jwn-20220730

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 30, 2022


☐			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 26, 2022: 159,131,955 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 Condensed Consolidated Financial Statements
	Note 1: Basis of Presentation	10
	Note 2: Revenue	11
	Note 3: Debt and Credit Facilities	11
	Note 4: Fair Value Measurements	12
	Note 5: Stock-based Compensation	13
	Note 6: Shareholders’ Equity	13
	Note 7: Commitments and Contingencies	14
	Note 8: Earnings Per Share	14
	Note 9: Segment Reporting	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	26
Item 4.	Controls and Procedures.	26
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.	27
Item 6.	Exhibits.	27
Exhibit Index		28
Signatures		29

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements regarding matters that are not historical facts, and are based on our management’s beliefs and assumptions and on information currently available to our management. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. In some cases, forward-looking statements can be identified 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 28, 2023, trends in our operations and the following:

Strategic and Operational

•COVID-19, which may make it necessary to close our physical stores and facilities in affected areas, may have a negative impact on our business and results and 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:

◦winning at 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,

◦broadening the reach of Nordstrom Rack, including balancing 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 and optimize our inventory to get it closer to the customer,

•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 mitigate the effects of disruptions in the global supply chain, including factory closures, transportation challenges or stoppages of certain imports, and rising prices of raw materials and freight expenses,

•our ability to control costs through effective inventory management, fulfillment and supply chain processes and systems,

•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, all in the context of the current nationwide labor shortage and an intense competition for talent,

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

•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 if 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, or that results in the interruption of business processes or causes financial loss, 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, employees, vendors and third-party partners and landlords,

•our ability to act responsibly and with transparency with respect to our corporate social responsibility practices and initiatives, and meet any communicated targets, goals or milestones,

•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 system and website identifiers for personalized delivery of targeted advertising,

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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,

•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, subject to the discretion of the Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules,

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 measures to control inflation, and resulting changes to customer purchasing behavior, unemployment and bankruptcy rates, as well as any fiscal stimulus, or the cessation of any fiscal stimulus and the resulting impact on consumer spending and credit patterns,

•the impact of economic, environmental or political conditions,

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

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

•weather conditions, natural disasters, climate change, national security concerns, global conflicts, civil unrest, 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, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing, and these estimates and assumptions may prove to be incorrect. This Quarterly Report on Form 10-Q should be read 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
2021 Annual Report						Annual Report on Form 10-K filed on March 11, 2022
Adjusted EPS						Adjusted earnings (loss) per diluted share (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. 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 includes a reserve for estimated returns.
EBIT						Earnings (loss) before interest and income taxes
EBITDA						Earnings (loss) before interest, income taxes, depreciation and amortization
EBITDAR						Earnings (loss) before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant
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 2022						13 fiscal weeks ending July 30, 2022
Second quarter of 2021						13 fiscal weeks ending July 31, 2021
Fiscal year 2022						52 fiscal weeks ending January 28, 2023
Fiscal year 2021						52 fiscal weeks ending January 29, 2022
GAAP						U.S. generally accepted accounting principles
GMV						Gross merchandise value
Gross profit						Net sales less cost of sales and related buying and occupancy costs
Leverage Ratio						The sum of our funded debt and operating lease liabilities divided by the preceding twelve months of Adjusted EBITDAR as defined by our Revolver covenant
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, Nordstrom Local and ASOS \| Nordstrom.
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 and Last Chance clearance stores
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 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Net sales	$3,991	$3,565	$7,458	$6,486
Credit card revenues, net	104	92	207	180
Total revenues	4,095	3,657	7,665	6,666
Cost of sales and related buying and occupancy costs	(2,586)	(2,332)	(4,917)	(4,351)
Selling, general and administrative expenses	(1,307)	(1,174)	(2,473)	(2,249)
Earnings before interest and income taxes	202	151	275	66
Interest expense, net	(34)	(40)	(69)	(177)
Earnings (loss) before income taxes	168	111	206	(111)
Income tax (expense) benefit	(42)	(31)	(60)	25
Net earnings (loss)	$126	$80	$146	($86)

Earnings (loss) per share:
Basic	$0.78	$0.50	$0.91	($0.54)
Diluted	$0.77	$0.49	$0.90	($0.54)

Weighted-average shares outstanding:
Basic	160.6	159.0	160.3	158.7
Diluted	162.9	162.8	162.9	158.7

