UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~October~~April 29, ~~2016~~2017



¨	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)		(Zip Code)

206-628-2111

(Registrant’s telephone number, including area code)

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 þ NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

YES þ NO ¨

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



	Large accelerated filer þ		Accelerated filer ¨
	Non-accelerated filer ¨ (Do not check if a smaller reporting company)		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 þ

Common stock outstanding as of ~~November 23, 2016: 173,342,135~~May 24, 2017: 166,052,065 shares

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NORDSTROM, INC.

TABLE OF CONTENTS



		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).

	Condensed Consolidated Statements of Earnings ~~Quarter~~Quarters Ended April 29, 2017 and ~~Nine Months Ended October 29,~~April 30, 2016 ~~and October 31, 2015~~	3

	Condensed Consolidated Statements of Comprehensive Earnings ~~Quarter~~Quarters Ended April 29, 2017 and ~~Nine Months Ended October 29,~~April 30, 2016 ~~and October 31, 2015~~	3

	Condensed Consolidated Balance Sheets ~~October~~April 29, ~~2016,~~2017, January 28, 2017 and April 30, 2016 ~~and October 31, 2015~~	4

	Condensed Consolidated Statements of Shareholders’ Equity ~~Nine Months~~Quarters Ended ~~October~~April 29, ~~2016~~2017 and ~~October 31, 2015~~April 30, 2016	5

	Condensed Consolidated Statements of Cash Flows ~~Nine Months~~Quarters Ended ~~October~~April 29, ~~2016~~2017 and ~~October 31, 2015~~April 30, 2016	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1412

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2622

Item 4.	Controls and Procedures.	2622

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	2723

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2723

Item 6.	Exhibits.	2723

Signatures		2824

Exhibit Index		2925

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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						Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Net sales		$3,472			$3,239			$10,255			$9,953			$3,279			$3,192
Credit card revenues, net	70			89			186			291			75			57
Total revenues	3,542			3,328			10,441			10,244			3,354			3,249
Cost of sales and related buying and occupancy costs	(2,261		)	(2,142		)	(6,720		)	(6,468		)	(2,155		)	(2,100		)
Selling, general and administrative expenses	(1,029		)	(1,031		)	(3,143		)	(2,999		)	(1,048		)	(1,043		)
Goodwill impairment	(197		)	—			(197		)	—
Earnings before interest and income taxes	55			155			381			777			151			106
Interest expense, net	(30		)	(30		)	(90		)	(94		)	(48		)	(31		)
Earnings before income taxes	25			125			291			683			103			75
Income tax expense	(35		)	(44		)	(138		)	(263		)	(40		)	(29		)
Net (loss) earnings		($10	)		$81			$153			$420
Net earnings														$63			$46

(Loss) Earnings per share:
Earnings per share:
Basic		($0.06	)		$0.43			$0.88			$2.22			$0.38			$0.27
Diluted		($0.06	)		$0.42			$0.87			$2.17			$0.37			$0.26

Weighted-average shares outstanding:
Basic	173.4			187.2			173.3			189.1			167.3			173.1
Diluted	173.4			191.3			175.6			193.2			169.1			175.7

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					Nine Months Ended					Quarter Ended
	October 29, 2016			October 31, 2015		October 29, 2016		October 31, 2015			April 29, 2017			April 30, 2016
Net (loss) earnings		($10	)		$81		$153		$420
Net earnings												$63			$46
Foreign currency translation adjustment											(12		)	27
Postretirement plan adjustments, net of tax	—			2		1		5			1			1
Foreign currency translation adjustment	(9		)	—		8		(5		)
Comprehensive net (loss) earnings		($19	)		$83		$162		$420
Comprehensive net earnings												$52			$74

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)


	October 29, 2016			January 30, 2016			October 31, 2015			April 29, 2017			January 28, 2017			April 30, 2016
Assets
Current assets:
Cash and cash equivalents		$531			$595			$821			$653			$1,007			$470
Accounts receivable, net	216			196			215			209			199			224
Merchandise inventories	2,411			1,945			2,402			2,160			1,896			2,125
Current deferred tax assets, net	—			—			247
Prepaid expenses and other	227			278			202			147			140			173
Total current assets	3,385			3,014			3,887			3,169			3,242			2,992

Land, property and equipment (net of accumulated depreciation of $5,462, $5,108 and $5,020)	3,865			3,735			3,742
Land, property and equipment (net of accumulated depreciation of $5,742, $5,596 and $5,170)										3,872			3,897			3,789
Goodwill	238			435			447			238			238			435
Other assets	478			514			510			492			481			483
Total assets		$7,966			$7,698			$8,586			$7,771			$7,858			$7,699

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$1,653			$1,324			$1,688			$1,590			$1,340			$1,456
Accrued salaries, wages and related benefits	391			416			417			319			455			320
Other current liabilities	1,186			1,161			1,075			1,225			1,223			1,150
Current portion of long-term debt	11			10			9			11			11			10
Total current liabilities	3,241			2,911			3,189			3,145			3,029			2,936

Long-term debt, net	2,767			2,795			2,800			2,731			2,763			2,776
Deferred property incentives, net	532			540			568			530			521			536
Other liabilities	566			581			621			688			675			576

Commitments and contingencies (Note 5)
Commitments and contingencies (Note 4)

Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 173.2, 173.5 and 185.4 shares issued and outstanding	2,651			2,539			2,519
Common stock, no par value: 1,000 shares authorized; 166.0, 170.0 and 173.4 shares issued and outstanding										2,730			2,707			2,582
Accumulated deficit	(1,742		)	(1,610		)	(1,047		)	(1,999		)	(1,794		)	(1,677		)
Accumulated other comprehensive loss	(49		)	(58		)	(64		)	(54		)	(43		)	(30		)
Total shareholders’ equity	860			871			1,408			677			870			875
Total liabilities and shareholders’ equity		$7,966			$7,698			$8,586			$7,771			$7,858			$7,699

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)


																					Accumulated
																					Other
														Common Stock				Accumulated			Comprehensive
														Shares		Amount		Deficit			Loss			Total
Balance at January 28, 2017														170.0			$2,707		($1,794	)		($43	)		$870
Net earnings														—		—		63			—			63
Other comprehensive loss														—		—		—			(11		)	(11		)
Dividends ($0.37 per share)														—		—		(62		)	—			(62		)
Issuance of common stock under stock compensation plans														0.3		11		—			—			11
Stock-based compensation														0.3		12		—			—			12
Repurchase of common stock														(4.6	)	—		(206		)	—			(206		)
Balance at April 29, 2017														166.0			$2,730		($1,999	)		($54	)		$677


								Accumulated													Accumulated
								Other													Other
	Common Stock				Accumulated			Comprehensive						Common Stock				Accumulated			Comprehensive
	Shares		Amount		Deficit			Loss			Total			Shares		Amount		Deficit			Loss			Total
Balance at January 30, 2016	173.5			$2,539		($1,610	)		($58	)		$871		173.5			$2,539		($1,610	)		($58	)		$871
Net earnings	—		—		153			—			153			—		—		46			—			46
Other comprehensive earnings	—		—		—			9			9			—		—		—			28			28
Dividends ($1.11 per share)	—		—		(192		)	—			(192		)
Dividends ($0.37 per share)														—		—		(63		)	—			(63		)
Issuance of common stock under stock compensation plans	1.4		50		—			—			50			0.7		28		—			—			28
Stock-based compensation	0.2		62		—			—			62			0.2		15		—			—			15
Repurchase of common stock	(1.9	)	—		(93		)	—			(93		)	(1.0	)	—		(50		)	—			(50		)
Balance at October 29, 2016	173.2			$2,651		($1,742	)		($49	)		$860


					Retained			Accumulated
					Earnings			Other
	Common Stock				(Accumulated			Comprehensive
	Shares		Amount		Deficit)			Loss			Total
Balance at January 31, 2015	190.1			$2,338		$166			($64	)		$2,440
Net earnings	—		—		420			—			420
Other comprehensive earnings	—		—		—			—			—
Dividends ($1.11 per share)	—		—		(211		)	—			(211		)
Special dividend related to the sale of credit card receivables ($4.85 per share)	—		—		(905		)	—			(905		)
Issuance of common stock for Trunk Club acquisition	0.3		23		—			—			23
Issuance of common stock under stock compensation plans	1.9		104		—			—			104
Stock-based compensation	0.1		54		—			—			54
Repurchase of common stock	(7.0	)	—		(517		)	—			(517		)
Balance at October 31, 2015	185.4			$2,519		($1,047	)		($64	)		$1,408
Balance at April 30, 2016														173.4			$2,582		($1,677	)		($30	)		$875

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)


	Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Operating Activities
Net earnings		$153			$420			$63			$46
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization expenses	480			424			161			155
Goodwill impairment	197			—
Amortization of deferred property incentives and other, net	(57		)	(107		)	(26		)	(17		)
Deferred income taxes, net	(14		)	(78		)	(21		)	6
Stock-based compensation expense	68			57			16			20
Tax (deficiency) benefit from stock-based compensation	(2		)	14
Excess tax benefit from stock-based compensation	(2		)	(14		)
Bad debt expense	—			26
Change in operating assets and liabilities:
Accounts receivable	(20		)	(73		)	(10		)	(27		)
Proceeds from sale of credit card receivables originated at Nordstrom	—			1,297
Merchandise inventories	(393		)	(607		)	(266		)	(212		)
Prepaid expenses and other assets	25			(36		)	(11		)	94
Accounts payable	360			326			272			192
Accrued salaries, wages and related benefits	(30		)	(2		)	(136		)	(96		)
Other current liabilities	33			(34		)	9			(6		)
Deferred property incentives	54			128			32			13
Other liabilities	20			4			6			8
Net cash provided by operating activities	872			1,745			89			176

Investing Activities
Capital expenditures	(625		)	(857		)	(153		)	(205		)
Change in credit card receivables originated at third parties	—			33
Proceeds from sale of credit card receivables originated at third parties	—			890
Other, net	47			3			9			31
Net cash (used in) provided by investing activities	(578		)	69
Net cash used in investing activities							(144		)	(174		)

Financing Activities
Proceeds from long-term borrowings, net of discounts	—			13			635			—
Principal payments on long-term borrowings	(7		)	(6		)	(653		)	(2		)
Defeasance of long-term debt	—			(339		)
(Decrease) increase in cash book overdrafts	(127		)	7
Decrease in cash book overdrafts							(21		)	(33		)
Cash dividends paid	(192		)	(1,116		)	(62		)	(63		)
Payments for repurchase of common stock	(91		)	(517		)	(211		)	(50		)
Proceeds from issuances under stock compensation plans	51			90			11			28
Excess tax benefit from stock-based compensation	2			14
Tax withholding on share-based awards							(5		)	(4		)
Other, net	6			34			7			(3		)
Net cash used in financing activities	(358		)	(1,820		)	(299		)	(127		)

Net decrease in cash and cash equivalents	(64		)	(6		)	(354		)	(125		)
Cash and cash equivalents at beginning of period	595			827			1,007			595
Cash and cash equivalents at end of period		$531			$821			$653			$470

Supplemental Cash Flow Information
Cash paid during the period for:
Income taxes, net		$99			$383
Income taxes (refund), net								$4			($83	)
Interest, net of capitalized interest	83			86			50			17

Non-cash investing and financing activities:
Beneficial interest asset acquired from the sale of credit card receivables	—			62
Issuance of common stock for Trunk Club acquisition	—			23

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 accompanying Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries (the “Company”). 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 ~~2015~~2016 Annual Report on Form 10-K (“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 ~~October~~April 29, ~~2016~~2017 and ~~October 31, 2015~~April 30, 2016 are unaudited. The Condensed Consolidated Balance Sheet as of January ~~30, 2016~~28, 2017 has been derived from the audited Consolidated Financial Statements included in our ~~2015~~2016 Annual Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our ~~2015~~2016 Annual Report.

