Cision PR Newswire

Nordstrom Reports Third Quarter 2023 Earnings

  • Third quarter total revenue of $3.3 billion
  • Reports EPS of $0.41, adjusted EPS of $0.251
  • Reaffirms fiscal 2023 revenue outlook, narrows EPS range

SEATTLE, Nov. 21, 2023 /PRNewswire/ -- Nordstrom, Inc. (NYSE: JWN) today reported third quarter net earnings of $67 million, or earnings per diluted share ("EPS") of $0.41, and earnings before interest and taxes ("EBIT") of $102 million. Excluding a favorable true-up related to the wind-down of Canadian operations, the Company reported adjusted EPS of $0.25.1

For the third quarter ended October 28, 2023, net sales decreased 6.8 percent versus the same period in fiscal 2022. Gross merchandise value ("GMV") decreased 7.1 percent. Third quarter net sales include a 270 basis point negative impact from the wind-down of Canadian operations. Anniversary Sale timing, with one week shifting from the second quarter to the third quarter, had a positive impact of approximately 200 basis points on net sales compared with 2022. Excluding the impacts of the Canadian wind-down and Anniversary Sale timing shift, net sales would have been down approximately 6 percent. During the quarter, Nordstrom banner net sales decreased 9.4 percent and GMV decreased 9.8 percent. Net sales for Nordstrom Rack decreased 1.8 percent. During the third quarter, active grew by double-digits, and beauty and accessories were up by low single-digits, versus 2022.

"In the third quarter we continued to make progress against our priorities, and we're especially pleased with the resulting improvements in gross margin and earnings," said Erik Nordstrom, chief executive officer of Nordstrom, Inc. "Given continued uncertainty and softening consumer spend, we're remaining agile and focused on serving our customers."

"Thanks to solid execution by our merchants, we're heading into holiday in a favorable inventory position across both banners," said Pete Nordstrom, president of Nordstrom, Inc. "We have a strong and relevant assortment of brands and products we know our customers respond to, and we're excited to help them celebrate the moments that matter this holiday season."

As previously announced, on November 15, 2023, the board of directors declared a quarterly cash dividend of $0.19 per share, payable on December 13, 2023, to shareholders of record at the close of business on November 28, 2023.

THIRD QUARTER 2023 SUMMARY

  • Total Company net sales decreased 6.8 percent and GMV decreased 7.1 percent compared with the same period in fiscal 2022. The wind-down of Canadian operations had a negative impact on total Company net sales of 270 basis points. The timing shift of the Anniversary Sale, with roughly one week falling into the third quarter of 2023 versus one day in 2022, had a positive impact on net sales of approximately 200 basis points compared with the third quarter of 2022.
  • For the Nordstrom banner, net sales decreased 9.4 percent and GMV decreased 9.8 percent compared with the same period in fiscal 2022. The wind-down of Canadian operations had a negative impact on Nordstrom banner net sales of 410 basis points. The timing shift of the Anniversary Sale had a positive impact on Nordstrom banner net sales of approximately 300 basis points compared with the third quarter of 2022.
  • For the Nordstrom Rack banner, net sales decreased 1.8 percent compared with the same period in fiscal 2022. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of fiscal 2022 negatively impacted third quarter Rack banner sales by approximately 100 basis points.
  • Digital sales decreased 11.3 percent compared with the same period in fiscal 2022. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of fiscal 2022 negatively impacted third quarter digital sales by approximately 100 basis points. The timing shift of the Anniversary Sale had a positive impact on Company digital sales of approximately 400 basis points compared with the third quarter of 2022. Digital sales represented 34 percent of total sales during the quarter.
  • Gross profit, as a percentage of net sales, of 35.0 percent increased 180 basis points compared with the same period in fiscal 2022 primarily due to lower markdowns, increased inventory productivity and lower buying and occupancy costs, partially offset by deleverage on lower sales.
  • Ending inventory decreased 8.8 percent compared with the same period in fiscal 2022, versus a 6.8 percent decrease in sales.
  • Selling, general and administrative ("SG&A") expenses, as a percentage of net sales, of 36.3 percent decreased 5 basis points compared with the same period in fiscal 2022. SG&A expenses increased 200 basis points when compared with adjusted SG&A expenses in fiscal 2022, primarily due to deleverage from lower sales and higher labor costs, partially offset by improvements in variable costs from supply chain efficiency initiatives. Adjusted SG&A expenses, as a percentage of net sales, of 34.3 percent in the third quarter of fiscal 2022 excluded a $70 million supply chain technology and related asset impairment charge.
  • EBIT was $102 million in the third quarter of 2023, compared with $3 million during the same period in fiscal 2022. Adjusted EBIT of $77 million in the third quarter of 2023 excluded a $25 million favorable true-up related to the wind-down of Canadian operations. Adjusted EBIT of $73 million in the third quarter of 2022 excluded an impairment charge associated with supply chain technology and related assets.2
  • Interest expense, net, of $24 million decreased from $32 million during the same period in fiscal 2022 due to higher interest income.
  • Income tax expense was $11 million, or 14.2 percent of pretax earnings, compared with income tax benefit of $9 million, or 30.6 percent of pretax loss, in the same period in fiscal 2022. The decrease in the rate in the third quarter of fiscal 2023 was driven by additional tax benefits associated with the wind-down of Canadian operations.
  • The Company ended the third quarter with $1.2 billion in available liquidity, including $375 million in cash and the full $800 million available on its revolving line of credit.

