Center 1981 122,000
Fashion Valley Center 1981 156,000
Hillsdale Shopping Center 1982 149,000
Glendale Galleria 1983 147,000
University Towne Centre 1984 130,000
Topanga Plaza 1984 154,000
Stanford Shopping Center 1984 187,000
Broadway Plaza 1984 193,000
The Village at Corte Madera 1985 116,000
Westside Pavilion 1985 150,000
Horton Plaza 1985 151,000
The Galleria at South Bay 1985 161,000
Montclair Plaza 1986 134,000
North County Fair 1986 156,000
Valley Fair 1987 165,000
MainPlace Mall 1987 169,000
Stonestown Galleria 1988 174,000
Downtown San Francisco 1988 350,000
Arden Fair 1989 190,000
Stoneridge Mall 1990 173,000
Paseo Nuevo 1990 186,000
The Galleria at Tyler 1991 164,000
Santa Anita 1994 151,000
</TABLE>
<TABLE>
<CAPTION>
Present
Year opened total store
Location or acquired area/sq. ft
<S> <C> <C>
East Coast Group
Tysons Corner Center 1988 253,000
The Fashion Centre
at Pentagon City 1989 241,000
Garden State Plaza 1990 282,000
Montgomery Mall 1991 225,000
Menlo Park Mall 1991 266,000
Freehold Raceway Mall 1992 174,000
Towson Town Center 1992 205,000
Annapolis Mall 1994 162,000
The Mall at Short Hills 1995 188,000
The Westchester 1995 219,000
King of Prussia 1996 238,000
Westfarms 1997 189,000
Roosevelt Field 1997 241,000
Midwest Group
Oakbrook Center 1991 249,000
Mall of America 1992 240,000
Old Orchard 1994 209,000
Woodfield Shopping Center 1995 215,000
Circle Centre Mall 1995 216,000
Dallas Galleria 1996 249,000
Somerset Collection North 1996 258,000
Beachwood Place 1997 231,000
</TABLE>
Page 44 Nordstrom, Inc. and Subsidiaries
<PAGE>
<TABLE>
<CAPTION>
Present
Year opened total store
Location or acquired area/sq. ft
<S> <C> <C>
Northwest Group
Downtown Seattle <fn1> 1963 245,000
Lloyd Center 1963 150,000
Northgate Mall 1965 122,000
Tacoma Mall 1966 134,000
Downtown Portland 1966 174,000
Bellevue Square 1967 285,000
Southcenter Mall 1968 170,000
Yakima 1972 44,000
Spokane 1974 121,000
Washington Square 1974 189,000
Anchorage 1975 97,000
Vancouver Mall 1977 71,000
Alderwood Mall 1979 127,000
Salem Center 1980 71,000
Crossroads Plaza 1980 140,000
Fashion Place Mall 1981 110,000
Clackamas Town Center 1981 121,000
Ogden City Mall 1982 76,000
Park Meadows 1996 245,000
Other
Faconnable-New York 1993 10,000
Faconnable-Beverly Hills 1997 17,000
Faconnable-South Coast Plaza 1997 8,000
Ala Moana-Women's 1997 14,000
Ala Moana-Men's 1997 8,000
<FN>
<fn1>
1 Excludes approximately 23,000 square feet of corporate and
administrative offices.
</TABLE>
<TABLE>
<CAPTION>
Present
Year opened total store
Location or acquired area/sq. ft
<S> <C> <C>
Rack Group
Clackamas Rack 1983 28,000
Metro Point Rack 1983 50,000
Woodland Hills Rack 1984 48,000
Alderwood Rack 1985 25,000
Mission Valley Rack 1985 57,000
Downtown Portland Rack 1986 19,000
Chino Town Square Rack 1987 30,000
280 Metro Center Rack 1987 31,000
Downtown Seattle Rack 1987 42,000
Bellis Fair Rack 1990 20,000
Marina Square Rack 1990 44,000
Potomac Mills Rack 1990 46,000
Sugarhouse Center Rack 1991 31,000
Towson Rack 1992 31,000
City Place Rack 1992 37,000
Last Chance 1992 48,000
Franklin Mills Rack 1993 43,000
Woodfield Rack 1994 45,000
SuperMall Rack 1995 48,000
Village Square Rack 1996 40,000
Factoria Rack 1997 46,000
The Mall at the Source Rack 1997 48,000
Page 45 Nordstrom, Inc. and Subsidiaries
<PAGE>
Shareholder Information
Independent Auditors
Deloitte & Touche LLP
Counsel
Lane Powell Spears Lubersky
Transfer Agent and Registrar
ChaseMellon Shareholder Services
Telephone (800) 522-6645
General Offices
1501 Fifth Avenue, Seattle, WA 98101-1603
Telephone (206) 628-2111
Annual Meeting
May 19, 1998 at 11:00 a.m. Pacific Daylight Time
The Ritz Carlton
San Francisco, CA
Form 10-K
The Company's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended January, 31, 1998 will
be provided to shareholders upon written request to:
Investors Relations, Nordstrom, Inc.,
P.O. Box 2737
Seattle, WA 98111
or by calling (206) 233-6301.
Shareholder Information Line
In order to provide our shareholders with information about
the Company in a more timely manner, we have established
a shareholder information line.
To obtain the latest financial releases and updates as
soon as they are available, call 1-800-667-3920.
Page 46 Nordstrom, Inc. and Subsidiaries
<PAGE>
Appendix
</TABLE>
<TABLE>
<CAPTION>
Graph Page
- ----------------------------------------
<S> <C>
Net Sales 2
Net Earnings 2
Percentage of 1997 Sales by Merchandise Category 22
Investing and Operating Cash Flows 24
Square Footage by Market Area at end of 1997 25
</TABLE>
