SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

For the transition period from ___________ to___________

(Exact name of registrant as specified in its charter)

Large ~~accelerated filer~~ þ

Accelerated ~~filer~~ ¨

Non-accelerated ~~filer~~ ¨

Smaller ~~reporting company~~ ¨

Emerging ~~growth company~~ ¨

Common stock outstanding as of ~~November 28, 2018: 167,323,864~~August 29, 2019: 154,914,812 shares

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “goal,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “pursue,” “going forward,” and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, time frames or achievements to be materially different from any future results, performance, time frames or achievements expressed or implied by the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, our anticipated financial outlook for the fiscal year ending February 1, 2020, our anticipated annual total sales rates, our anticipated new store openings in existing, new and international markets, our anticipated Adjusted Return on Invested Capital, trends in our operations and the following:

Strategic and Operational

Economic and External

Legal and Regulatory

Given these risks, uncertainties and other factors, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We hereby qualify our forward-looking statements by these cautionary statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

All references to “Nordstrom,” “we,” “us,” “our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the filing date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

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

CONDENSED CONSOLIDATED BALANCE SHEETS

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

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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”).~~subsidiaries. All intercompany transactions and balances are eliminated in consolidation. The interim Condensed Consolidated Financial Statements have been prepared on a basis consistent in all material respects with the accounting policies described and applied in our ~~2017~~2018 Annual Report, ~~on Form 10-K (“Annual Report”),~~ except as described in Note 2: ~~Revenue,~~Leases, 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 ~~November~~August 3, ~~2018~~2019 and ~~October 28, 2017~~August 4, 2018 are unaudited. The Condensed Consolidated Balance Sheet as of February ~~3, 2018~~2, 2019 has been derived from the audited Consolidated Financial Statements included in our ~~2017~~2018 Annual Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our ~~2017~~2018 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. Our sales are typically higher during our Anniversary Sale in July and the holidays in the fourth quarter. ~~Our Anniversary Sale shifted to the second quarter in 2018 compared with the second and third quarters in 2017.~~ Results for any one quarter are not indicative of the results that may be achieved for a full fiscal year.

~~Estimated Non-recurring Charge~~

During the third quarter of 2018, we recognized a non-recurring estimated credit-related charge (“Estimated Non-recurring Charge”) of $72, or $49 net of tax, resulting from some delinquent Nordstrom credit card accounts being charged higher interest in error. We estimate that less than 4% of Nordstrom cardmembers will receive a cash refund or credit to outstanding balances, with most receiving less than one hundred dollars.NOTE 2: LEASES

We have taken action, including the appropriate steps to address this issue and recorded an estimated charge representing our costs through the third quarter of 2018 which are comprised primarily of amounts we intend to refund to impacted cardmembers. The Estimated Non-recurring Charge increased our selling, general and administrative expenses on our Consolidated Statement of Earnings and other current liabilities on our Consolidated Balance Sheet. Of the $72 Estimated Non-recurring Charge, approximately $16 is a prior period misstatement recognized in the third quarter of 2018. As this out of period adjustment is not material to previously reported amounts in any prior periods, we recorded it all in the third quarter of 2018 instead of revising prior periods presented.

We continue to make investments in evolving the customer experience, with a strong emphasis on integrating technology across our business. To support these efforts, we have acquired two retail technology companies. During the first quarter of ~~2018,~~fiscal 2019, we ~~recorded $11 of goodwill as~~adopted the Lease Standard using the transition method provided in ASU 2018-11. As a result, reporting periods beginning in the first quarter of ~~these acquisitions.~~2019 are presented under the Lease Standard while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 840 — Leases.