 

STORES UPDATE

To date in fiscal 2023, the Company has opened or relocated 20 stores:

City


Location


Square Footage

(000s)


Timing of Opening

Nordstrom Rack







Los Angeles, CA


NOHO West


26


April 13, 2023

Clovis, CA


Clovis Crossing


31


April 13, 2023

Delray Beach, FL


Delray Place


26


May 11, 2023

Chattanooga, TN


The Terrace at Hamilton Place


24


May 18, 2023

Las Vegas, NV


Best in the West


31


May 18, 2023

Birmingham, AL


The Summit (relocation from River Ridge)


27


May 25, 2023

Wichita, KS


Bradley Fair


28


May 25, 2023

San Clemente, CA


San Clemente Plaza


32


May 25, 2023

Aurora, CO


Southlands


29


August 17, 2023

Olympia, WA


Cooper Point Marketplace


32


September 7, 2023

San Antonio, TX


Northwoods


35


September 7, 2023

Union Gap, WA


Valley Mall


28


September 14, 2023

Salem, OR


Willamette Town Center


25


September 21, 2023

Visalia, CA


Sequoia Mall


29


October 5, 2023

Denton, TX


Denton Crossing


25


October 5, 2023

Overland Park, KS


Overland Crossing


27


October 12, 2023

Allen, TX


The Village at Allen


29


October 19, 2023

San Luis Obispo, CA


SLO Promenade


24


October 26, 2023

Sacramento, CA


The Promenade at Sacramento Gateway


26


October 26, 2023

Anaheim Hills, CA


Anaheim Hills Festival


24


November 9, 2023

 

The Company has also announced plans to open the following stores:

City


Location


Square Footage

(000s)


Timing of Opening

Nordstrom Rack







Pinole, CA


Pinole Vista Crossing


23


Spring 2024

Kennesaw, GA


Barrett Place


25


Spring 2024

Elk Grove, CA


The Ridge Elk Grove


25


Spring 2024

Gilroy, CA


Gilroy Crossing


25


Spring 2024

Oceanside, CA


Pacific Coast Plaza


31


Spring 2024

Wheaton, IL


Danada Square East


29


Spring 2024

Snellville, GA


Presidential Markets


35


Spring 2024

Macedonia, OH


Macedonia Gateway


28


Spring 2024

Jacksonville Beach, FL


South Beach Regional


30


Spring 2024

Queen Creek, AZ


Queen Creek Marketplace


28


Spring 2024

Bay Shore, NY


Gardiner Manor Mall


24


Spring 2024

San Mateo, CA


Bridgepointe Shopping Center


36


Fall 2024

San Diego, CA


Clairemont Town Square


26


Fall 2024

Mason, OH


Deerfield Towne Center


30


Fall 2024

San Antonio, TX


Bandera Pointe


25


Fall 2024

Mooresville, NC


Mooresville Crossing


28


Fall 2024

Davis, CA


The Davis Collection


25


Spring 2025

 

The Company had the following store counts as of quarter-end:


October 28, 2023


October 29, 2022

Nordstrom




Nordstrom U.S.