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions.

Our business, like that of other retailers, is subject to seasonal fluctuations. ~~Due to~~Our sales are typically higher during our Anniversary Sale ~~in July~~ and the holidays in the fourth ~~quarter,~~quarter. Consistent with the timing in 2016, our ~~sales are typically higher in~~2017 Anniversary Sale will take place during the last week of July and the first week of August, spanning the second and ~~fourth quarters than in the first and~~ third ~~quarters of the fiscal year. In 2016, the Anniversary Sale event started one week later in July relative to last year, shifting one week of the event into the third quarter.~~quarters. Results for any quarter are not ~~necessarily~~ indicative of the results that may be achieved for a full fiscal year.

~~Loyalty Program~~

Prior to the second quarter of 2016, customers who used Nordstrom Visa or Nordstrom credit or debit cards were able to participate in the Nordstrom Rewards program. During the second quarter of 2016, the Nordstrom Rewards program was expanded to enable all customers to earn benefits regardless of how they choose to pay. Customers accumulate points based on their level of spending. Upon reaching a certain points threshold, customers receive Nordstrom Notes, which can be redeemed for any goods or services offered at Nordstrom full-line stores, Nordstrom.com, Nordstrom Rack and Nordstromrack.com/HauteLook. Customers who use Nordstrom private label credit or debit cards or Nordstrom Visa credit cards receive additional benefits, including reimbursements for alterations, shopping and fashion events and early access to the Anniversary Sale.

We estimate the net cost of Nordstrom Notes that will be issued and redeemed and record this cost as rewards points are accumulated. These costs, as well as reimbursed alterations, are recorded in cost of sales as we provide customers with products and services for these rewards. Other benefits of the loyalty program, including shopping and fashion events, are recorded in selling, general and administrative expenses.

~~Reclassification~~

~~Reclassifications were made to our fiscal 2015 Condensed Consolidated Statements of Earnings and Condensed Consolidated Statement of Cash Flows to conform with current period presentation.~~

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which was subsequently modified in August 2015 by ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs which clarify the implementation guidance on principal versus agent considerations, on identifying performance obligations and licensing, ~~and~~ on the revenue recognition ~~criteria. This guidance~~criteria and other technical corrections. In our ongoing evaluation of this ASU, we have determined that the new standard will primarily impact the following areas: gift card breakage will be estimated based on the historical pattern of gift card redemption, rather than when redemption is ~~effective for us beginning~~considered remote; sales attributable to the loyalty program benefits (e.g., points, alterations) will be deferred rather than recorded as an increase to cost of sales; revenue related to our online sales will be recognized at the shipping point rather than receipt by the customer; and estimated costs of returns will be recorded as a current asset rather than netted with our sales return reserve. We plan to adopt this ASU in the first quarter of ~~2018. We~~2018 and are ~~currently evaluating~~continuing to evaluate the ~~impact these provisions~~impacts this ASU and related disclosures will have on our Consolidated Financial ~~Statements.~~Statements, as well as our preferred transition method.

In February 2016, the FASB issued ASU No. 2016-02,Leases. This ASU increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification dictates whether lease expense is to be recognized based on an effective interest method or on a straight-line basis over the term of the lease. This ASU is effective for us beginning in the first quarter of 2019. Though we are currently evaluating the impact of these provisions, we expect they will have a material impact on our Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation — Stock Compensation — Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments and presentation within the financial statements. We adopted ASU No. 2016-09 with an effective date of January 29, 2017. The impact of the adoption resulted in the following:

Excess tax benefits and deficiencies resulting from stock-based compensation arrangements are now recorded within income tax expense on the Condensed Consolidated Statement of Earnings when the awards vest or are settled, rather than within equity. Additionally, excess tax benefits are now excluded from assumed future proceeds in our calculation of diluted shares for purposes of determining diluted earnings per share. The prospective adoption of this provision did not have a material effect on the Condensed Consolidated Financial Statements for the quarter ended April 29, 2017. We had no previously unrecognized excess tax benefits that would have resulted in a cumulative-effect adjustment to beginning retained earnings.

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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)

Forfeitures on share-based awards are recorded as they occur, rather than our historical method of estimating forfeitures at the grant date. In ~~March 2016,~~evaluating the ~~FASB issued ASU 2016-09,~~ ~~Compensation — Stock Compensation — Improvements~~impact of this change, the adjustment to ~~Employee Share-Based Payment Accounting~~.adopt on a modified retrospective basis was immaterial, therefore no adjustment has been made to beginning retained earnings.

Excess tax benefits from stock-based compensation arrangements are classified as cash flows from operations, rather than as cash flows from financing activities. We adopted this change retrospectively, which resulted in an increase to net cash provided by operating activities and an increase in cash flows used in financing activities of $1 for the quarter ended April 30, 2016. Additionally, cash flows related to withholding shares for tax purposes on net-settled awards are classified as financing activities, rather than operating activities. This ~~ASU impacts several aspects~~classification change was also adopted retrospectively, resulting in an increase of ~~the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification~~$4 to net cash provided by operating activities with an offsetting increase to net cash used in financing activities on the ~~statement~~Condensed Consolidated Statement of ~~cash flows. This ASU is effective~~Cash Flows for ~~us beginning in~~ the ~~first~~ quarter of 2017. We have evaluated this ASU and believe the impact to our Consolidated Financial Statements upon adoption will be nominal, however, actual results will be dependent on unpredictable events, including the future price of our common stock, option exercise activity and forfeitures.ended April 30, 2016.

~~NOTE 2: CREDIT CARD RECEIVABLE TRANSACTION~~

On October 1, 2015, we completed the sale of a substantial majority of our U.S. Visa and private label credit card portfolio to TD Bank, N.A. (“TD”) and we entered into a long-term program agreement under which TD is the exclusive issuer of our U.S. consumer credit cards.

In connection with the close of the credit card receivable transaction, we completed the defeasance of our $325 Series 2011-1 Class A Notes in order to provide the credit card receivables to TD free and clear.~~At close, we received $2.2 billion in cash consideration reflecting the par value of the receivables sold and incurred $32 in transaction-related expenses during the third quarter of 2015.~~Pursuant to the agreement, we are obligated to offer and administer our loyalty program and perform other account servicing functions. In return, we receive a portion of the ongoing credit card revenue, net of credit losses, from both the sold and newly generated credit card receivables.

We recorded certain assets and liabilities associated with the arrangement. The beneficial interest asset is carried at fair value (see Note 4: Fair Value Measurements) and is amortized over approximately four years based primarily on the payment rate of the associated receivables. The deferred revenue and investment in contract asset are recognized/amortized over seven years on a straight line basis, following the delivery of the contract obligations and expected life of the agreement. We record each of these items in credit card revenue, net in our Condensed Consolidated Statements of Earnings.

NOTE 3:2: DEBT AND CREDIT FACILITIES

Debt

A summary of our long-term debt, including capital leases, is as follows:


	October 29, 2016			January 30, 2016			October 31, 2015			April 29, 2017			January 28, 2017			April 30, 2016
Secured
Mortgage payable, 7.68%, due April 2020		$26			$30			$32			$23			$24			$29
Other	3			5			5			2			3			4
Total secured debt	29			35			37			25			27			33

Unsecured
Net of unamortized discount:
Senior notes, 6.25%, due January 2018	650			649			649			—			650			649
Senior notes, 4.75%, due May 2020	499			499			499			499			499			499
Senior notes, 4.00%, due October 2021	500			500			499			500			500			500
Senior notes, 4.00%, due March 2027										349			—			—
Senior debentures, 6.95%, due March 2028	300			300			300			300			300			300
Senior notes, 7.00%, due January 2038	146			146			146			146			146			146
Senior notes, 5.00%, due January 2044	602			600			600			890			602			601
Other	52			76			79			33			50			58
Total unsecured debt	2,749			2,770			2,772			2,717			2,747			2,753

Total long-term debt	2,778			2,805			2,809			2,742			2,774			2,786
Less: current portion	(11		)	(10		)	(9		)	(11		)	(11		)	(10		)
Total due beyond one year		$2,767			$2,795			$2,800			$2,731			$2,763			$2,776

During the first quarter, we issued $350 aggregate principal amount of 4.00% senior unsecured notes due March 2027 and $300 aggregate principal amount of 5.00% senior unsecured notes due January 2044. With the proceeds of these new notes, we retired our $650 senior unsecured notes that were due January 2018. For the quarter ended April 29, 2017, we incurred $18 of net interest expense related to the refinancing, which included the write-off of unamortized balances associated with the debt discount, issue costs and fair value hedge adjustment resulting from the sale of our interest rate swap agreements in 2012. It also included a one-time payment of $24 to 2018 Senior Note holders under a make-whole provision, which represents the net present value of expected coupon payments had the notes been outstanding through the original maturity date.

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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)

Credit Facilities

As of ~~October~~April 29, ~~2016,~~2017, we had total short-term borrowing capacity of $800 under our senior unsecured revolving credit facility (“revolver”) that expires in April ~~2020, with an option to extend for an additional year.~~2020. Under the terms of our revolver, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is available for working capital, capital expenditures and general corporate purposes. We have the option to increase the revolving commitment by up to $200, to a total of $1,000, provided that we obtain written consent from the lenders. As of ~~October~~April 29, ~~2016,~~2017, we had no issuances outstanding under our commercial paper program and no borrowings outstanding under our revolver.

The revolver requires that we maintain an adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) leverage ratio of ~~less~~no more than four times. As of ~~October~~April 29, ~~2016,~~2017, we were in compliance with this covenant.