Adoption of the Lease Standard did not have a material impact on our Condensed Consolidated Statement of Earnings, Condensed Consolidated Statement of Comprehensive Earnings, Condensed Consolidated Statement of Cash Flows or Condensed Consolidated Statement of Shareholders’ Equity. The impact of adopting the Lease Standard resulted in the following on February 3, 2019:

Upon adoption of the Lease Standard, we record leases, which consist primarily of operating leases, on the Condensed Consolidated Balance Sheet as operating lease ROU assets, current portion of operating lease liabilities and non-current operating lease liabilities. Operating lease liabilities are initially recognized based on the net present value of the fixed portion of our lease and common area maintenance payments from lease commencement through the lease term. To calculate the net present value, we apply an incremental borrowing rate. The incremental borrowing rate is determined using a portfolio approach based on the rate of interest we would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use quoted interest rates obtained from financial institutions as an input to derive our incremental borrowing rate as the discount rate for the lease. We recognize ROU assets based on operating lease liabilities reduced by property incentives. ROU assets are tested for impairment in the same manner as long-lived assets.

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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)

~~Recent Accounting Pronouncements~~We elected the following practical expedients permitted under the Lease Standard:

We lease the land, buildings, or land and buildings for many of our stores, office facilities and Supply Chain Network facilities. We also lease equipment and have service contracts including transportation agreements and warehouse agreements where we control identified assets such as vehicles, warehouse space and equipment and therefore represent embedded leases under the Lease Standard.

The majority of our fixed, non-cancellable lease terms are 15 to 30 years for Nordstrom FLS, approximately 10 years for Nordstrom Rack stores and 5 to 20 years for office facilities and Supply Chain Network facilities. Many of our leases include options that allow us to extend the lease term beyond the initial commitment period. At the commencement of a lease, we generally include only the ~~lease. Additional qualitative and quantitative disclosures will be required~~initial lease term as we have determined that options to ~~give financial statement users information on~~extend are not reasonably certain to occur. The exercise of lease renewal options is generally at our sole discretion. At the ~~amount, timing and judgments related to a reporting entity’s cash flows arising from leases. We plan to adopt this ASU~~renewal of an expiring lease, we reassess our options in the first quarter of 2019 using the additional (and optional) transition method provided in ASU 2018-11, which would allow for application of the guidance at the beginning of the period in which it is adopted by recognizing a cumulative-effect adjustment to the opening balance of retained earnings. We expect the adoption of this standard will result in a material increase in noncurrent assetsagreement and ~~noncurrent liabilities on our Consolidated Balance Sheet. We are currently evaluating additional impacts this guidance may have on our Consolidated Financial Statements.~~

~~In February 2018, the FASB issued ASU No. 2018-02,~~ ~~Income Statement — Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.~~ ~~This new guidance allows a reclassification from accumulated other comprehensive loss to accumulated deficit for~~include all reasonably certain ~~tax effects resulting from the 2017 Tax Cuts and Jobs Act (“Tax Act”), which could not be recorded under prior guidance. We elected to early adopt this standard~~extensions in the ~~first quarter~~measurement of ~~2018~~our lease term.

Most of our leases also require we pay certain expenses, such as common area maintenance charges, real estate taxes and ~~reclassified $5~~other executory costs, the fixed portion of ~~tax impacts resulting from~~which is included in Operating Lease Cost. We recognize Operating Lease Cost, which is primarily included in occupancy costs, on a straight-line basis over the ~~change in~~lease term. Variable lease cost includes payments for variable common area maintenance charges and additional payments based on a percentage of sales, which are recognized when probable. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The following table summarizes the ~~federal corporate tax rate, decreasing the beginning accumulated deficit~~components of lease cost:



	August 3, 2019
	Quarter Ended			Six Months Ended
Operating Lease Cost		$68			$138
Variable lease cost¹	13			25
Sublease income	(2		)	(4		)
Total lease cost		$79			$159

¹ Variable lease cost includes short-term lease cost, which was immaterial for the ~~nine~~quarter and six months ended ~~November~~August 3, ~~2018.~~2019.

Present value of net lease payments¹

¹ Total lease payments exclude $13 of lease payments for operating leases that were ~~redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the Condensed Consolidated Statements~~signed but have not yet commenced.