93


94

Nordstrom Canada


6

Nordstrom Local service hubs

6


7

ASOS | Nordstrom

1


1

Nordstrom Rack




Nordstrom Rack U.S.

258


242

Nordstrom Rack Canada


7

Last Chance clearance stores

2


2

Total

360


359


Gross store square footage

26,305,000


27,609,000

 

During the third quarter, the Company closed one U.S. Nordstrom store and one Nordstrom Local service hub.

FISCAL YEAR 2023 OUTLOOK

The Company updated its financial outlook for fiscal 2023, which includes a 53rd week and reflects the true-up related to the wind-down of Canadian operations and related tax impacts recorded in the third quarter:

  • Revenue decline, including retail sales and credit card revenues, of 4.0 to 6.0 percent versus fiscal 2022, including an approximately 250 basis point negative impact from the wind-down of Canadian operations and an approximately 130 basis point positive impact from the 53rd week
  • EBIT margin (including the negative impact of charges related to the wind-down of Canadian operations) of 1.8 to 2.1 percent of sales
  • Adjusted EBIT margin (excluding charges related to the wind-down of Canadian operations) of 3.8 to 4.1 percent of sales3
  • Income tax rate of approximately 21 percent, including an approximately 800 basis point favorable impact primarily from the one-time Canada charges
  • EPS (including the negative impact of charges related to the wind-down of Canadian operations) of $0.74 to $0.94, excluding the impact of share repurchase activity, if any
  • Adjusted EPS (excluding charges related to the wind-down of Canadian operations) of $1.90 to $2.10, excluding the impact of share repurchase activity, if any3

CONFERENCE CALL INFORMATION

The Company's senior management will host a conference call to provide a business update and to discuss third quarter 2023 financial results and fiscal 2023 outlook at 4:45 p.m. EST today. To listen to the live call online and view the speakers' prepared remarks and the conference call slides, visit the Investor Relations section of the Company's corporate website at investor.nordstrom.com. An archived webcast with the speakers' prepared remarks and the conference call slides will be available in the Quarterly Results section for one year. Interested parties may also dial 201-689-8354. A telephone replay will be available beginning approximately three hours after the conclusion of the call by dialing 877-660-6853 or 201-612-7415 and entering Conference ID 13742508, until the close of business on November 28, 2023.

ABOUT NORDSTROM

At Nordstrom, Inc. (NYSE: JWN), we exist to help our customers feel good and look their best. Since starting as a shoe store in 1901, how to best serve customers has been at the center of every decision we make. This heritage of service is the foundation we're building on as we provide convenience and true connection for our customers. Our digital-first platform enables us to serve customers when, where and how they want to shop – whether that's in-store at more than 350 Nordstrom, Nordstrom Local and Nordstrom Rack locations or digitally through our Nordstrom and Rack apps and websites. Through it all, we remain committed to leaving the world better than we found it.

Certain statements in this press release contain or may suggest "forward-looking" information (as defined in the Private Securities Litigation Reform Act of 1995) that involves risks and uncertainties that could cause results to be materially different from expectations. The words "will," "may," "designed to," "outlook," "believes," "should," "targets," "anticipates," "assumptions," "plans," "expects" or "expectations," "intends," "estimates," "forecasts," "guidance" and similar expressions identify certain of these forward-looking statements. The Company also may provide forward-looking statements in oral statements or other written materials released to the public. All statements contained or incorporated in this press release or in any other public statements that address such future events or expectations are forward-looking statements. Important factors that could cause actual results to differ materially from these forward-looking statements are detailed in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2023, and our Form 10-Qs for the fiscal quarters ended April 29, 2023, July 29, 2023 and October 28, 2023, to be filed with the SEC on or about December 1, 2023. In addition, forward-looking statements contained in this release may be impacted by the actual outcome of events or occurrences related to the wind-down of business operations in Canada. These forward-looking statements are not guarantees of future performance and speak only as of the date made, and, except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances. In addition, the actual timing, price, manner and amounts of future share repurchases, if any, will be subject to the discretion of our board of directors, contractual commitments, market and economic conditions and applicable Securities and Exchange Commission rules.

