Nordstrom 2Q15 Earnings Call Notes

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This will probably be the death of the Westside Pavillion in LA

“In the U.S., this October, we will also…relocate a store in Los Angeles.”

mid single digit comps

“Our combined full-line store and business delivered mid-single-digit comp increases over the past year. The growth in our off-price business continues with Rack’s total sales increase of 13%, which represented 26 consecutive quarters of double-digit growth. Rack had a comp increase of 1.7%, on plan for a low-single-digit comp for the year.”

Mechanics of transaction with TD

“Moving on to the credit transaction. The sale of the receivables will improve our capital efficiency. We expect to receive approximately $1.8 billion in net proceeds at closing. Because we are planning on fully funding our long-term growth through our current operations, we’re not intending to apply the proceeds to our incremental investment. While we are currently evaluating our plans, we are committed to maintaining our capital structure using a balanced approach.

In terms of the financial impact of the transaction, we reclassified our receivables as held for sale in the second quarter, resulting in the reversal of the allowance for bad debt. In addition, under the program agreement with TD Bank, we will be entitled to a substantial portion of net revenue generated by the portfolio. We estimate the cash impact of this revenue share agreement while maintaining our credit operating expenses will result in roughly 50% of credit EBIT retained. ”

We haven’t paid much attention to tourist spending, just focused on running our business

“We really haven’t commented or, frankly, paid particular attention to the amount of tourists we have in those individual stores. I mean, we’re focused on running our business and having the best product, and to-date, it really hasn’t been a discussion point for us.”

Customers are buying now wearing now more frequently

“One thing that has changed a bit over the years, our customers are more and more interested in buy now, wear now merchandise. So it’s less about selling merchandise that our customers put away in their closet for October and November than it used to be. ”

We don’t think customer loyalty is based on channels

“we’ve been focused for a number of years on really trying to create a seamless experience for our customers, whether they’re shopping online or in the store or on their phone, and we’ve made, and we continue to make progress on that. We don’t think the customer is loyal to channels. We don’t hear customers talk about channels very much. Customers value experiences, and so the more successful we’re at in creating a great shopping experience, no matter how they’re choosing to shop, I think the better our business will be.’

No secret that our industry has been more promotional, but we’re focused on our customers

“I mean, as I mentioned earlier, over the last couple of years, I don’t think it’s been a secret that our industry has been more promotional than historical levels. I can’t speak to any particular competitors out there what they are doing. We’re pretty focused on our deal and our customer, and what works for them and how to best serve them.”

This is how they think about price matching

“we’ve long believed for many, many years that we don’t want to be undersold. That if a product that we sell is available for less out there, then that’s the price that the market is at, and we need to be there. So it is part of the nature of our business that if you can buy something that we sell cheaper somewhere else, if we don’t match that price, you’re probably not going to buy it from us. And we think it’s just good customer service and part of earning our customers’ trust that we have market prices. We set our prices fairly, and we’re a full-price retailer. We sell that merchandise at regular price until it’s time to clear it out. When there is a promotion that we need to match, we’ll match it. But it’s all about earning the customers’ loyalty and earning their business over the long-term.”

We’re still in the early stages of understanding how e-commerce will evolve

“I think one of the challenges we all face right now, we’re still in relatively early stages, particularly in this e-commerce space in terms of understanding how that model is evolving and the elements of that model that we need to find to be more productive.”