11 of Shareholders’ Equity for interim financial statements. Under the amendments, an analysis of changes in each caption of shareholders’ equity presented in the Condensed Consolidated Balance Sheets must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which the Condensed Consolidated Statement of Comprehensive Earnings is required to be filed. This final rule is effective for us in the fourth quarter of 2018. With respect to the Condensed Consolidated Statements of Shareholders’ Equity, the SEC provided relief on the effective date until the first quarter of 2019. The adoption of this final rule will not have a material effect on our Consolidated Financial Statements.28

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NORDSTROM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

(Unaudited)

~~NOTE 2: REVENUE~~The following table includes supplemental information:



	Six Months Ended August 3, 2019
Cash paid related to operating lease liabilities		$177
Operating lease interest	47
Operating lease liabilities arising from obtaining ROU assets	2,282
Cash received from developer reimbursements	35
Amortization of developer reimbursements	38

	August 3, 2019
Weighted-average remaining lease term	10 years
Weighted-average discount rate	4.7		%

~~During~~Previous Lease Standard Disclosures

Before fiscal year 2019, we recognized minimum rent expense, net of developer reimbursements, on a straight-line basis over the ~~first quarter of fiscal 2018,~~minimum lease term from the time we ~~adopted ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers,~~ ~~and all related amendments (“Revenue Standard”),using~~controlled the ~~modified retrospective adoption method. Results for reporting periods beginning in~~leased property. For scheduled rent escalation clauses during the ~~first quarter of 2018 are presented under the new Revenue Standard while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605 —~~ ~~Revenue Recognition. Upon adoption,~~lease terms, we recorded minimum rent expense on a ~~net cumulative effect adjustment to decrease beginning accumulated deficit of $55. We do not expect~~straight-line basis over the impact of adopting the new Revenue Standard to be material to our Consolidated Statement of Earnings for the year ended February 2, 2019. The impact of adoption on our Condensed Consolidated Balance Sheet for the period ended November 3, 2018 was as follows:

November 3, 2018
As Reported
Revenue Standard Adjustment
Excluding Impact of Revenue Standard
Assets
Merchandise inventories
$2,614

$46

$2,660
Prepaid expenses and other 366
(130 ) 236
Other assets 305
96
401

Liabilities and Shareholders’ Equity
Other current liabilities 1,202
(17 ) 1,185
Other liabilities 521
110
631
Accumulated deficit (1,777 ) (81 ) (1,858 )

~~Revenue Recognition~~

~~NET SALES~~

We recognize sales revenue net of estimated returns and excluding sales taxes. Revenue from sales to customers shipped from our fulfillment centers, stores and directly from our vendors (“shipped revenues”), which includes shipping revenue when applicable, is recognized at shipping point, the point in time where control has transferred to the customer. Costs to ship orders to customers are expensed as a fulfillment activity at shipping point and commissions from sales at our full-line stores are expensed at the point of sale and both are recorded in selling, general and administrative expenses. Prior to 2018, shipped revenues were recognized upon estimated receipt by the customer and we recorded an estimated in-transit reserve for orders shipped prior to a period’s end, but not yet received by the customer.

We reduce sales and cost of sales by an estimate of customer merchandise returns, which is calculated based on historical return patterns, and record a sales return reserve and an estimated returns asset. Our sales return reserve is classified in other current liabilities and our estimated returns asset, calculated based on the cost of merchandise sold, is classified in prepaid expenses and other on the Condensed Consolidated Balance Sheet. Due to the seasonality of our business, these balances typically increase with higher sales occurring in the last month of a period, such as the Anniversary Sale at the endterms of the ~~second quarter, and decrease in the following period. Prior to 2018, the estimated cost of merchandise returned was netted with our sales return reserve in other current liabilities.~~

~~CREDIT CARD REVENUES, NET~~

~~Credit program revenues, net include our portion of the ongoing credit card revenue, net of credit losses, pursuant to the program agreement with TD Bank N.A. (“TD”).~~