NOTE 4:3: FAIR VALUE MEASUREMENTS

We disclose our financial assets and liabilities that are measured at fair value in our Condensed Consolidated Balance Sheets by level within the fair value hierarchy as defined by applicable accounting standards:

Level 1: Quoted market prices in active markets for identical assets or liabilities

Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs that cannot be corroborated by market data that reflect the reporting entity’s own assumptions

~~Financial Instruments Measured at Fair Value on a Recurring Basis~~

We recorded a beneficial interest asset when we completed the sale of a substantial majority of our U.S. Visa and private label credit card portfolio (see Note 2: Credit Card Receivable Transaction). We determined the fair value of the beneficial interest asset based on a discounted cash flow model using Level 3 inputs of the fair value hierarchy. Inputs and assumptions include the discount rate, payment rate, credit loss rate and revenues and expenses associated with the program agreement. Given our review of market participant capital structures in the banking and credit card industries and our historical and expected portfolio performance, we used the following ranges of input assumptions to determine the fair value as of October 29, 2016 and October 31, 2015:

October 29, 2016 October 31, 2015
Minimum
Maximum
Minimum
Maximum
Discount rate 12 % 12 % 12 % 12 %
Monthly payment rate 6 % 11 % 6 % 33 %
Annual credit loss rate 3 % 4 % 1 % 4 %
Annual revenues as a percent to credit card receivables 14 % 18 % 6 % 18 %
Annual expenses as a percent to credit card receivables 5 % 9 % 2 % 9 %

We recognized $5 and $22 of amortization expense for the quarter and nine months ended October 29, 2016 on the beneficial interest asset, which had a fair value of $15 and $37 as of October 29, 2016 and January 30, 2016. Amortization primarily reflects payments received on the receivables sold and is recorded in credit card revenues, net.

Financial Instruments Not Measured at Fair Value

Financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable and certificates of deposit, which approximate fair value due to their short-term nature, and long-term debt.

We estimate the fair value of our long-term debt using quoted market prices of the same or similar issues and, as such, this is considered a Level 2 fair value measurement. The following table summarizes the carrying value and fair value estimate of our long-term debt, including current maturities:

October 29, 2016
January 30, 2016
October 31, 2015
Carrying value of long-term debt
$2,778

$2,805

$2,809
Fair value of long-term debt 3,064
3,077
3,177

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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)~~



	April 29, 2017		January 28, 2017		April 30, 2016
Carrying value of long-term debt		$2,742		$2,774		$2,786
Fair value of long-term debt	2,921		2,949		3,085

Non-financial Assets Measured at Fair Value on a Nonrecurring Basis

We also measure certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, investment in contract asset and long-lived tangible and intangible assets, in connection with periodic evaluations for potential impairment. We estimate the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements.

During the quarter, the long-term operating plan for Trunk Club was updated to reflect current expectations for future growth and profitability which were lower than previous expectations. Due to lowered expectations, we tested Trunk Club goodwill for impairment in the third quarter, one quarter prior to the annual evaluation. Step 1 test results indicated that the estimated fair value of the reporting unit was less than the carrying value.

In our Step 2 analysis, we used a combination of the expected present value of future cash flows (income approach) and comparable public companies (market approach) to determine the fair value of the reporting unit. These approaches use primarily unobservable inputs, including discount, sales growth and profit margin rates, which are considered Level 3 fair value measurements. The fair value analysis took into account recent and expected operating performance as well as the overall decline in the retail industry. Within our Retail Segment, we recognized a goodwill impairment charge of $197, reducing Trunk Club goodwill to $64 as of October 29, 2016 from $261 as of January 30, 2016.

There were no material impairment charges for these assets for the ~~nine months~~quarters ended ~~October 31, 2015.~~April 29, 2017 and April 30, 2016.

NOTE 5:4: COMMITMENTS AND CONTINGENCIES

Plans for our Manhattan full-line store, which we currently expect to open in 2019, ultimately include owning a condominium interest in a mixed-use tower and leasing certain nearby properties. As of ~~October~~April 29, ~~2016,~~2017, we had approximately ~~$201~~$249 of fee interest in land, which is expected to convert to a condominium interest once the store is constructed. We have committed to make future installment payments based on the developer meeting pre-established construction and development milestones. In the event that this project is not completed, the opening may be delayed and we may be subject to future losses or capital commitments in order to complete construction or to monetize our investment in the land.

NOTE 6:5: SHAREHOLDERS’ EQUITY

~~On October 1, 2015,~~In February 2017, our Board of Directors authorized a program to repurchase up to ~~$1,000~~$500 of our outstanding common stock, through August 31, 2018. Our October 1, 2015 Board authorized share repurchase program expired in March ~~1, 2017.~~ 2017, which had $409 of unused capacity upon program expiration.

During the ~~nine months~~quarter ended ~~October~~April 29, ~~2016,~~2017, we repurchased ~~1.9~~4.6 shares of our common stock for an aggregate purchase price of ~~$93~~$206 and had ~~$718~~$414 remaining in share repurchase capacity as of ~~October~~April 29, ~~2016.~~2017. The actual ~~number,~~timing, price, manner and ~~timing~~amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission (“SEC”) rules.

In ~~November 2016,~~May 2017, subsequent to quarter end, we declared a quarterly dividend of $0.37 per share, which will be paid on ~~December 13, 2016.~~June 12, 2017.

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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 7:6: STOCK-BASED COMPENSATION

The following table summarizes our stock-based compensation expense:


	Quarter Ended						Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Restricted stock units														$12			$6
Stock options		$9			$7			$28			$26		3			8
Restricted stock units	10			4			25			14
Acquisition-related stock compensation	2			5			10			14			—			4
Performance share units	—			(1		)	1			(1		)
Other	—			1			4			4			1			2
Total stock-based compensation expense, before income tax benefit	21			16			68			57			16			20
Income tax benefit	(7		)	(5		)	(22		)	(18		)	(6		)	(6		)
Total stock-based compensation expense, net of income tax benefit		$14			$11			$46			$39			$10			$14

In 2014, restricted stock units became a growing component of our stock-based compensation mix. In the first quarter of 2017, this trend continued as our annual grant allocation shifted towards more restricted stock units and less options to better align with our compensation program’s guiding principles. The following table summarizes our grants:

Nine Months Ended
October 29, 2016 October 31, 2015
Granted
Weighted-average grant-date fair value per unit
Granted
Weighted-average grant-date fair value per unit
Stock options 2.9

$15
1.8

$21
Stock options special dividend adjustment —
N/A
0.9
N/A
Restricted stock units 1.9

$44
0.5

$77
Restricted stock units special dividend adjustment —
N/A
0.1
N/A
Performance share units¹
0.1

$44
0.1
N/A

¹ ~~Performance share units granted in 2015 were liability-based awards, therefore the weighted-average grant-date fair value is not meaningful.~~



	Quarter Ended
	April 29, 2017			April 30, 2016
	Granted	Weighted-average grant-date fair value per unit		Granted	Weighted-average grant-date fair value per unit
Restricted stock units	1.7		$43	0.7		$49
Stock options	0.3		$16	2.5		$16
Performance share units	0.1		$40	0.1		$44

NOTE ~~8: (LOSS)~~7: EARNINGS PER SHARE

The computation of ~~(loss)~~ earnings per share is as follows:

Quarter Ended Nine Months Ended
October 29, 2016
October 31, 2015
October 29, 2016
October 31, 2015
Net (loss) earnings
($10 )
$81

$153

$420

Basic shares 173.4
187.2
173.3
189.1
Dilutive effect of stock options and other¹
—
4.1
2.3
4.1
Diluted shares 173.4
191.3
175.6
193.2

(Loss) Earnings per basic share
($0.06 )
$0.43

$0.88

$2.22
(Loss) Earnings per diluted share
($0.06 )
$0.42

$0.87

$2.17

Anti-dilutive stock options and other 6.5
1.9
9.0
1.8

¹Due to the anti-dilutive effect resulting from the reported net loss for the quarter ended October 29, 2016, the impact of potentially dilutive securities on the weighted-average shares outstanding has been omitted from the quarterly calculation of loss per diluted share. The impact of these potentially dilutive securities has been included in the calculation of weighted-average shares for the nine months ended October 29, 2016.



	Quarter Ended
	April 29, 2017		April 30, 2016
Net earnings		$63		$46

Basic shares	167.3		173.1
Dilutive effect of common stock equivalents	1.8		2.6
Diluted shares	169.1		175.7

Earnings per basic share		$0.38		$0.27
Earnings per diluted share		$0.37		$0.26

Anti-dilutive common stock equivalents	12.1		6.8

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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 9:8: SEGMENT REPORTING

The following table sets forth information for our reportable segments:

Retail
Corporate/Other

Retail
Business

Credit
Total
Quarter Ended October 29, 2016
Net sales
$3,317

$155

$3,472

$—

$3,472
Credit card revenues, net —
—
—
70
70
Earnings before interest and income taxes 18
5
23
32
55
Interest expense, net —
(30 ) (30 ) —
(30 )
Earnings (loss) before income taxes 18
(25 ) (7 ) 32
25
Assets¹
5,760
1,759
7,519
447
7,966

Quarter Ended October 31, 2015
Net sales
$3,169

$70

$3,239

$—

$3,239
Credit card revenues, net —
—
—
89
89
Earnings (loss) before interest and income taxes 178
(30 ) 148
7
155
Interest expense, net —
(27 ) (27 ) (3 ) (30 )
Earnings (loss) before income taxes 178
(57 ) 121
4
125
Assets¹
6,140
1,869
8,009
577
8,586

Nine Months Ended October 29, 2016
Net sales
$10,446

($191 )
$10,255

$—

$10,255
Credit card revenues, net —
—
—
186
186
Earnings (loss) before interest and income taxes 590
(274 ) 316
65
381
Interest expense, net —
(90 ) (90 ) —
(90 )
Earnings (loss) before income taxes 590
(364 ) 226
65
291
Assets¹
5,760

1,759
7,519
447
7,966

Nine Months Ended October 31, 2015

Net sales
$10,135

($182 )
$9,953

$—

$9,953
Credit card revenues, net —
—
—
291
291
Earnings (loss) before interest and income taxes 836
(227 ) 609
168
777
Interest expense, net —
(82 ) (82 ) (12 ) (94 )
Earnings (loss) before income taxes 836
(309 ) 527
156
683
Assets¹
6,140

1,869
8,009
577
8,586

¹~~Assets in Corporate/Other include unallocated assets in corporate headquarters, consisting primarily of cash, land, property and equipment and deferred tax assets.~~

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~(Unaudited)~~



	Retail		Corporate/Other			Retail Business			Credit		Total
Quarter Ended April 29, 2017
Net sales		$3,308		($29	)		$3,279			$—		$3,279
Credit card revenues, net	—		—			—			75		75
Earnings (loss) before interest and income taxes	212		(97		)	115			36		151
Interest expense, net	—		(48		)	(48		)	—		(48		)
Earnings (loss) before income taxes	212		(145		)	67			36		103

