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
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Executive Officers of the Registrant - ------------------------------------
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Item 2.
Item 2. Properties. - --------------------
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders. - ------------------------------------------------------------- None
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PART II
Item 5.
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.
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.
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.
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.
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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.
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Item 8.
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.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. - ------------------------------------------------------------------------ None
PART III
Item 10.
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.
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
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Item 12.
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.
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.
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.
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(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.
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(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.
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(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)
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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 ------------------------
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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
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NORDSTROM, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
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NORDSTROM INC. AND SUBSIDIARIES