~~Upon adoption of the new Revenue Standard, the remaining unamortized balances of the investment in contract asset and deferred revenue associated~~leases, with the ~~sale of the credit card receivables to TD in 2015~~adjustments accrued as current and ~~2017 were eliminated as part of a cumulative-effect adjustment, reducing the opening balance of accumulated deficit for 2018. As a result, the asset amortization~~non-current deferred rent and deferred revenue recognition are no longer recorded in credit card revenues, net. Prior to 2018, the investment in contract asset was classified in prepaid expenses and other and other assets, while the deferred revenue was classifiedincluded in other current liabilities and other liabilities on ~~the~~our Condensed Consolidated Balance Sheet. Contingent rental payments, typically based on a percentage of sales, were recognized in rent expense primarily in occupancy costs when payment of the contingent rent was probable.

The following table summarizes rent expense for the quarter and six months ended August 4, 2018, before adoption of the Lease Standard:



	August 4, 2018
	Quarter Ended			Six Months Ended
Minimum rent		$78			$159
Percentage rent	3			5
Property incentives	(19		)	(40		)
Total rent expense		$62			$124

The rent expense above does not include common area maintenance charges, real estate taxes and other executory costs, which were $37 for the quarter and $74 for the six months ended August 4, 2018.

The following table summarizes future minimum lease payments as of February 2, 2019, before adoption of the Lease Standard:



Fiscal year	Operating Leases
2019		$322
2020	313
2021	294
2022	271
2023	249
Thereafter	1,160
Total minimum lease payments		$2,609

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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)

~~LOYALTY PROGRAM~~

We evolved our customer loyalty program with the launch of The Nordy Club in October 2018, which incorporates a traditional point system and the favorite benefits of our previous program, while providing customers exclusive access to products and events, enhanced services, personalized experiences and more convenient ways to shop. Customers accumulate points based on their level of spending and type of participation. Upon reaching certain point thresholds, customers receive Nordstrom Notes (“Notes”), which can be redeemed for goods or services offered at Nordstrom full-line stores, Nordstrom.com, Nordstrom Rack and Nordstromrack.com/HauteLook. Nordstrom cardmembers can also earn rewards at Trunk Club. The Nordy Club member benefits will vary based on the level of customer spend, and include Personal Double Points days, shopping and fashion events and the ability to Reserve Online and Try In Store. Customers who participate in The Nordy Club loyalty program through our credit and debit cards receive additional benefits, and can vary depending on the level of spend, including early access to the Anniversary Sale, Nordstrom to You (an in-home stylist) and incremental accumulation of points towards Notes. For more information regarding The Nordy Club, visit Nordstrom.com/NordyClub.

As our customers earn points and Notes in the loyalty program, a portion of underlying sales revenue is deferred. We recognize the revenue and related cost of sale when the Notes are ultimately redeemed. The amount of revenue deferred is based on an estimated stand-alone selling price of the points, Notes and other loyalty benefits, such as alterations, and included in other current liabilities on the Condensed Consolidated Balance Sheet. Other benefits of the loyalty program, including shopping and fashion events, are recorded in selling, general and administrative expenses as these are not a material right of the program.

Our outstanding performance obligation for The Nordy Club consists primarily of unredeemed points and Notes and was $154 as of November 3, 2018. Almost all Notes are redeemed within six months of issuance. We record breakage revenue of unused points and unredeemed Notes based on expected customer redemption. We estimate, based on historical usage, that 6% of Notes will be unredeemed and recognized as revenue. Prior to 2018, we estimated the net cost of Notes that will be issued and redeemed and recorded this cost as rewards points were accumulated. These costs, as well as reimbursed alterations, were recorded in cost of sales as we provided customers with products and services for these rewards.

~~GIFT CARDS~~

We record deferred revenue from the sale of gift cards at the time of purchase. As gift cards are redeemed, we recognize revenue and reduce our contract liability. Though our gift cards do not have an expiration date, we include this deferred revenue in other current liabilities on the Condensed Consolidated Balance Sheet as customers can redeem gift cards at any time.