Quarter Ended April 30, 2016
Net sales		$3,258		($66	)		$3,192			$—		$3,192
Credit card revenues, net	—		—			—			57		57
Earnings (loss) before interest and income taxes	189		(99		)	90			16		106
Interest expense, net	—		(31		)	(31		)	—		(31		)
Earnings (loss) before income taxes	189		(130		)	59			16		75

The following table summarizes net sales within our reportable segments:


	Quarter Ended				Nine Months Ended						Quarter Ended
	October 29, 2016		October 31, 2015		October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Nordstrom full-line stores - U.S.		$1,568		$1,634		$5,128			$5,431			$1,482			$1,582
Nordstrom.com	497		414		1,675			1,518			548			495
Nordstrom	2,065		2,048		6,803			6,949			2,030			2,077

Nordstrom Rack	958		885		2,777			2,573			954			894
Nordstromrack.com/HauteLook	159		129		482			363			198			166
Off-price	1,117		1,014		3,259			2,936			1,152			1,060

Other retail¹	135		107		384			250			126			121
Total Retail segment	3,317		3,169		10,446			10,135
Retail segment											3,308			3,258
Corporate/Other	155		70		(191		)	(182		)	(29		)	(66		)
Total net sales		$3,472		$3,239		$10,255			$9,953			$3,279			$3,192

¹Other retail includes Nordstrom Canada full-line stores, Trunk Club and Jeffrey ~~boutiques.~~boutiques (see Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Dollar and share amounts in millions except per share and per square foot amounts)

CAUTIONARY STATEMENT

Certain statements in this Quarterly Report on Form 10-Q contain or may suggest “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties including, but not limited to, anticipated financial outlook for the fiscal year ending ~~January 28, 2017,~~February 3, 2018, anticipated annual total and comparable sales rates, anticipated new store openings in existing, new and international markets, anticipated Return on Invested Capital and trends in our operations. Such statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to:

Strategic and Operational

successful execution of our customer strategy, including expansion into new domestic and international markets, acquisitions, investments in our stores and online, as well as investments in technology, our ability to realize the anticipated benefits from growth initiatives and our ability to provide a seamless experience across all channels,

timely and effective execution of our ecommerce initiatives and ability to manage the costs and organizational changes associated with this evolving business model,

timely completion of construction associated with newly planned stores, relocations and remodels, all of which may be impacted by the financial health of third parties,

our ability to maintain relationships with our employees and to effectively attract, develop and retain our future leaders,

effective inventory management processes and systems, fulfillment processes and systems, disruptions in our supply chain and our ability to control costs,

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~~third party provider that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information or compliance with information security and privacy laws and regulations in the event of such an incident,

successful execution of our information technology strategy,

our ability to effectively utilize data in strategic planning and decision making,

efficient and proper allocation of our capital resources,

our ability to realize the expected benefits, respond to potential risks and appropriately manage costs associated with our program agreement with TD Bank, N.A.,

our ability to safeguard our reputation and maintain our vendor relationships,

our ability to respond to the business and retail environment, fashion trends and consumer preferences, including changing expectations of service and experience in stores and online, and evolve our business model,

the effectiveness of planned advertising, marketing and promotional campaigns in the highly competitive and promotional retail industry,

the timing, price, manner and amounts of share repurchases by the Company, if any, or any share issuances by the Company, including issuances associated with option exercises or other matters,

Economic and External

the impact of economic and market conditions and the resultant impact on consumer spending patterns,

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

weather conditions, natural disasters, health hazards, national security or other market disruptions, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications,

Legal and Regulatory

our compliance with applicable domestic and international laws, regulations and ethical standards, including those related to banking, employment and tax and the outcome of claims and litigation and resolution of such matters,

the impact of the current regulatory environment and financial system and health care reforms, and

compliance with debt covenants, availability and cost of credit, changes in our credit rating, changes in interest rates, debt repayment patterns and personal bankruptcies.

These and other factors, including those factors described in Part I, “Item 1A. Risk Factors” in our ~~2015~~2016 Annual Report on Form 10-K could affect our financial results and cause actual results to differ materially from any forward-looking information we may provide. We undertake no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

OVERVIEW

Our customers remain at the center of our strategy. Our business model continues to evolve to one that is more diversified, providing customers multiple ways to shop with us. With customer service and our merchandising strategy at the forefront, we feel we have conservatively planned the business based on recent trends and we continued to maintain discipline around inventory and expenses during the quarter. Our first quarter earnings of $63, or $0.37 per share, were in-line with expectations. Our net sales increased 2.7%, and comparable sales decreased 0.8%, which is generally consistent with the trends we have experienced over the past year. While we are not satisfied with our top-line results, we continue to see growth in ecommerce and our overall customer base fueled by our investments in capabilities to better serve our customers and gain market share:

Online sales increased to 24% of total net sales, driven by growth of 11% at Nordstrom.com and 19% at Nordstromrack.com/HauteLook.

Net sales for our off-price business increased 8.7% and now represents roughly 30% of total net sales.

Total customer count increased compared with the first quarter ended 2016, reflecting our ongoing efforts to gain new customers.

Through the successful partnership with TD Bank, N.A., which was established in the third quarter results reflected our team’s substantial progress to align to current business trends and make longer-term changes to our business model. The changes we’ve made in the way we operate to enhance the customer experience and increase our productivity contributed to our strong operating performance. In addition, continued focus on inventory led to a positive spread between sales and inventory growth forof 2015, credit card revenues increased $18 during the quarter.

Our ~~third quarter net loss~~local market assets – our stores, salespeople, product and services – represent the core of ~~$10 included~~our brand. Our stores play an important role in attracting and retaining customers, but we also know customers like to shop online and increasingly with mobile devices. We have a ~~non-cash goodwill impairment charge~~high-quality portfolio of ~~$197 related~~122 full-line stores in some of the best malls, which contribute positive cash flow to ~~Trunk Club,~~our business. We have also strategically grown our off-price business, which is positioned as our largest source of new customers, and brings with it a younger customer demographic. Approximately one-third of customers who start shopping at the Rack also cross-shop in our full-price channels. We believe our local market assets and how we ~~acquired~~utilize them gives us a unique, competitive advantage in August 2014. While this business continues to deliver outsized top-line growth, current expectations for future growth and profitability are lower than initial estimates. To better position Trunk Club’s business,the market.

As we ~~are making~~look ahead, we have a number of ~~operational changes~~opportunities to ~~improve the customer experience and improve operating results.~~drive growth:

Total net sales in the quarter grew 7.2% and we had positive comparable sales for both full-price and off-price. Total Company comparable sales for the quarter increased 2.4%, which included one week of our Anniversary Sale shifting into the quarter. The combined second and third quarter comparable sales, which removes the impact of the event shift, increased 0.4%, which was generally consistent with our trends over the past year.

Our strategy is squarely focused on serving customers on their terms with the high-quality product and service they expect from us. We continue to make progress in the areas of supply chain, marketing and technology that enhance the customer experience and improve our operating performance. This quarter, we have executed on a number of initiatives to better serve customers and drive top-line growth.

In our Nordstrom brand, we achieved another milestone related to our Canada expansion with two successful store openings in Toronto, at Eaton Centre and Yorkdale Centre. With Toronto being the fourth largest market in North America, we believe these stores will be among our top volume stores. In the U.S., we had a successful opening of our second store in Austin, Texas, at The Domain.

Our Rack business serves as a great way of attracting new customers to Nordstrom. We expanded our reach with 15 new store openings this fall for a total of 215 Racks. These stores are complemented by our online offering at Nordstromrack.com/HauteLook, which is expected to reach over $700 in sales this year.

A curated product assortment is an integral element of our customer strategy and led to the launch of new collaborations with J. Crew and denim brand Good American. Through these and other partnerships, we are able to give our customers compelling product that has limited distribution.

~~Our website platform has been upgraded enabling us to accelerate the continuous delivery of new customer-facing features.~~ From a ~~productivity standpoint, we’ve prioritized our investments toward modernizing our infrastructure and implementing the highest value customer experiences.~~

~~In May,~~merchandising perspective, we expanded the Nordstrom Rewards loyalty program to enable all customers to earn benefits regardless of how they choose to pay. This represents a meaningful opportunity to directly engage with customers and drives incremental trips and sales. We now have more than 7 million customers in our overall program, up over 40% from a year ago.

~~As customer expectations~~ continue ~~to evolve, it’s even more important for us~~ to focus on ~~how best~~providing customers with newness through a greater emphasis on limited-distribution and relevant product.

Our long-term ambition is for continued double-digit online growth. With more than half of our online customer visits originating from mobile devices, we are pursuing new ways to ~~serve~~connect the physical and digital experiences. For example, we plan to expand our ~~customers. This guides us on how we set priorities, allocate resources~~Reserve Online and ~~accelerate~~Try On In Store program from 6 to 50 stores this year. We have also increased the speed ofand agility around enhancements to our ~~execution~~product pages, navigation and content.

This fall, we have our sixth full-line store opening in Canada – at CF Sherway Gardens in Toronto, and two full-line store relocations in California – at Westfield Century City in Los Angeles and at University Towne Center in San Diego. We have opened six Racks so far in 2017 and have 11 more opening in the fall.

As our business evolves, we will continue to aggressively prioritize our resources to ensure that we ~~provide a relevant, best-in-class experience~~can serve customers with high-quality products and services while achieving profitable growth. Through these ongoing efforts, we believe we will be well-positioned for ~~our customers. We have strong momentum in place and remain committed to continuing our progress to ensure we’re best positioned to achieve profitable growth.~~future success.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

RESULTS OF OPERATIONS

Our reportable segments are Retail and Credit. We analyze our results of operations through earnings before interest and income taxes for our Retail Business and Credit, while interest expense, income taxes and earnings per share are discussed on a total Company basis.

Retail Business

Our Retail Business includes our Nordstrom U.S. and Canada full-line stores, Nordstrom.com, Nordstrom Rack stores, Nordstromrack.com/HauteLook, Trunk Club, Jeffrey boutiques and ~~our~~ Last Chance clearance stores. For purposes of discussion and analysis of our results of operations of our Retail Business, we combine our Retail segment results with revenues and expenses in the “Corporate/Other” column of Note 9:8: Segment Reporting in Item 1 (collectively, the “Retail Business”).