1

Adjusted EPS is a non-GAAP financial measure. Refer to the "Adjusted EBIT, Adjusted EBITDA and Adjusted EPS" section of this release for additional information as well as reconciliations between the Company's GAAP and non-GAAP financial results.

2

Adjusted EBIT is a non-GAAP financial measure. Refer to the "Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT Margin and Adjusted EPS" section of this release for additional information as well as reconciliations between the Company's GAAP and non-GAAP financial results.

3

Adjusted EBIT margin and adjusted EPS are non-GAAP financial measures. Refer to the "Forward-Looking Non-GAAP Measures" section of this release for additional information as well as reconciliations between the Company's GAAP and non-GAAP financial expectations.

 

NORDSTROM, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited; amounts in millions, except per share amounts)



Quarter Ended


Nine Months Ended


October 28, 2023


October 29, 2022


October 28, 2023


October 29, 2022

Net sales

$3,200


$3,433


$9,926


$10,891

Credit card revenues, net

120


113


347


320

Total revenues

3,320


3,546


10,273


11,211

Cost of sales and related buying and occupancy costs

(2,080)


(2,294)


(6,488)


(7,211)

Selling, general and administrative expenses

(1,163)


(1,249)


(3,466)


(3,722)

Canada wind-down costs

25



(284)


Earnings before interest and income taxes

102


3


35


278

Interest expense, net

(24)


(32)


(78)


(101)

Earnings (loss) before income taxes

78


(29)


(43)


177

Income tax (expense) benefit

(11)


9


43


(51)

Net earnings (loss)

$67


($20)


$—


$126









Earnings (loss) per share:








Basic

$0.41


($0.13)


$—


$0.79

Diluted

$0.41


($0.13)


$—


$0.77









Weighted-average shares outstanding:








Basic

162.0


159.5


161.5


160.1

Diluted

163.6


159.5


161.5


162.3









Percent of net sales:








Gross profit

35.0 %


33.2 %


34.6 %


33.8 %

Selling, general and administrative expenses

36.3 %


36.4 %


34.9 %


34.2 %

Earnings before interest and income taxes

3.2 %


0.1 %


0.4 %


2.6 %

 

NORDSTROM, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; amounts in millions)



October 28, 2023


January 28, 2023


October 29, 2022

Assets






Current assets:






Cash and cash equivalents

$375


$687


$293

Accounts receivable, net

322


265


288

Merchandise inventories

2,626


1,941


2,878

Prepaid expenses and other current assets

392


316


348

Total current assets

3,715


3,209


3,807







Land, property and equipment (net of accumulated depreciation of
$8,258, $8,289 and $8,135)

3,187


3,351


3,373

Operating lease right-of-use assets

1,402


1,470


1,490

Goodwill

249


249


249

Other assets

460


466


476

Total assets

$9,013


$8,745


$9,395







Liabilities and Shareholders' Equity






Current liabilities:






Borrowings under revolving line of credit

$—


$—


$100

Accounts payable

1,890


1,238


2,073

Accrued salaries, wages and related benefits

245


291


242

Current portion of operating lease liabilities

232


258


256

Other current liabilities

1,092


1,203


1,168

Current portion of long-term debt

250



Total current liabilities

3,709


2,990


3,839







Long-term debt, net

2,611


2,856


2,855

Non-current operating lease liabilities

1,403


1,526


1,544

Other liabilities

561


634


551







Commitments and contingencies












Shareholders' equity:






Common stock, no par value: 1,000 shares authorized; 162.3, 160.1
and 159.7 shares issued and outstanding

3,407


3,353


3,334

Accumulated deficit

(2,681)


(2,588)


(2,669)

Accumulated other comprehensive gain (loss)

3


(26)


(59)

Total shareholders' equity

729


739


606

Total liabilities and shareholders' equity

$9,013


$8,745


$9,395

 

NORDSTROM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; amounts in millions)



Nine Months Ended


October 28, 2023


October 29, 2022

Operating Activities




Net earnings

$—


$126

Adjustments to reconcile net earnings to net cash provided by operating activities:




Depreciation and amortization expenses

430


453

Canada wind-down costs

207


Asset impairment


80

Right-of-use asset amortization

132


141

Deferred income taxes, net

2


(85)

Stock-based compensation expense

41


50

Other, net

(61)


(53)

Change in operating assets and liabilities:




Merchandise inventories

(687)