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 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Net earnings (loss)	$126	$80	$146	($86)
Foreign currency translation adjustment	—	(3)	(1)	7
Post retirement plan adjustments, net of tax	—	1	1	2
Comprehensive net earnings (loss)	$126	$78	$146	($77)

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 30, 2022	January 29, 2022	July 31, 2021
Assets
Current assets:
Cash and cash equivalents	$494	$322	$487
Accounts receivable, net	300	255	317
Merchandise inventories	2,399	2,289	2,182
Prepaid expenses and other	408	306	475
Total current assets	3,601	3,172	3,461

Land, property and equipment (net of accumulated depreciation of $7,943, $7,737 and $7,471)	3,443	3,562	3,573
Operating lease right-of-use assets	1,466	1,496	1,532
Goodwill	249	249	249
Other assets	403	390	415
Total assets	$9,162	$8,869	$9,230

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable	$1,747	$1,529	$1,961
Accrued salaries, wages and related benefits	302	383	487
Current portion of operating lease liabilities	253	242	238
Other current liabilities	1,254	1,160	1,170

Total current liabilities	3,556	3,314	3,856

Long-term debt, net	2,853	2,853	2,849

Non-current operating lease liabilities	1,526	1,556	1,619
Other liabilities	564	565	638

Commitments and contingencies (Note 7)

Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 159.8, 159.4 and 158.9 shares issued and outstanding	3,314	3,283	3,245
Accumulated deficit	(2,601)	(2,652)	(2,916)
Accumulated other comprehensive loss	(50)	(50)	(61)
Total shareholders’ equity	663	581	268
Total liabilities and shareholders’ equity	$9,162	$8,869	$9,230

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 30, 2022	July 31, 2021	July 30, 2022	July 31, 2021
Common stock
Balance, beginning of period	$3,301	$3,221	$3,283	$3,205
Issuance of common stock under stock compensation plans	1	—	9	7
Stock-based compensation	12	24	22	33
Balance, end of period	$3,314	$3,245	$3,314	$3,245

Accumulated deficit
Balance, beginning of period	($2,662)	($2,996)	($2,652)	($2,830)

Net earnings (loss)	126	80	146	(86)
Dividends	(30)	—	(60)	—
Repurchase of common stock	(35)	—	(35)	—
Balance, end of period	($2,601)	($2,916)	($2,601)	($2,916)

Accumulated other comprehensive loss
Balance, beginning of period	($50)	($59)	($50)	($70)

Other comprehensive (loss) income	—	(2)	—	9
Balance, end of period	($50)	($61)	($50)	($61)

Total shareholders’ equity	$663	$268	$663	$268

Dividends per share	$0.19	$—	$0.38	$—

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 30, 2022	July 31, 2021
Operating Activities
Net earnings (loss)	$146	($86)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization expenses	301	321
Right-of-use asset amortization	93	90
Deferred income taxes, net	(31)	17
Stock-based compensation expense	39	45
Other, net	(41)	80
Change in operating assets and liabilities:
Accounts receivable	(17)	(72)
Merchandise inventories	(38)	(189)
Prepaid expenses and other assets	(99)	314
Accounts payable	133	(88)
Accrued salaries, wages and related benefits	(82)	137
Other current liabilities	97	123
Lease liabilities	(133)	(156)
Other liabilities	5	9
Net cash provided by operating activities	373	545

Investing Activities
Capital expenditures	(215)	(217)

Proceeds from the sale of assets and other, net	82	(13)
Net cash used in investing activities	(133)	(230)

Financing Activities
Proceeds from revolving line of credit	—	200
Payments on revolving line of credit	—	(200)
Proceeds from long-term borrowings	—	675
Principal payments on long-term borrowings	—	(1,100)
Increase in cash book overdrafts	36	6
Cash dividends paid	(60)	—
Payments for repurchase of common stock	(35)	—
Proceeds from issuances under stock compensation plans	9	7
Tax withholding on share-based awards	(14)	(13)
Make-whole premium payment and other, net	(4)	(86)
Net cash used in financing activities	(68)	(511)

Effect of exchange rate changes on cash and cash equivalents	—	2
Net increase (decrease) in cash and cash equivalents	172	(194)
Cash and cash equivalents at beginning of period	322	681
Cash and cash equivalents at end of period	$494	$487

Supplemental Cash Flow Information
Cash paid (received) during the period for:
Income taxes, net	$91	($486)
Interest, net of capitalized interest	69	99

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

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NORDSTROM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in millions except per share, per option and per unit amounts)

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation. The interim Condensed Consolidated Financial Statements have been prepared on a basis consistent in all material respects with the accounting policies described and applied in our 2021 Annual Report and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented.