Certain metrics we use to evaluate the Retail Business may not be calculated in a consistent manner among industry peers. Provided below are definitions of metrics we present within our analysis of the Retail Business:

Comparable Sales – sales from stores that have been open at least one full year at the beginning of the year. Total Company comparable sales include sales from our online ~~channels.~~channels

Gross Profit – net sales less cost of sales and related buying and occupancy ~~costs.~~costs

Inventory Turnover Rate – annual cost of sales and related buying and occupancy costs (for all segments) divided by the trailing 4-quarter average ~~inventory.~~inventory

Total Sales Per Square Foot – net sales divided by weighted-average square ~~footage.~~footage

4-wall Sales Per Square Foot – sales for Nordstrom U.S. and Canada full-line stores, Nordstrom Rack stores, Trunk Club clubhouses, Jeffrey boutiques and ~~our~~ Last Chance clearance stores divided by their weighted-average square ~~footage.~~footage

Summary

The following table summarizes the results of our Retail Business:


	Quarter Ended										Quarter Ended
	October 29, 2016					October 31, 2015					April 29, 2017					April 30, 2016
	Amount			% of net sales¹		Amount			% of net sales¹		Amount			% of net sales¹		Amount			% of net sales¹
Net sales		$3,472		100.0	%		$3,239		100.0	%		$3,279		100.0	%		$3,192		100.0	%
Cost of sales and related buying and occupancy costs	(2,262		)	(65.2	%)	(2,140		)	(66.1	%)	(2,154		)	(65.7	%)	(2,099		)	(65.8	%)
Gross profit	1,210			34.8	%	1,099			33.9	%	1,125			34.3	%	1,093			34.2	%
Selling, general and administrative expenses	(990		)	(28.5	%)	(951		)	(29.3	%)	(1,010		)	(30.8	%)	(1,003		)	(31.4	%)
Goodwill impairment	(197		)	(5.7	%)	—			—
Earnings before interest and income taxes		$23		0.6	%		$148		4.6	%		$115		3.5	%		$90		2.8	%

	Nine Months Ended
	October 29, 2016					October 31, 2015
	Amount			% of net sales¹		Amount			% of net sales¹
Net sales		$10,255		100.0	%		$9,953		100.0	%
Cost of sales and related buying and occupancy costs	(6,718		)	(65.5	%)	(6,463		)	(64.9	%)
Gross profit	3,537			34.5	%	3,490			35.1	%
Selling, general and administrative expenses	(3,024		)	(29.5	%)	(2,881		)	(28.9	%)
Goodwill impairment	(197		)	(1.9	%)	—			—
Earnings before interest and income taxes		$316		3.1	%		$609		6.1	%

¹Subtotals and totals may not foot due to rounding.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

Retail Business Net Sales

In our ongoing effort to enhance the customer experience, we are focused on providing customers with a seamless experience across our channels. While our customers may engage with us through multiple channels, we know they value the overall Nordstrom brand experience and view us simply as Nordstrom, which is ultimately how we view our business. ~~To provide additional transparency into~~The following is a summary of our net sales by channel ~~we present the following summary of~~for our Retail Business:


	Quarter Ended						Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Net sales by channel:
Nordstrom full-line stores - U.S.		$1,568			$1,634			$5,128			$5,431			$1,482			$1,582
Nordstrom.com	497			414			1,675			1,518			548			495
Full-price	2,065			2,048			6,803			6,949			2,030			2,077

Nordstrom Rack	958			885			2,777			2,573			954			894
Nordstromrack.com/HauteLook	159			129			482			363			198			166
Off-price	1,117			1,014			3,259			2,936			1,152			1,060

Other retail¹	135			107			384			250			126			121
Retail segment	3,317			3,169			10,446			10,135			3,308			3,258
Corporate/Other	155			70			(191		)	(182		)	(29		)	(66		)
Total net sales		$3,472			$3,239			$10,255			$9,953			$3,279			$3,192

Net sales increase	7.2		%	6.6		%	3.0		%	8.5		%	2.7		%	2.5		%

Comparable sales increase (decrease) by channel:
Nordstrom full-line stores - U.S.	(4.5		%)	(2.2		%)	(6.3		%)	(0.2		%)	(6.4		%)	(7.7		%)
Nordstrom.com	20.1		%	11.4		%	10.3		%	17.6		%	10.9		%	3.1		%
Full-price	0.5		%	0.3		%	(2.6		%)	3.2		%	(2.3		%)	(5.4		%)
Nordstrom Rack	0.9		%	(2.2		%)	0.4		%	(0.2		%)	(0.9		%)	(0.8		%)
Nordstromrack.com/HauteLook	23.2		%	38.8		%	32.9		%	46.1		%	19.1		%	41.8		%
Off-price	3.9		%	2.4		%	4.6		%	4.6		%	2.3		%	4.6		%
Total Company	2.4		%	0.9		%	(0.2		%)	3.5		%	(0.8		%)	(1.7		%)

Sales per square foot:
Total sales per square foot		$119			$116			$355			$361			$110			$111
4-wall sales per square foot	90			93			283			296			85			89
Full-line sales per square foot - U.S.	76			79			247			264			72			76
Nordstrom Rack sales per square foot	127			130			376			389			120			123

¹Other retail includes Nordstrom Canada full-line stores, Trunk Club and Jeffrey boutiques.

Total Company net sales increased ~~7.2%~~2.7% for the quarter and 3.0% for the nine months ended October 29, 2016, compared with the same periods in 2015, while comparable sales increased 2.4% for the quarter and decreased 0.2% for the nine months ended October 29, 2016. Current period results include a favorable comparison resulting from one week of the Anniversary Sale, historically the Company's largest event of the year, shifting into the third quarter. Combined second and third quarter comparable sales, which removes the impact of the event shift, increased 0.4% compared with the same period last year.

~~Total sales per square foot improved for the~~first quarter ended ~~October 29, 2016,~~2017, compared with the same period in ~~2015, due to~~2016, while comparable sales decreased 0.8% for the first quarter ended 2017. During the quarter, we closed one full-line store and opened five Nordstrom Rack stores.

Full-price net sales, which consists of U.S. full-line and Nordstrom.com channels, decreased 2.2% for the first quarter ended 2017, while comparable sales decreased 2.3%. Also on a comparable basis for the quarter, full-price experienced a decrease in the total number of items sold, partially offset by an increase in the average selling price per item sold. The top-performing merchandise categories were Men’s and Women’s Apparel. The West was the top-performing U.S. geographic region.

Off-price net sales, ~~from our online~~which consists of Nordstrom Rack and Nordstromrack.com/HauteLook channels, ~~as well as the shift in the Anniversary Sale. Total sales per square foot decreased~~increased 8.7% for the ~~nine months~~quarter ended ~~October~~April 29, ~~2016~~2017, compared with the same period in ~~2015, due to store expansion. To date~~2016, while comparable sales increased 2.3%. Nordstromrack.com/Hautelook had a comparable sales increase of 19.1%, while Nordstrom Rack decreased 0.9% for the first quarter ended 2017. The average selling price per item sold decreased at Nordstrom Rack, partially offset by an increase in ~~fiscal 2016, we opened 26 stores, relocated three stores~~the total number of items sold. Kids was the top-performing merchandise category and ~~closed one store.~~the West was the top-performing geographic region.

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(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

~~Full-price~~Other retail net sales ~~which consists of U.S. full-line and Nordstrom.com channels,~~ increased ~~0.8% for the quarter and decreased 2.1% for the nine months ended October 29, 2016, compared~~due to new store openings in Canada, partially offset by planned decreases in Trunk Club. Trunk Club’s results align with the ~~same periods in 2015, while on a comparable basis, sales increased 0.5%~~long-term operating plan, which was updated in the third quarter ~~and decreased 2.6% for the nine months ended October 29, 2016. Also on a comparable basis for the quarter, full-price experienced an increase in the number~~ of items sold, partially offset by a decrease in the average selling price per item sold. For the nine months ended October 29, 2016, there was a decrease in the number of items sold, partially offset by an increase in the average selling price per item sold.

Full-price top-performing merchandise categories for the third quarter were Women's Apparel and Men's Apparel. The top-performing merchandise category for the nine months ended October 29, 2016 was Beauty. The West was the top-performing geographic region for the quarter and nine months ended October 29, 2016.

Off-price net sales, which consists of Nordstrom Rack and Nordstromrack.com/HauteLook channels, increased 10.1% for the quarter and 11.0% for the nine months ended October 29, 2016, compared with the same periods in 2015, while on a comparable basis, sales increased 3.9% in the third quarter and 4.6% for the nine months ended October 29, 2016. Nordstrom Rack net sales increased 8.2% and 7.9% for the quarter and nine months ended October 29, 2016, compared with the same periods in 2015, attributable to 21 new store openings since the end of the third quarter of 2015. On a comparable basis for the quarter and nine months ended October 29, 2016, the number of items sold increased at Nordstrom Rack, partially offset by a decrease in the average selling price per item sold. Kids was the top-performing merchandise category for the quarter and nine months ended October 29, 2016. The East was the top-performing geographic region for both the quarter and nine months ended October 29, 2016.

Retail Business Gross Profit

The following table summarizes the Retail Business gross profit (“Retail GP”):


	Quarter Ended						Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Retail gross profit		$1,210			$1,099			$3,537			$3,490			$1,125			$1,093
Retail gross profit as a % of net sales	34.8		%	33.9		%	34.5		%	35.1		%	34.3		%	34.2		%

							October 29, 2016			October 31, 2015
Ending inventory per square foot								$80.94			$83.98			$72.58			$73.87
Inventory turnover rate							4.31			4.32			4.47			4.42

Our Retail GP rate ~~increased 93 basis points~~was relatively flat for the first quarter ended ~~October 29, 2016,~~2017, compared with the same period in ~~2015, reflecting strong~~2016, due to improvement in full-price gross margin performance, partially offset by increased markdowns in the off-price business. Continued inventory execution ~~in addition to leverage of buying and occupancy costs. Our strong inventory execution also~~ led to improvements in both ending inventory per square foot and the inventory turnover rate as of ~~October~~April 29, ~~2016. Our Retail GP decreased 57 basis points for the nine months ended October 29, 2016 primarily due to higher markdowns in the first half of 2016.~~2017.

Retail Business Selling, General and Administrative Expenses

Retail Business selling, general and administrative expenses (“Retail SG&A”) are summarized in the following table:


	Quarter Ended						Nine Months Ended						Quarter Ended
	October 29, 2016			October 31, 2015			October 29, 2016			October 31, 2015			April 29, 2017			April 30, 2016
Retail selling, general and administrative expenses		$990			$951			$3,024			$2,881			$1,010			$1,003
Retail selling, general and administrative expenses as a % of net sales	28.5		%	29.3		%	29.5		%	28.9		%	30.8		%	31.4		%

For the quarter ended ~~October~~April 29, ~~2016, our~~2017, Retail SG&A was relatively flat. Our Retail SG&A rate decreased 8262 basis points primarily due to higher credit chargeback expenses and severance charges in 2016, partially offset by planned increases in technology expenses.