(550)

Other current and noncurrent assets

(140)


(61)

Accounts payable

509


469

Accrued salaries, wages and related benefits

(41)


(142)

Lease liabilities

(203)


(201)

Other current and noncurrent liabilities

(82)


13

Net cash provided by operating activities

107


240





Investing Activities




Capital expenditures

(375)


(325)

Decrease in cash and cash equivalents resulting from Canada deconsolidation

(33)


Proceeds from the sale of assets and other, net

32


82

Net cash used in investing activities

(376)


(243)





Financing Activities




Proceeds from revolving line of credit


100

Change in cash book overdrafts

37


21

Cash dividends paid

(92)


(90)

Payments for repurchase of common stock

(1)


(53)

Proceeds from issuances under stock compensation plans

19


18

Other, net

(6)


(19)

Net cash used in financing activities

(43)


(23)





Effect of exchange rate changes on cash and cash equivalents


(3)

Net decrease in cash and cash equivalents

(312)


(29)

Cash and cash equivalents at beginning of period

687


322

Cash and cash equivalents at end of period

$375


$293

 

NORDSTROM, INC.
ADJUSTED EBIT, ADJUSTED EBITDA, ADJUSTED EBIT MARGIN AND ADJUSTED EPS
(NON-GAAP FINANCIAL MEASURES)
(unaudited; amounts in millions, except per share amounts)

The following are key financial metrics and, when used in conjunction with GAAP measures, we believe they provide useful information for evaluating our core business performance, enable comparison of financial results across periods and allow for greater transparency with respect to key metrics used by management for financial and operational decision-making. Adjusted EBIT, adjusted EBITDA, adjusted EBIT margin and adjusted EPS exclude certain items that we do not consider representative of our core operating performance. The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT and adjusted EBITDA is net earnings (loss). The financial measure calculated under GAAP which is most directly comparable to adjusted EBIT margin is net earnings as a percent of net sales. The financial measure calculated under GAAP which is most directly comparable to adjusted EPS is diluted EPS.

Adjusted EBIT, adjusted EBITDA, adjusted EBIT margin and adjusted EPS are not measures of financial performance under GAAP and should be considered in addition to, and not as a substitute for, net earnings, net earnings as a percent of net sales, operating cash flows, earnings per share, earnings per diluted share or other financial measures performed in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other companies' financial measures and therefore may not be comparable to methods used by other companies.

The following is a reconciliation of net earnings (loss) to adjusted EBIT and adjusted EBITDA and net earnings as a percent of net sales to adjusted EBIT margin:


Quarter Ended


Nine Months Ended


October 28, 2023


October 29, 2022


October 28, 2023


October 29, 2022

Net earnings (loss)

$67


($20)


$—


$126

Income tax expense (benefit)

11


(9)


(43)


51

Interest expense, net

24


32


78


101

Earnings before interest and income taxes

102


3


35


278

Canada wind-down costs

(25)



284


Supply chain impairment


70



70

Trunk Club wind-down costs




18

Gain on sale of interest in a corporate office building




(51)

Adjusted EBIT

77


73


319


315

Depreciation and amortization expenses

145


152


430


453

Amortization of developer reimbursements

(17)


(18)


(52)


(54)

Adjusted EBITDA

$205


$207


$697


$714









Net sales

$3,200


$3,433


$9,926


$10,891

Net earnings (loss) as a % of net sales

2.1 %


(0.6 %)


— %


1.2 %

EBIT margin %

3.2 %


0.1 %


0.4 %


2.6 %

Adjusted EBIT margin %

2.4 %


2.1 %


3.2 %


2.9 %

 

The following is a reconciliation of diluted EPS to adjusted EPS:


Quarter Ended


Nine Months Ended


October 28, 2023


October 29, 2022


October 28, 2023


October 29, 2022

Diluted EPS

$0.41


($0.13)


$—


$0.77

Canada wind-down costs

(0.15)



1.74


Supply chain impairment


0.44



0.44

Trunk Club wind-down costs




0.11

Gain on sale of interest in a corporate office building




(0.31)

Income tax impact on adjustments1

(0.01)


(0.11)


(0.58)


(0.06)

Adjusted EPS

$0.25


$0.20


$1.16


$0.95


1 The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate for the respective non-GAAP adjustment.

 