The Condensed Consolidated Financial Statements as of and for the periods ended July 30, 2022 and July 31, 2021 are unaudited. The Condensed Consolidated Balance Sheet as of January 29, 2022 has been derived from the audited Consolidated Financial Statements included in our 2021 Annual Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our 2021 Annual Report.

Seasonality

Our business, like that of other retailers, is subject to seasonal fluctuations and cyclical trends in consumer spending. Our sales are typically higher in our second quarter, which usually includes most of our Anniversary Sale, and in the fourth quarter due to the holidays. Approximately one week of our Anniversary Sale shifted from the third quarter in 2021 to the second quarter in 2022.

Results for any one quarter are not indicative of the results that may be achieved for a full fiscal year. We plan our merchandise purchases and receipts to coincide with expected sales trends. For instance, our merchandise purchases and receipts increase prior to the Anniversary Sale and in the fall as we prepare for the holiday shopping season in November through December. Consistent with our seasonal fluctuations, our working capital requirements have historically increased during the months leading up to the Anniversary Sale and the holidays as we purchase inventory in anticipation of increased sales.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires that we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results may differ from these estimates and assumptions. Our most significant accounting judgments and estimates include revenue recognition, inventory valuation, long-lived asset recoverability and income taxes, all of which involve assumptions about future events. We may be unable to accurately predict the impact of COVID-19 and changes in economic conditions going forward and as a result our estimates may change in the near term.

Leases

We incurred operating lease liabilities arising from lease agreements of $113 for the six months ended July 30, 2022 and $66 for the six months ended July 31, 2021.

Trunk Club Wind-down

During the first quarter of 2022, in conjunction with the decision to sunset the Trunk Club brand, we incurred non-cash impairment charges of $10 related to a Trunk Club property to adjust the carrying values to their estimated fair value. These charges are included in our Retail segment SG&A expense on the Condensed Consolidated Statement of Earnings. During the second quarter of 2022, we incurred additional costs of $8 associated with the wind-down of Trunk Club. These costs are primarily included in our Retail segment cost of sales and related buying and occupancy costs expense on the Condensed Consolidated Statement of Earnings. All charges are classified as operating on the Condensed Consolidated Statement of Cash Flows.

Investments

In July 2021, we acquired a minority interest in the Topshop, Topman, Miss Selfridge and HIIT brands through a strategic partnership with ASOS.com Ltd. From time to time, we invest in financial interests of private companies that align with our business and omni-channel strategies, which are recorded in other assets in the Condensed Consolidated Balance Sheets and proceeds from the sale of assets and other, net on the Condensed Consolidated Statements of Cash Flows.

During the first quarter of 2022, in connection with the sale of a limited partnership interest in a corporate office building, we recognized a gain of $51 in our Corporate/Other SG&A expense in the Condensed Consolidated Statement of Earnings and $73 in proceeds from the sale of assets and other, net on the Condensed Consolidated Statement of Cash Flows.

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NORDSTROM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar and share amounts in millions except per share, per option and per unit amounts)

(Unaudited)

NOTE 2: REVENUE

Contract Liabilities

Contract liabilities represent our obligation to transfer goods or services to customers and include deferred revenue for The Nordy Club (including points and Nordstrom Notes) and gift cards. Our contract liabilities are classified as current on the Condensed Consolidated Balance Sheets and are as follows:


			Contract Liabilities
Balance as of January 30, 2021			$478
Balance as of May 1, 2021			436
Balance as of July 31, 2021			433


Balance as of January 29, 2022			478
Balance as of April 30, 2022			442
Balance as of July 30, 2022			438

Revenues recognized from our beginning contract liability balance were $119 and $197 the quarter and six months ended July 30, 2022 and $106 and $176 for the quarter and six months ended July 31, 2021.

Disaggregation of Revenue

The following table summarizes our disaggregated net sales:


	Quarter Ended				Six Months Ended
	July 30, 2022		July 31, 2021		July 30, 2022	July 31, 2021
Nordstrom	$2,771		$2,417		$5,060	$4,270
Nordstrom Rack	1,220		1,148		2,398	2,216

Total net sales	$3,991		$3,565		$7,458	$6,486

Digital sales as a % of total net sales	38	%	40	%	38

SEC Form 10-Q filed by Nordstrom Inc.