Credit Segment

The Nordstrom credit and debit card products are designed to strengthen customer relationships and grow retail sales by providing loyalty benefits, valuable services and payment products. We believe our credit business allows us to build deeper relationships with our customers by fully integrating the Nordstrom Rewards program with our retail business and providing better service, which in turn fosters greater customer loyalty. Nordstrom cardholders tend to visit our stores more frequently and spend more than non-cardholders. Nordstrom private label credit and debit cards can be used at all of our U.S. retail channels, while Nordstrom Visa credit cards also may be used for purchases outside of Nordstrom (“outside volume”).

Summary

The table below provides a ~~shift~~detailed view of the operational results of our Credit segment, consistent with Note 8: Segment Reporting in Item 1:



	Quarter Ended
	April 29, 2017			April 30, 2016
Credit card revenues, net		$75			$57
Credit expenses	(39		)	(41		)
Earnings before interest and income taxes		$36			$16

Credit and debit card volume:
Outside		$1,001			$1,016
Inside	1,237			1,267
Total volume		$2,238			$2,283

Credit and debit card volume represents sales ~~volume~~on the total portfolio plus applicable sales taxes. The decrease in inside spend was largely attributed to lower debit card usage.

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(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

Credit Card Revenues, net

The following is a summary of our credit card revenues, net:



	Quarter Ended
	April 29, 2017		April 30, 2016
Credit program revenues, net		$72		$54
Other	3		3
Total credit card revenues, net		$75		$57

Pursuant to our program agreement with TD Bank, N.A., we receive our portion of the ongoing credit card revenue, net of credit losses, from both sold and newly generated credit card receivables, which is recorded in credit program revenues, net. Asset amortization and deferred revenue recognition associated with the ~~Anniversary Sale resulting~~assets and liabilities recorded as part of the transaction are also recognized in ~~expense leverage, while Retail SG&A expenses~~credit program revenues, net. Revenue earned under the program agreement is impacted by the credit quality of receivables, both owned and serviced, and factors such as deteriorating economic conditions, declining creditworthiness of cardholders and the execution of account management and collection activities may heighten the risk of credit losses. Other credit card revenues include finance charge revenue, interchange fees and late fees.

Despite lower card volumes, credit card revenues, net increased ~~$39~~$18 for the quarter ended April 29, 2017, compared with the same period in 2016, primarily due to increased ~~fulfillment expenses. For~~finance charges on higher receivable balances associated with providing customers lower minimum payment options. This translated to higher revenues earned under the ~~nine months~~program agreement. There was also a reduction in amortization expenses related to the sale of the credit card portfolio of $7.

Credit Expenses

Total credit expenses were relatively flat for the quarter ended ~~October~~April 29, ~~2016, our Retail SG&A increased 55 basis points and $143~~2017, compared with the same period in 2016.

Total Company Results

Interest Expense, net

Interest expense, net was $48 for the first quarter ended April 29, 2017, compared with $31 for the same period in 2016. The increase was primarily due to ~~increased fulfillment expenses and technology investments.~~

~~Retail Business Goodwill Impairment~~

~~We recognized~~ a ~~goodwill impairment~~net interest expense charge of ~~$197 for the quarter and nine months ended October 29, 2016~~$18 related to ~~Trunk Club~~the $650 debt refinancing completed in the first quarter of 2017 (see Note ~~4: Fair Value Measurements~~2: Debt and Credit Facilities in Item 1).

Income Tax Expense

Income tax expense is summarized in the following table:



	Quarter Ended
	April 29, 2017			April 30, 2016
Income tax expense		$40			$29
Effective tax rate	38.7		%	38.4		%

The effective tax rate remained relatively consistent for the first quarter ended April 29, 2017, compared with the same period in 2016, including the impact of stock compensation and jurisdictional mix of income.

Earnings Per Share

Earnings per share is as follows:



	Quarter Ended
	April 29, 2017		April 30, 2016
Basic		$0.38		$0.27
Diluted		$0.37		$0.26

Earnings per diluted share increased for the first quarter ended April 29, 2017, compared with the same period in 2016, primarily due to $30 of non-operational charges in the first quarter of 2016 related to higher credit chargeback expenses associated with an industry change in liability rules and severance charges due to the realignment of corporate support functions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

~~Credit Segment~~2017 Outlook

As we completed the sale of a substantial majority of our U.S. Visa and private label credit card portfolio to TD on October 1, 2015, and entered into a long-term program agreement under which TD is the exclusive issuer of our U.S. consumer credit cards, our Credit Segment business has changed. With these changes, although we receive a smallerThe Company’s annual outlook expectations for earnings per diluted share ~~of available profits under the program agreement, we no longer fund this portfolio alleviating significant working capital requirements (see Note 2: Credit Card Receivable Transaction in Item 1).~~

~~Summary~~

~~The table below provides a detailed view of the operational~~are unchanged, incorporating first quarter results, ~~of our Credit segment, consistent with Note 9: Segment Reporting in Item 1:~~

Quarter Ended Nine Months Ended
October 29, 2016
October 31, 2015
October 29, 2016
October 31, 2015
Credit card revenues, net
$70

$89

$186

$291
Credit expenses (38 ) (50 ) (121 ) (152 )
Credit transaction, net —
(32 ) —
29
Earnings before interest and income taxes 32
7
65
168
Interest expense¹
—
(3 ) —
(12 )
Earnings before income taxes
$32

$4

$65

$156

Credit and debit card volume²:

Outside
$1,023

$1,059

$3,106

$3,209
Inside 1,239
1,243
4,215
4,242
Total volume
$2,262

$2,302

$7,321

$7,451

¹~~Prior to the credit card receivable transaction, interest expense was allocated to the Credit segment as if it carried~~ debt ~~of up to 80% of the credit card receivables.~~

²~~Volume represents sales on the total portfolio plus applicable taxes.~~

~~Credit Card Revenues, net~~

~~The following is a summary of our credit card revenues, net~~:

Quarter Ended Nine Months Ended
October 29, 2016
October 31, 2015
October 29, 2016
October 31, 2015
Finance charge revenue
$2

$45

$5

$173
Interchange fees 1
15
4
60
Late fees and other —
14
1
43
Credit program revenues, net 67
15
176
15
Total credit card revenues, net
$70

$89

$186

$291

Prior to the close of the credit card receivable transaction on October 1, 2015, credit card revenues included finance charges, interchange fees, late fees and other revenue, recorded net of estimated uncollectible finance charges and fees. Finance charges represent interest earned on unpaid balances while interchange fees are earned from the use of Nordstrom Visa credit cards at merchants outside of Nordstrom. Late fees are assessed when a credit card account becomes past due. We continue to recognize revenue in this manner for the credit card receivables retained subsequent to the close of the credit card receivable transaction.

Following the close of the transaction and pursuant to the program agreement with TD, we receive our portion of the ongoing credit card revenue, net of credit losses, from both the sold and newly generated credit card receivables, which is recorded in credit program revenues, net. Revenue earned under the program agreement is impacted by the credit quality of receivables and factors such as deteriorating economic conditions, declining creditworthiness of cardholdersrefinancing costs and the ~~execution~~impact of ~~account management and collection activities may heighten~~share repurchases in the risk of credit losses. Asset amortization and deferred revenue recognition associated with the assets and liabilities recorded as part of the transaction are also recognized in credit program revenues, net.

~~Credit card revenues, net decreased $19 and $105~~first quarter. Nordstrom’s expectations for ~~the quarter and nine months ended October 29, 2016, compared with the same periods in 2015, primarily due to~~fiscal 2017, which include the impact of the ~~program agreement with TD and the amortization of our beneficial interest asset.~~

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~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~(Continued)~~ ~~(Dollar and share amounts in millions except per share and per square foot amounts)~~

~~Credit Expenses~~

Total credit expenses decreased $12 and $31 for the quarter and nine months ended October 29, 2016, compared with the same periods in 2015 due to a decrease in bad debt expense since the sale of our credit card receivables in the third quarter of 2015.

~~Credit Transaction, net~~

Credit transaction, net of $(32) for the quarter ended October 31, 2015 represents transaction costs associated with the sale. Credit transaction, net of $29 for the nine months ended October 31, 2015 was primarily due to the reversal of the allowance for credit losses on accounts receivable that were reclassified to “held for sale” during the second quarter of 2015, partially offset by transaction costs related to the sale.

~~Total Company Results~~

~~Interest Expense, net~~

~~Interest expense, net of $30 for the third quarter and $90 for the nine months ended October 29, 2016 was relatively flat compared with the same periods in 2015.~~

~~Income Tax Expense~~

~~Income tax expense is summarized in the following table:~~

Quarter Ended Nine Months Ended
October 29, 2016
October 31, 2015
October 29, 2016
October 31, 2015
Income tax expense
$35

$44

$138

$263
Effective tax rate 140.3 % 35.2 % 47.4 % 38.5 %

The effective tax rate increased for the quarter and nine months ended October 29, 2016, compared with the same periods in 2015, primarily due to the non-deductible goodwill impairment charge of $197 related to Trunk Club (see Note 4: Fair Value Measurements in Item 1). Excluding the impact of the Trunk Club impairment, our effective tax rate for the quarter and nine months ended October 29, 2016 would have decreased approximately 2% compared with prior year primarily due to the favorable resolution of certain federal income tax issues.

~~(Loss) Earnings Per Share~~

~~(Loss) Earnings per share (EPS) is as follows:~~

Quarter Ended Nine Months Ended
October 29, 2016
October 31, 2015
October 29, 2016
October 31, 2015
Basic
($0.06 )
$0.43

$0.88

$2.22
Diluted:
Actual
($0.06 )
$0.42

$0.87

$2.17
Adjusted¹

$0.84
N/A

$1.77
N/A

¹~~A reconciliation of adjusted earnings per share, a non-GAAP financial measure, to the closest GAAP measure is included below.~~

(Loss) earnings per diluted share decreased for the quarter and nine months ended October 29, 2016, compared with the same periods in 2015, primarily due to the goodwill impairment charge of $197 related to Trunk Club.

Excluding the goodwill impairment charge, adjusted earnings per diluted share increased for the quarter ended October 29, 2016 compared with diluted EPS for the quarter ended October 31, 2015, primarily due to increased sales and margin and a reduction of credit expenses from 2015 related to the credit transaction. Adjusted earnings per diluted share decreased for the nine months ended October 29, 2016, compared with diluted EPS for the nine months ended October 31, 2015, primarily due to higher fulfillment expenses and planned technology investments supporting our growth initiatives.

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~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~(Continued)~~ ~~(Dollar and share amounts in millions except per share and per square foot amounts)~~

~~Adjusted Earnings and Adjusted Earnings Per Share (Non-GAAP financial measures)~~

We believe that Adjusted Earnings and Adjusted Earnings Per Share provide useful information to investors in evaluating our business performance for the quarter and nine months ended October 29, 2016. The effect of excluding certain items from net (loss) earnings provides management and shareholders an alternative measure to use in evaluating our business performance period over period.

