jwn-20210731

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2021


☐			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: 001-15059

NORDSTROM, INC.

(Exact name of registrant as specified in its charter)


Washington						91-0515058
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1617 Sixth Avenue, Seattle, Washington 98101

(Address of principal executive offices)

206-628-2111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, without par value	JWN	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☑	Large Accelerated Filer	☐	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Common stock outstanding as of August 27, 2021: 158,922,869 shares

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TABLE OF CONTENTS


		Page
FORWARD-LOOKING STATEMENTS		3
DEFINITIONS OF COMMONLY USED TERMS		5
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).	6
	Condensed Consolidated Statements of Earnings	6
	Condensed Consolidated Statements of Comprehensive Earnings	6
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Shareholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Consolidated Financial Statements
	Note 1: Basis of Presentation	10
	Note 2: Revenue	11
	Note 3: Debt and Credit Facilities	12
	Note 4: Fair Value Measurements	13
	Note 5: Commitments and Contingencies	14
	Note 6: Shareholders’ Equity	14
	Note 7: Stock-based Compensation	14
	Note 8: Earnings Per Share	15
	Note 9: Segment Reporting	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	25
Item 4.	Controls and Procedures.	25
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	26
Item 1A.	Risk Factors.	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26
Item 6.	Exhibits.	26
Exhibit Index		27
Signatures		28

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “pursue,” “going forward,” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, our anticipated financial outlook for the fiscal year ending January 29, 2022, trends in our operations and the following:

Strategic and Operational

•the novel coronavirus (“COVID-19”) global pandemic and civil unrest, each of which may make it necessary to close our physical stores and facilities in affected areas and may have a negative impact on our business and results, any of which may exacerbate the risks below,

•successful execution of our customer strategy to provide customers superior service, products and experiences, online, through our fulfillment capabilities and in stores,

•timely and effective implementation and execution of our evolving business model, including:

◦scaling our market strategy by providing a differentiated and seamless experience, which consists of the integration of our digital and physical assets, development of new supply chain capabilities and timely delivery of products,

◦expanding the reach of Nordstrom Rack, including expanding our price range and selection and leveraging our digital and physical assets,

◦enhancing our platforms and processes to deliver core capabilities to drive customer, employee and partner experiences both digitally and in-store,

•our ability to effectively manage our merchandise strategy, including our ability to offer compelling assortments,

•our ability to effectively utilize internal and third-party data in strategic planning and decision making,

•our ability to effectively allocate and scale our marketing strategies and resources, as well as realize the expected benefits between The Nordy Club, advertising and promotional campaigns,

•our ability to respond to the evolving retail environment, including new fashion trends, environmental considerations and our customers’ changing expectations of service and experience in stores and online, and our development of new market strategies and customer offerings,

•our ability to prevent or mitigate disruptions in the global supply chain, including factory closures, transportation challenges or stoppages of certain imports, and rising freight expenses and control costs through effective inventory management, fulfillment and supply chain processes and systems,

•our ability to realize the expected benefits, anticipate and respond to potential risks and appropriately manage costs associated with our credit card revenue sharing program,

•our ability to acquire, develop and retain qualified and diverse talent by providing appropriate training, compelling work environments and competitive compensation and benefits, especially in areas with increased market compensation,

•potential goodwill impairment charges, future impairment charges, fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames or our strategic direction changes,

Data, Cybersecurity and Information Technology

•successful execution of our information technology strategy, including engagement with third-party service providers,

•the impact of any systems or network failures, cybersecurity and/or security breaches, including any security breach of our systems or those of a third-party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, and our compliance with information security and privacy laws and regulations, as well as third-party contractual obligations in the event of such an incident,

Reputation and Relationships

•our ability to maintain our reputation and relationships with our customers, vendors and third-party partners and landlords,

•our ability to maintain relationships with and motivate our employees, including sustaining our corporate culture and employee morale amid our changing corporate work model,

•our ability to market our brand and distribute our products through a variety of third-party publisher or platform channels, as well as access mobile operating systems and website identifiers for personalized delivery of targeted advertising,

Investment and Capital

•efficient and proper allocation of our capital resources,

•our ability to properly balance our investments in technology, Supply Chain Network facilities and existing and new store locations, including the expansion of our market strategy,

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•our ability to maintain or expand our presence, including timely completion of construction associated with Supply Chain Network facilities and new, relocated and remodeled stores, as well as any potential store closures, all of which may be impacted by third parties, consumer demand and other natural or man-made disruptions, and government responses to any such disruptions,

•market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate,

•compliance with debt and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates,

•the actual timing, price, manner and amounts of future share repurchases, dividend payments or share issuances, if any,

Economic and External

•the length and severity of epidemics or pandemics, such as the COVID-19 pandemic, or other catastrophic events, and the related impact on customer behavior, store and online operations and supply chain functions, as well as our future consolidated financial position, results of operations and cash flows,