NORDSTROM, INC.
SUMMARY OF NET SALES
(unaudited; amounts in millions)

Our Nordstrom brand includes Nordstrom.com, Nordstrom U.S. stores, Nordstrom Local and ASOS | Nordstrom. Nordstrom also included Canada operations prior to March 2, 2023, inclusive of Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, and TrunkClub.com prior to October 2022. Our Nordstrom Rack brand includes NordstromRack.com, Nordstrom Rack U.S. stores and Last Chance clearance stores. The following table summarizes net sales for the quarter and nine months ended October 28, 2023, compared with the quarter and nine months ended October 29, 2022:


Quarter Ended


Nine Months Ended


October 28, 2023


October 29, 2022


October 28, 2023


October 29, 2022

Net sales:








Nordstrom

$2,051


$2,264


$6,570


$7,324

Nordstrom Rack

1,149


1,169


3,356


3,567

Total net sales

$3,200


$3,433


$9,926


$10,891









Net sales (decrease) increase:








Nordstrom

(9.4 %)


(3.4 %)


(10.3 %)


10.7 %

Nordstrom Rack

(1.8 %)


(1.9 %)


(5.9 %)


4.7 %

Total Company

(6.8 %)


(2.9 %)


(8.9 %)


8.7 %









Digital sales as % of total net sales1

34 %


34 %


35 %


37 %



1

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.

 

NORDSTROM, INC.
FISCAL YEAR 2023 FORWARD-LOOKING NON-GAAP MEASURES
(NON-GAAP FINANCIAL MEASURES)
(unaudited)

Our adjusted EBIT as a percent of net sales ("adjusted EBIT margin") and adjusted EPS outlook for fiscal year 2023 excludes the impacts from certain items that we do not consider representative of our core operating performance. These items include charges from the wind-down of Canadian operations recognized in the nine months ended October 28, 2023.

The following is a reconciliation of expected net earnings as a percent of net sales to expected adjusted EBIT margin included within our Fiscal Year 2023 Outlook:


53 Weeks Ending February 3, 2024


Low


High

Expected net earnings as a % of net sales

0.9 %


1.1 %

Income tax expense

0.2 %


0.3 %

Interest expense, net

0.7 %


0.7 %

Expected EBIT as a % of net sales

1.8 %


2.1 %





Canada wind-down costs

2.0 %


2.0 %

Expected adjusted EBIT margin

3.8 %


4.1 %

The following is a reconciliation of expected diluted EPS to expected adjusted EPS included within our Fiscal Year 2023 Outlook:


53 Weeks Ending February 3, 2024


Low


High

Expected diluted EPS

$0.74


$0.94

Canada wind-down costs

1.74


1.74

Income tax impact on adjustments

(0.58)


(0.58)

Expected adjusted EPS

$1.90


$2.10

 

NORDSTROM, INC.
ADJUSTED RETURN ON INVESTED CAPITAL ("ADJUSTED ROIC")
(NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)

We believe that Adjusted ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of the capital we have invested in our business to generate returns over time. In addition, we have incorporated it in our executive incentive measures and we believe it is an important indicator of shareholders' return over the long term. 

Beginning in the second quarter of 2023, the Adjusted ROIC calculation was updated to exclude certain items that we do not consider representative of our core operating performance. Refer to non-operating related adjustments included within adjusted net operating profit after tax and adjusted average invested capital. Prior periods have been modified to conform with current period presentation.

Adjusted ROIC is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets. The following shows the components to reconcile the return on assets calculation to Adjusted ROIC:


Four Quarters Ended


October 28, 2023


October 29, 2022

Net earnings

$119


$326

Income tax (benefit) expense

(2)


117

Interest expense

136


138

Earnings before interest and income tax expense

253


581





Operating lease interest1

86


85

Non-operating related adjustments2

284


38

Adjusted net operating profit

623


704

Adjusted estimated income tax expense3

(144)


(186)

Adjusted net operating profit after tax

$479


$518





Average total assets

$8,956


$9,227

Average non-current deferred property incentives in excess of operating lease right-of-use
     (ROU) assets4

(167)


(205)

Average non-interest bearing current liabilities

(3,134)


(3,369)

Non-operating related adjustments5

294


(7)

Adjusted average invested capital

$5,949


$5,646





Return on assets

1.3 %


3.5 %

Adjusted ROIC

8.1 %


9.2 %



1

Operating lease interest is a component of operating lease cost recorded in occupancy costs. We add back operating lease interest for purposes of calculating adjusted net operating profit for consistency with the treatment of interest expense on our debt.