Adjusted Earnings and Adjusted Earnings Per Share are not measures of financial performance under generally accepted accounting principles (“GAAP”) and should be considered in addition to, and not as a substitute for, net (loss) earnings, (loss) earnings per share and diluted earnings per share or other financial measures prepared 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 financial measures calculated under GAAP which are most directly comparable to Adjusted Earnings and Adjusted Earnings Per Share are net (loss) earnings and diluted earnings per share, which are reconciled below:

Quarter Ended October 29, 2016 Nine Months Ended October 29, 2016
Amount
Amount Per Share
Amount
Amount Per Share
Net (loss) earnings¹

($10 )
($0.06 )
$153

$0.87
Trunk Club goodwill impairment 197
1.12
197
1.12
Tax effect of non-deductible charges in interim period²
(39 ) (0.22 ) (39 ) (0.22 )
Adjusted Earnings
$148

$0.84

$311

$1.77

¹Due to the anti-dilutive effect resulting from the reported net loss, the impact of potentially dilutive securities on the per share amounts has been omitted from the quarterly calculation of weighted-average shares for diluted EPS for the quarter ended October 29, 2016. The impact of these potentially dilutive securities has been included in the calculation of weighted-average shares for diluted EPS for the nine months ended October 29, 2016.

²The effect of taxes on the adjustments used to arrive at Adjusted Earnings is calculated based on applying the estimated annual effective tax rate to Adjusted Earnings plus other tax items for each interim period. The impact of this tax effect will reverse in the fourth quarter of 2016.

~~2016 Outlook~~

Excluding the impairment charge, we raised our annual earnings per diluted share expectations to incorporate our third quarter results, which exceeded expectations primarily due to our efforts to realign inventory and improve operational efficiencies. Our expectations for fiscal 201653rd week, are as follows:



	~~Prior Outlook~~	~~Current Outlook, excluding impairment charge~~	Current Outlook
Net sales (percent)	~~2.5~~3 to ~~4.5 increase~~	~~Approximately 3.5 increase~~	~~Approximately 3.5~~4 increase
Comparable sales (percent)	~~1 decrease to 1 increase~~	~~Approximately flat~~	Approximately flat
Retail EBIT ~~(percent)~~	10$780 to ~~15 decrease~~	~~5 to 10 decrease~~	~~30 to 35 decrease~~$840
Credit EBIT	Approximately ~~$80~~	~~Approximately $90~~	~~Approximately $90~~$140
Earnings per diluted share (excluding the impact of any future share repurchases)	$~~2.60~~2.75 to ~~$2.75~~	~~$2.85 to $2.95~~	~~$1.70 to $1.80~~$3.00

The 53rd week is expected to add approximately $200 to total sales and is not included in comparable sales calculations.

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~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

~~(Continued)~~ ~~(Dollar and share amounts in millions except per share and per square foot amounts)~~

Return on Invested Capital (“ROIC”) ~~and Adjusted ROIC~~ (Non-GAAP financial ~~measures)~~measure)

We believe ROIC is a useful financial measure for investors in evaluating the efficiency and effectiveness of our use of capital and believe ROIC is an important component of ~~shareholders'~~shareholders’ return over the long term. In addition, we incorporate ROIC in our executive incentive compensation measures. ~~The effect of excluding certain items from ROIC to arrive at an Adjusted ROIC provides management and shareholders an alternative measure to use in evaluating our results period over period.~~ For the 12 fiscal months ended ~~October~~April 29, ~~2016,~~2017, our ~~ROIC and Adjusted~~ ROIC decreased compared with the 12 fiscal months ended ~~October 31, 2015,~~April 30, 2016, primarily due to reduced ~~earnings.~~earnings largely impacted by the Trunk Club goodwill impairment in the third quarter of 2016, partially offset by a decrease in average total assets. The non-cash impairment charge had a negative impact on ROIC in the current period of 3.2%.

We define ROIC as our net operating profit after tax divided by our average invested capital using the trailing 12-month average. ROIC ~~and Adjusted ROIC are~~is not ~~measures~~a measure of financial performance under ~~GAAP~~generally accepted accounting principles (“GAAP”) and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures may differ from other ~~companies'~~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 ROIC ~~and Adjusted ROIC~~ is return on assets. The following is a reconciliation of the components ~~and adjustments to~~of ROIC and return on assets:


	12 Fiscal Months Ended
	October 29, 2016								October 31, 2015			12 Fiscal Months Ended
	Unadjusted			Adjustments¹		Adjusted						April 29, 2017			April 30, 2016
Net earnings		$333			$197		$530			$675			$371			$518
Add: income tax expense	252			—		252			438			341			321
Add: interest expense	121			—		121			129			140			123
Earnings before interest and income tax expense	706			197		903			1,242			852			962

Add: rent expense	195			—		195			165			212			182
Less: estimated depreciation on capitalized operating leases²	(103		)	—		(103		)	(88		)
Less: estimated depreciation on capitalized operating leases¹												(113		)	(96		)
Net operating profit	798			197		995			1,319			951			1,048

Less: estimated income tax expense	(383		)	—		(383		)	(519		)	(436		)	(402		)
Net operating profit after tax		$415			$197		$612			$800			$515			$646

Average total assets		$7,987			$—		$7,987			$9,362			$7,977			$8,719
Less: average non-interest-bearing current liabilities	(3,105		)	—		(3,105		)	(2,965		)
Less: average deferred property incentives	(541		)	—		(541		)	(536		)
Less: average non-interest-bearing current liabilities²												(3,013		)	(3,039		)
Less: average deferred property incentives and deferred rent liability²												(644		)	(552		)
Add: average estimated asset base of capitalized operating leases³	1,452			—		1,452			1,171			1,570			1,312
Average invested capital		$5,793			$—		$5,793			$7,032			$5,890			$6,440

Return on assets	4.2		%						7.2		%	4.7		%	5.9		%
ROIC/Adjusted ROIC	7.2		%			10.6		%	11.4		%
ROIC												8.7		%	10.0		%

¹~~The adjustment for the 12 fiscal months ended October 29, 2016 includes the goodwill impairment charge of $197 related to Trunk Club (see Note 4: Fair Value Measurements in Item 1).~~

²Capitalized operating leases is our best estimate of the asset base we would record for our leases that are classified as operating if they had met the criteria for a capital lease or we had purchased the property. Asset base is calculated as described in footnote 3 below.

² Balances associated with our deferred rent liability have been classified as long-term liabilities in the current period.

³Based upon the trailing 12-month average of the monthly asset base. The asset base for each month is calculated as the trailing 12 months of rent expense multiplied by eight. The multiple of eight times rent expense is a commonly used method of estimating the asset base we would record for our capitalized operating leases described in footnote 2.1.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

LIQUIDITY AND CAPITAL RESOURCES

We strive to maintain a level of liquidity sufficient to allow us to cover our seasonal cash needs and to maintain appropriate levels of short-term borrowings. We believe that our operating cash flows, available credit facilities and potential future borrowings are sufficient to finance our cash requirements for the next 12 months and beyond.

Over the long term, we manage our cash and capital structure to maximize shareholder return, maintain our financial position, manage refinancing risk and allow flexibility for strategic initiatives. We regularly assess our debt and leverage levels, capital expenditure requirements, debt service payments, dividend payouts, potential share repurchases and other future investments. We believe that as of ~~October~~April 29, ~~2016,~~2017, our existing cash and cash equivalents on-hand of ~~$531,~~$653, available credit facilities of $800 and potential future operating cash flows and borrowings will be sufficient to fund these scheduled future payments and potential long-term initiatives.

Operating Activities

Net cash provided by operating activities decreased ~~$873~~$87 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2016,~~2017, compared with the same period in ~~2015,~~2016, primarily due to ~~$1,297~~ ~~of proceeds~~a tax refund received in ~~2015 related~~2016, as well as increased inventory purchases to support the ~~sale of credit card receivables originated at Nordstrom, partially offset by favorable changes in working capital, which includes our efforts to align inventory levels with sales trends.~~Company’s online growth initiatives.

Investing Activities

Net cash used in investing activities ~~was $578~~decreased $30 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2016,~~2017, compared with ~~net cash provided by investing activities of $69 for~~ the same period in ~~2015,~~2016, primarily due to ~~proceeds~~the Manhattan full-line store installment payment of ~~$890~~ ~~received~~$25 in ~~2015 related to~~ the ~~sale~~first quarter of ~~the credit card receivables originated at third parties. This was partially offset by a decrease~~2016 (see Note 4: Commitments and Contingencies in Item 1) and decreased capital expenditures ~~related to lower spend on full-line store openings and relocations and our East Coast Fulfillment Center, which was completed in the third quarter of 2015.~~

At the beginning of our second quarter, we completed a review of our five-year capital plan, resulting in reduced spend of approximately $400, or 10%, primarily related to new stores and remodels over the next few years.for technology.

Financing Activities

Net cash used in financing activities ~~was $358~~increased $172 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2016,~~2017, compared with ~~$1,820 for~~ the same period in ~~2015. This decrease was largely attributed~~2016, primarily due to increased share repurchase activity.

Short-term and Long-term Borrowing Activity

During the ~~$1.8 billion~~first quarter, we ~~returned to shareholders in 2015 through a special cash dividend~~issued $350 aggregate principal amount of 4.00% senior unsecured notes due March 2027 and ~~repurchases~~$300 aggregate principal amount of ~~common stock~~5.00% senior unsecured notes due January 2044. We recorded debt issuance costs incurred as a result of the ~~sale~~issuance in other financing activities, net in the Condensed Consolidated Statements of Cash Flows in Item 1. With the proceeds of these new notes, we retired our ~~credit card receivables.~~$650 senior unsecured notes that were due January 2018. See Note 2: Debt and Credit Facilities in Item 1 for additional information.

Free Cash Flow (Non-GAAP financial measure)

Free Cash Flow is one of our key liquidity measures, and when used in conjunction with GAAP measures, provides investors with a meaningful analysis of our ability to generate cash from our business. For the ~~nine months~~quarter ended ~~October~~April 29, ~~2016,~~2017, we had Free Cash Flow of ($~~72)~~147) compared with ~~$702~~($125) for the ~~nine months~~first quarter ended ~~October 31, 2015.~~2016.