•the impact of the seasonal nature of our business and cyclical customer spending,

•the impact of economic and market conditions in the U.S. and Canada, including inflation and the resulting changes to customer purchasing behavior, unemployment and bankruptcy rates, as well as any fiscal stimulus and the resultant impact on consumer spending and credit patterns,

•the impact of economic, environmental or political conditions in the U.S. and Canada and countries where our third-party vendors operate,

•the impact of changing traffic patterns at shopping centers and malls,

•financial insecurity or potential insolvency experienced by our vendors, suppliers, landlords, peers or customers as a result of any economic downturn,

•weather conditions, natural disasters, climate change, national security concerns, other market and supply chain disruptions, the effects of tariffs, or the prospects of these events, and the resulting impact on consumer spending patterns or information technology systems and communications,

Legal and Regulatory

•our, and our vendors’, compliance with applicable domestic and international laws, regulations and ethical standards, including those related to COVID-19, minimum wage, employment and tax, information security and privacy, consumer credit and environmental regulations and the outcome of any claims, litigation and regulatory investigations and resolution of such matters,

•the impact of the current regulatory environment, financial system and tax reforms,

•the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations or changes in underlying assumptions, estimates or judgments.

These and other factors, including those factors we discussed in Part II, Item 1A: Risk Factors, could affect our financial results and cause our actual results to differ materially from any forward-looking information we may provide. Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

All references to “we,” “us,” “our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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DEFINITIONS OF COMMONLY USED TERMS


Term						Definition


2019 Plan						2019 Equity Incentive Plan
2020 Annual Report						Annual Report on Form 10-K filed on March 15, 2021
Adjusted EBITDA						Adjusted earnings (loss) before interest, income taxes, depreciation and amortization (a non-GAAP financial measure)
Adjusted EBITDAR						Adjusted earnings (loss) before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant (a non-GAAP financial measure)
Adjusted ROIC						Adjusted return on invested capital (a non-GAAP financial measure)

ASC						Accounting Standards Codification
ASU						Accounting Standards Update
CARES Act						Coronavirus Aid, Relief and Economic Security Act
CODM						Chief operating decision maker
COVID-19						Novel coronavirus
Digital sales						Sales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool, such as Nordstrom Trunk Club or Style Board. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also include a reserve for estimated returns.
EBIT						Earnings (loss) before interest and income taxes
EPS						Earnings (loss) per share
ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
Second quarter of 2021						13 fiscal weeks ending July 31, 2021
Second quarter of 2020						13 fiscal weeks ending August 1, 2020
Second quarter of 2019						13 fiscal weeks ending August 3, 2019
Fiscal year 2021						52 fiscal weeks ending January 29, 2022
Fiscal year 2020						52 fiscal weeks ending January 30, 2021
GAAP						U.S. generally accepted accounting principles

Gross profit						Net sales less cost of sales and related buying and occupancy costs
Inventory turnover rate						Trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory
Lease Standard						ASU No. 2016-02, Leases, and all related amendments (ASC 842)
Leverage Ratio						The sum of the preceding twelve months of rent expense under the previous lease guidance multiplied by six and funded debt divided by the preceding twelve months of Adjusted EBITDAR as defined by our Revolver covenant. See Liquidity and Capital Resources in Item 2 for a reconciliation of our non-GAAP financial measure.
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nordstrom						Nordstrom.com, TrunkClub.com, Nordstrom-branded U.S. stores, Canada, which includes Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, and Nordstrom Local
Nordstrom Local						Nordstrom Local service hubs, which offer Nordstrom order pickups, returns, alterations and other services
Nordstrom NYC						Our New York City Nordstrom flagship store, including the Men’s location
Nordstrom Rack						NordstromRack.com, Nordstrom Rack-branded U.S. stores, Last Chance clearance stores and, prior to the first quarter of 2021, HauteLook.com
The Nordy Club						Our customer loyalty program
NYSE						New York Stock Exchange
Operating Lease Cost						Fixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization
PCAOB						Public Company Accounting Oversight Board (United States)
Property incentives						Developer and vendor reimbursements
PSU						Performance share unit


Revolver						Senior revolving credit facility
ROU asset						Operating lease right-of-use asset
RSU						Restricted stock unit
SEC						Securities and Exchange Commission
SERP						Unfunded defined benefit Supplemental Executive Retirement Plan
Secured Notes						8.750% senior secured notes due May 2025
SG&A						Selling, general and administrative
Supply Chain Network						Fulfillment centers that primarily process and ship orders to our customers, distribution centers that primarily process and ship merchandise to our stores and other facilities and omni-channel centers that both fulfill customer orders and ship merchandise to our stores

TD						Toronto-Dominion Bank, N.A.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in millions except per share amounts)

(Unaudited)