2

Non-operating related adjustments primarily relate to the wind-down of our Canadian operations for the four quarters ended October 28, 2023 and a supply chain impairment charge partially offset by the gain on sale of our interest in a corporate office building for the four quarters ended October 29, 2022. See the Adjusted EBIT and Adjusted EBITDA section, as well as our 2022 Annual Report, for detailed information on certain non-operating related adjustments.

3

Adjusted estimated income tax expense is calculated by multiplying the adjusted net operating profit by the adjusted effective tax rate (which removes the impact of non-operating related adjustments) for the trailing twelve-month periods ended October 28, 2023 and October 29, 2022. The adjusted effective tax rate is calculated by dividing adjusted income tax by adjusted earnings before income taxes for the same trailing twelve-month periods.

4

For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities on the Condensed Consolidated Balance Sheets. The current and noncurrent amounts are used to reduce average total assets above, as this better reflects how we manage our business. 

5

Non-operating related adjustments primarily relate to the wind-down of our Canadian operations for the trailing twelve-month period ended October 28, 2023 and a supply chain impairment charge partially offset by the gain on sale of our interest in a corporate office building for the trailing twelve-month period ended October 29, 2022.

 

NORDSTROM, INC.
ADJUSTED DEBT TO EBITDAR (NON-GAAP FINANCIAL MEASURE)
(unaudited; dollars in millions)

Adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") is one of our key financial metrics and we believe that our debt levels are best analyzed using this measure, as it provides a reflection of our creditworthiness which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with the updates in our Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases. Our goal is to manage debt levels to achieve and maintain investment-grade credit ratings while operating with an efficient capital structure.

Adjusted debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other GAAP financial measures. Our method of calculating a non-GAAP financial measure may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Adjusted debt to EBITDAR is debt to net earnings. The following shows the components to reconcile the debt to net earnings calculation to Adjusted debt to EBITDAR:


October 28, 2023

Debt

$2,861

Operating lease liabilities

1,635

Adjusted debt

$4,496




Four Quarters Ended
October 28, 2023

Net earnings

$119

Income tax benefit

(2)

Interest expense, net

106

Earnings before interest and income taxes

223



Depreciation and amortization expenses

581

Operating lease cost1

270

Amortization of developer reimbursements2

69

Canada wind-down costs

284

Other Revolver covenant adjustments3

46

Adjusted EBITDAR

$1,473



Debt to Net Earnings

24.0

Adjusted debt to EBITDAR

3.1



1

Operating lease cost is fixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization.

2

Amortization of developer reimbursements is a non-cash reduction of operating lease cost and is therefore added back to operating lease cost for purposes of our Revolver covenant calculation.

3

Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended October 28, 2023, other Revolver covenant adjustments primarily includes interest income. See our 2022 Annual Report for detailed information on certain non-operating related adjustments.

 

NORDSTROM, INC.
FREE CASH FLOW (NON-GAAP FINANCIAL MEASURE)
(unaudited; amounts in millions)

Free Cash Flow is one of our key liquidity measures and, when used in conjunction with GAAP measures, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business. 

Free Cash Flow is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, operating cash flows or other financial measures prepared in accordance with GAAP. Our method of calculating a non-GAAP financial measure may differ from other companies' methods and therefore may not be comparable to those used by other companies. The financial measure calculated under GAAP which is most directly comparable to Free Cash Flow is net cash provided by operating activities. The following is a reconciliation of net cash provided by operating activities to Free Cash Flow:


Nine Months Ended


October 28, 2023


October 29, 2022

Net cash provided by operating activities

$107


$240

Capital expenditures

(375)


(325)

Change in cash book overdrafts

37


21

Free Cash Flow

($231)


($64)

 

INVESTOR CONTACT: 


James Duies



Nordstrom, Inc.



InvRelations@Nordstrom.com




MEDIA CONTACT:


Stephanie Corzett



Nordstrom, Inc.



NordstromPR@Nordstrom.com

 

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