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 determining non-GAAP financial measures 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 29, 2016
October 31, 2015
Net cash provided by operating activities
$872

$1,745
Less: capital expenditures (625 ) (857 )
Less: cash dividends paid (192 ) (1,116 )
Add: proceeds from sale of accounts receivable originated at third parties —
890
Add: change in credit card receivables originated at third parties —
33
(Less) Add: change in cash book overdrafts (127 ) 7
Free Cash Flow
($72 )
$702

Net cash (used in) provided by investing activities
($578 )
$69
Net cash used in financing activities (358 ) (1,820 )



	Quarter Ended
	April 29, 2017			April 30, 2016
Net cash provided by operating activities		$89			$176
Less: capital expenditures	(153		)	(205		)
Less: cash dividends paid	(62		)	(63		)
Less: change in cash book overdrafts	(21		)	(33		)
Free Cash Flow		($147	)		($125	)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

Credit Capacity and Commitments

As of ~~October~~April 29, ~~2016,~~2017, we had total short-term borrowing capacity of $800 under our senior unsecured revolving credit facility (“revolver”) that expires in April ~~2020, with an option to extend for an additional year.~~2020. Under the terms of our revolver, we pay a variable rate of interest and a commitment fee based on our debt rating. The revolver is available for working capital, capital expenditures and general corporate purposes. We have the option to increase the revolving commitment by up to $200, to a total of $1,000, provided that we obtain written consent from the lenders. From time to time we utilize our commercial paper program to fund working capital needs, which has the effect of reducing our available liquidity under the revolver until repaid.

As of ~~October~~April 29, ~~2016,~~2017, we had no issuances outstanding under our commercial paper program and no borrowings outstanding under our revolver.

Impact of Credit Ratings

Under the terms of our revolver, any borrowings we may enter into will accrue interest for Euro-Dollar Rate Loans at a floating base rate tied to LIBOR, for Canadian Dealer Offer Rate Loans at a floating rate tied to CDOR, and for Base Rate Loans at the highest of: (i) the Euro-Dollar rate plus 100 basis points, (ii) the federal funds rate plus 50 basis points and (iii) the prime rate.

The rate depends upon the type of borrowing incurred, plus in each case an applicable margin. This applicable margin varies depending upon the credit ratings assigned to our long-term unsecured debt. At the time of this report, our long-term unsecured debt ratings, outlook and resulting applicable margin were as follows:



	Credit Ratings	Outlook
Moody’s	Baa1	Stable
Standard & Poor’s	BBB+	Negative



	Base Interest Rate	Applicable Margin
Euro-Dollar Rate Loan	LIBOR	1.02	%
Canadian Dealer Offer Rate Loan	CDOR	1.02	%
Base Rate Loan	various	—

Should the ratings assigned to our long-term unsecured debt improve, the applicable margin associated with any such borrowings may decrease, resulting in a lower borrowing cost under this facility. Should the ratings assigned to our long-term unsecured debt worsen, the applicable margin associated with our borrowings may increase, resulting in a higher borrowing cost under this facility.

Debt Covenants

The revolver requires that we maintain an adjusted debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) leverage ratio of ~~less~~no more than four times (see the following additional discussion of Adjusted Debt to EBITDAR). As of ~~October~~April 29, ~~2016,~~2017, we were in compliance with this covenant.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(Continued) (Dollar and share amounts in millions except per share and per square foot amounts)

Adjusted Debt to EBITDAR (Non-GAAP financial measure)

Adjusted Debt to EBITDAR is one of our key financial metrics, and we believe that our debt levels are best analyzed using this measure. Our goal is to manage debt levels to maintain an investment-grade credit rating and operate with an efficient capital structure. In evaluating our debt levels, this measure provides a reflection of our credit worthiness that could impact our credit rating and borrowing costs. We also have a debt covenant that requires an adjusted debt to EBITDAR leverage ratio of ~~less~~no more than four times. As of ~~October~~April 29, ~~2016,~~2017, our Adjusted Debt to EBITDAR was ~~2.5,~~2.3, compared with ~~2.1~~2.4 as of ~~October 31, 2015. This increase was primarily driven by reduced earnings.~~April 30, 2016.

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 financial measures prepared in accordance with GAAP. Our method of determining non-GAAP financial measures 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 is a reconciliation of the components of Adjusted Debt to EBITDAR and debt to net earnings:


	2016¹			2015¹			2017¹		2016¹
Debt		$2,778			$2,809			$2,742		$2,786
Add: estimated capitalized operating lease liability²	1,561			1,320			1,700		1,459
Less: fair value hedge adjustment included in long-term debt	(14		)	(26		)	—		(21		)
Adjusted Debt		$4,325			$4,103			$4,442		$4,224

Net earnings		$333			$675			$371		$518
Add: income tax expense	252			438			341		321
Add: interest expense, net	121			129			138		123
Earnings before interest and income taxes	706			1,242			850		962

Add: depreciation and amortization expenses	631			557			649		593
Add: rent expense	195			165			212		182
Add: non-cash acquisition-related charges³	197			13
Add: non-cash acquisition-related charges							207		9
EBITDAR		$1,729			$1,977			$1,918		$1,746

Debt to Net Earnings	8.3			4.2			7.4		5.4
Adjusted Debt to EBITDAR	2.5			2.1			2.3		2.4

¹The components of Adjusted Debt are as of ~~October~~April 29, ~~2016~~2017 and ~~October 31, 2015,~~April 30, 2016, while the components of EBITDAR are for the 12 months ended ~~October~~April 29, ~~2016~~2017 and ~~October 31, 2015.~~April 30, 2016.

²Based upon the estimated lease liability as of the end of the period, calculated as the trailing 12 months of rent expense multiplied by eight. The multiple of eight times rent expense is a commonly used method of estimating the debt we would record for our leases that are classified as operating if they had met the criteria for a capital lease or we had purchased the property.

³ ~~Non-cash acquisition-related charges for the 12 months ended October 29, 2016 include the goodwill impairment charge of $197 related to Trunk Club (see Note 4: Fair Value Measurements in Item 1).~~

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We discussed our interest rate risk and our foreign currency exchange risk in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our ~~2015~~2016 Annual Report on Form 10-K filed with the SEC on March ~~14, 2016.~~20, 2017. There have been no material changes to these risks since that time.

Item 4. Controls and Procedures.

~~Disclosure Controls~~DISCLOSURE CONTROLS AND PROCEDURES

On May 4, 2017, the Company filed an 8-K announcing the retirement of Michael G. Koppel as an officer, employee and ~~Procedures~~the Company’s principal financial officer for the purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Blake W. Nordstrom will serve as the Company’s interim principal financial officer until June 2, 2017, at which point Anne L. Bramman will assume the position of Chief Financial Officer and the role of the Company’s principal financial officer.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company performed an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the design and effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective in the timely and accurate recording, processing, summarizing and reporting of material financial and non-financial information within the time periods specified within the SEC’s rules and forms. Our principal executive officer and principal financial officer also concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

~~Changes in Internal Control over Financial Reporting~~CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are subject from time to time to various claims and lawsuits arising in the ordinary course of business, including lawsuits alleging violations of state and/or federal wage and hour and other employment laws, privacy and other consumer-based claims. Some of these lawsuits include certified classes of litigants, or purport or may be determined to be class or collective actions and seek substantial damages or injunctive relief, or both, and some may remain unresolved for several years. We believe the recorded reserves in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimable liabilities. As of the date of this report, we do not believe any currently identified claim, proceeding or litigation, either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters are subject to inherent uncertainties, our view of them may change in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

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

The following is a summary of our ~~third~~first quarter share repurchases:

Total Number
of Shares
Purchased

Average
Price Paid
Per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Approximate Dollar Value
of Shares that May
Yet Be Purchased Under
the Plans or Programs¹

August 2016
(July 31, 2016 to August 27, 2016)²
—

$41.54
—

$750
September 2016
(August 28, 2016 to October 1, 2016) 0.4
50.32
0.4
730
October 2016
(October 2, 2016 to October 29, 2016) 0.2
53.29
0.2
718
Total 0.6

$50.89
0.6



	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
February 2017 (January 29, 2017 to February 25, 2017)	2.3		$44.41	2.3		$928
March 2017 (February 26, 2017 to April 1, 2017)¹	2.2		$44.95	2.2		$420
April 2017 (April 2, 2017 to April 29, 2017)	0.1		$44.73	0.1		$414
Total	4.6		$44.68	4.6

¹On March 1, 2017, our October 1, 2015 Board authorized share repurchase program expired, which had $409 of unused capacity upon program expiration.

In February 2017, our Board of Directors authorized a program to repurchase up to ~~$1,000~~$500 of our outstanding common stock, through ~~March 1, 2017.~~August 31, 2018. The actual ~~number,~~timing, price, manner and ~~timing~~amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable SEC rules.

² ~~In August 2016, the total number of shares repurchased was less than 0.1 shares.~~

Item 6. Exhibits.

Exhibits are incorporated herein by reference or are filed or furnished with this report as set forth in the Exhibit Index on page 2925 hereof.

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SIGNATURES

Pursuant to the requirements 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)

/s/ ~~Michael G. Koppel~~Blake W. Nordstrom
~~Michael G. Koppel~~Blake W. Nordstrom
~~Executive Vice President~~Co-President and Interim Chief Financial Officer
(Principal Financial Officer)

Date:	~~November 29, 2016~~May 31, 2017

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NORDSTROM, INC.

Exhibit Index



Exhibit		Method of Filing
10.1	Underwriting Agreement, dated March 6, 2017, by and between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC and U.S. Bancorp Investments, Inc., as representatives of the several underwriters named therein.	Incorporated by reference from the Registrant’s Form 8-K filed on March 10, 2017, Exhibit 1.1

31.1	Certification of Co-President required by Section 302(a) of the Sarbanes-Oxley Act of 2002	Filed herewith electronically

31.2	Certification of Interim Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002	Filed herewith electronically

32.1	Certification of Co-President and Interim Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith electronically

101.INS	XBRL Instance Document	Filed herewith electronically

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith electronically

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith electronically

101.LAB	XBRL Taxonomy Extension Labels Linkbase Document	Filed herewith electronically

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith electronically

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith electronically

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	October 29, 2016				October 31, 2015
	Minimum		Maximum		Minimum		Maximum
Discount rate	12	%	12	%	12	%	12	%
Monthly payment rate	6	%	11	%	6	%	33	%
Annual credit loss rate	3	%	4	%	1	%	4	%
Annual revenues as a percent to credit card receivables	14	%	18	%	6	%	18	%
Annual expenses as a percent to credit card receivables	5	%	9	%	2	%	9	%



	Quarter Ended October 29, 2016						Nine Months Ended October 29, 2016
	Amount			Amount Per Share			Amount			Amount Per Share
Net (loss) earnings¹		($10	)		($0.06	)		$153			$0.87
Trunk Club goodwill impairment	197			1.12			197			1.12
Tax effect of non-deductible charges in interim period²	(39		)	(0.22		)	(39		)	(0.22		)
Adjusted Earnings		$148			$0.84			$311			$1.77