As of November 3, 2018, our outstanding performance obligation for unredeemed gift cards was $296. Almost all gift cards are redeemed within two years of issuance. We record breakage revenue on unused gift cards based on expected customer redemption. We estimate, based on historical usage, that 2% will be unredeemed and recognized as revenue. Prior to 2018, gift card breakage was recorded in selling, general and administrative expenses and was estimated based on when redemption was considered remote.NOTE 3: REVENUE

Contract Liabilities

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



	Contract Liabilities
Opening balance as of February 4, 2018		$498
Balance as of May 5, 2018	460
Balance as of August 4, 2018	445
~~Ending balance~~
Balance as of ~~November~~February 2, 2019	548
Balance as of May 4, 2019	504
Balance as of August 3, ~~2018~~2019	~~450~~488

~~The amount of revenue~~Revenues recognized from our beginning contract liability balance ~~was $116~~were $138 and $231 for the ~~third~~ quarter ~~of 2018~~ and ~~$272~~six months ended August 3, 2019 and $77 and $228 for the ~~nine~~quarter and six months ended ~~November 3,~~August 4, 2018.

Disaggregation of Revenue

Digital sales as a % of total net sales¹

¹In 2019, we updated our digital sales calculation, including our prior year digital sales calculation for comparability. Although we do not expect the change to be material for the full year, some timing differences will occur between the second and third quarters.

The following table summarizes the percent of net sales by merchandise category:



	Quarter Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Women’s Apparel	32	%	32	%	32	%	33	%
Shoes	23	%	23	%	24	%	24	%
Men’s Apparel	16	%	17	%	16	%	16	%
Women’s Accessories	11	%	11	%	11	%	11	%
Beauty	11	%	11	%	11	%	11	%
Kids’ Apparel	4	%	4	%	4	%	3	%
Other	3	%	2	%	2	%	2	%
Total net sales	100	%	100	%	100	%	100	%

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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)

~~Disaggregation of Revenue~~

~~The following table summarizes our disaggregated net sales:~~

Digital sales as % of total net sales²

¹ We present our sales in the way that management views our results internally, including presenting 2018 under the new Revenue Standard and allocating our sales return reserve and the loyalty related adjustments to Full-Price and Off-Price. Amounts in 2018 related to adoption of the new Revenue Standard have not been recast for any prior periods due to the modified retrospective method of adoption. For 2017, Other primarily included unallocated sales return, in-transit and loyalty related adjustments necessary to reconcile sales by business to total net sales. If we applied the sales return reserve allocation and the loyalty related adjustments to the third quarter and nine months ended October 28, 2017, Full-Price net sales would increase $155 and decrease $115, Off-Price net sales would decrease $16 and $45 and Other net sales would decrease $139 and increase $160. We typically see timing shifts between the second and third quarters primarily due to the seasonal timing of the Anniversary Sale in July.

²Digital sales are online sales and digitally assisted store sales which include Buy Online, Pickup in Store (“BOPUS”), Reserve Online, Try on in Store (Store Reserve) and Style Boards, a digital selling tool.

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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 3:4: SEGMENT REPORTING

Retail segment EBIT¹

Corporate/Other loss before interest and income taxes¹

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Retail segment earnings before interest and income taxes¹

$171

$152

$701

$696
Corporate/Other (loss) earnings before interest and income taxes¹
(66 ) 56
(197 ) (121 )
Interest expense, net (25 ) (28 ) (81 ) (104 )
Earnings before income taxes
$80

$180

$423

$471

¹~~We present our segment results in~~ Certain reclassifications were made to fiscal 2018 amounts to conform with current period presentation, which is the way that management views our results internally, including allocating our sales return reserve and the loyalty related adjustments to Full-Price and Off-Price in 2018. Amounts in 2018 reflect the adoption of the new Revenue Standard, whereas 2017 amounts have not been recast due to the modified retrospective method of adoption described ininternally.