	Quarter Ended		Six Months Ended
	July 31, 2021	August 1, 2020	July 31, 2021	August 1, 2020
Net sales	$3,565	$1,778	$6,486	$3,804
Credit card revenues, net	92	84	180	177
Total revenues	3,657	1,862	6,666	3,981
Cost of sales and related buying and occupancy costs	(2,332)	(1,406)	(4,351)	(3,216)
Selling, general and administrative expenses	(1,174)	(826)	(2,249)	(1,948)
Earnings (loss) before interest and income taxes	151	(370)	66	(1,183)
Interest expense, net	(40)	(51)	(177)	(85)
Earnings (loss) before income taxes	111	(421)	(111)	(1,268)
Income tax (expense) benefit	(31)	166	25	492
Net earnings (loss)	$80	($255)	($86)	($776)

Earnings (loss) per share:
Basic	$0.50	($1.62)	($0.54)	($4.95)
Diluted	$0.49	($1.62)	($0.54)	($4.95)

Weighted-average shares outstanding:
Basic	159.0	157.2	158.7	156.8
Diluted	162.8	157.2	158.7	156.8

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in millions)

(Unaudited)


	Quarter Ended		Six Months Ended
	July 31, 2021	August 1, 2020	July 31, 2021	August 1, 2020
Net earnings (loss)	$80	($255)	($86)	($776)
Foreign currency translation adjustment	(3)	11	7	(13)
Post retirement plan adjustments, net of tax	1	1	2	3
Comprehensive net earnings (loss)	$78	($243)	($77)	($786)

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions)

(Unaudited)


	July 31, 2021	January 30, 2021	August 1, 2020
Assets
Current assets:
Cash and cash equivalents	$487	$681	$991
Accounts receivable, net	317	245	146
Merchandise inventories	2,182	1,863	1,466
Prepaid expenses and other	475	853	802
Total current assets	3,461	3,642	3,405

Land, property and equipment (net of accumulated depreciation of $7,471, $7,159 and $6,843)	3,573	3,732	3,845
Operating lease right-of-use assets	1,532	1,581	1,655
Goodwill	249	249	249
Other assets	415	334	381
Total assets	$9,230	$9,538	$9,535

Liabilities and Shareholders’ Equity
Current liabilities:
Borrowings under revolving line of credit	$—	$—	$500
Accounts payable	1,961	1,960	1,298
Accrued salaries, wages and related benefits	487	352	288
Current portion of operating lease liabilities	238	260	272
Other current liabilities	1,170	1,048	1,284
Current portion of long-term debt	—	500	—
Total current liabilities	3,856	4,120	3,642

Long-term debt, net	2,849	2,769	3,266

Non-current operating lease liabilities	1,619	1,687	1,782
Other liabilities	638	657	671

Commitments and contingencies (Note 5)

Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 158.9, 157.8 and 157.1 shares issued and outstanding	3,245	3,205	3,168
Accumulated deficit	(2,916)	(2,830)	(2,916)
Accumulated other comprehensive loss	(61)	(70)	(78)
Total shareholders’ equity	268	305	174
Total liabilities and shareholders’ equity	$9,230	$9,538	$9,535

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in millions except per share amounts)

(Unaudited)


	Quarter Ended		Six Months Ended
	July 31, 2021	August 1, 2020	July 31, 2021	August 1, 2020
Common stock
Balance, beginning of period	$3,221	$3,148	$3,205	$3,129
Issuance of common stock under stock compensation plans	—	—	7	11
Stock-based compensation	24	20	33	28
Balance, end of period	$3,245	$3,168	$3,245	$3,168

Accumulated deficit
Balance, beginning of period	($2,996)	($2,661)	($2,830)	($2,082)

Net earnings (loss)	80	(255)	(86)	(776)
Dividends	—	—	—	(58)

Balance, end of period	($2,916)	($2,916)	($2,916)	($2,916)

Accumulated other comprehensive loss
Balance, beginning of period	($59)	($90)	($70)	($68)

Other comprehensive (loss) income	(2)	12	9	(10)
Balance, end of period	($61)	($78)	($61)	($78)

Total shareholders’ equity	$268	$174	$268	$174

Dividends per share	$—	$—	$—	$0.37

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

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NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)


	Six Months Ended
	July 31, 2021	August 1, 2020
Operating Activities
Net loss	($86)	($776)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expenses	321	342
Asset impairment	—	137

Right-of-use asset amortization	90	85
Deferred income taxes, net	17	(67)
Stock-based compensation expense	45	33
Other, net	80	11
Change in operating assets and liabilities:
Accounts receivable	(72)	49
Merchandise inventories	(189)	397
Prepaid expenses and other assets	314	(534)
Accounts payable	(88)	(49)
Accrued salaries, wages and related benefits	137	(219)
Other current liabilities	123	98
Lease liabilities	(156)	(103)