For information about disaggregated revenues, see Note 2:3: Revenue. If we applied the sales return reserve allocation and the loyalty related adjustments to the third quarter and nine months ended October 28, 2017, Retail segment earnings before interest and income taxes would increase $78 and $10 and Corporate/Other earnings before interest and income taxes would decrease $78 and Corporate/Other loss before interest and income taxes would increase $10. We typically see timing shifts between the second and third quarters primarily due to the seasonal timing of the Anniversary Sale in July.

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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 4:5: DEBT AND CREDIT FACILITIES

November 3, 2018

February 3, 2018

October 28, 2017
Secured
Mortgage payable, 7.68%, due April 2020
$12

$17

$20
Other —
1
1
Total secured debt 12
18
21

Unsecured
Net of unamortized discount:
Senior notes, 4.75%, due May 2020 500
500
499
Senior notes, 4.00%, due October 2021 500
500
500
Senior notes, 4.00%, due March 2027 349
349
349
Senior debentures, 6.95%, due March 2028 300
300
300
Senior notes, 7.00%, due January 2038 146
146
146
Senior notes, 5.00%, due January 2044 894
892
891
Other¹
(15 ) 32
32
Total unsecured debt 2,674
2,719
2,717

Total long-term debt 2,686
2,737
2,738
Less: current portion (8 ) (56 ) (57 )
Total due beyond one year
$2,678

$2,681

$2,681

¹Other ~~unsecured debt~~primarily includes ~~our~~ deferred bond issue ~~costs as of November 3, 2018.~~costs. As of ~~February 3,~~August 4, 2018, ~~and October 28, 2017,~~ Other also included our Puerto Rico unsecured borrowing facility ~~partially offset by deferred bond issue costs.~~

As of ~~November~~August 3, ~~2018,~~2019, we had total short-term borrowing capacity ~~available~~ of ~~$800. In September 2018, we renewed our existing~~ $800 ~~senior unsecured revolving credit facility (“revolver”), extending~~under the ~~expiration from April 2020 to~~Revolver that expires in September 2023. ~~Our revolver~~The Revolver contains customary representations, warranties, covenants and terms, ~~which are substantially similar to our 2015 revolver. Under the terms of our revolver, we pay~~including paying a variable rate of interest and a commitment fee based on our debt rating. The ~~revolver~~Revolver is available for working capital, capital expenditures and general corporate purposes. Provided that we obtain written consent from the lenders, we have the option to increase the ~~revolving commitment~~Revolver by up to $200, to a total of $1,000, and ~~two~~2 options to extend the ~~revolving commitment~~Revolver by one year.

The ~~revolver~~Revolver requires that we maintain an adjusted debt to ~~earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”)~~EBITDAR leverage ratio of no more than ~~four~~4 times. The Revolver’s ratio calculation methodology has not been impacted by the adoption of the new Lease Standard. As of ~~November~~August 3, ~~2018,~~2019, we were in compliance with this covenant.

Our $800 commercial paper program allows us to use the proceeds to fund operating cash requirements. Under the terms of the commercial paper agreement, we pay a rate of interest based on, among other factors, the maturity of the issuance and market conditions. The issuance of commercial paper has the effect, while it is outstanding, of reducing available liquidity under the ~~revolver~~Revolver by an amount equal to the principal amount of commercial paper.

As of August 3, 2019, we had 0 issuances outstanding under our commercial paper program and 0 borrowings outstanding under our Revolver.

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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)

Our wholly owned subsidiary in Puerto Rico maintained a $52 unsecured borrowing facility to support our expansion into that market. Borrowings on this facility incurred interest at an annual rate based upon LIBOR plus 1.275% and also incurred a fee based on any unused commitment. ~~During the third quarter,~~In September 2018, we fully repaid $47 outstanding on this facility ~~which was included~~and did not renew the facility upon expiration in the ~~current portion~~fourth quarter of ~~long-term debt. In November 2018, subsequent to quarter end, this facility expired.~~2018.

NOTE 5:6: 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 ~~Not~~ Measured at ~~Fair~~Carrying Value

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

Long term-debt is recorded at carrying value. If long-term ~~debt.~~

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 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. There were no0 material impairment charges for these assets for the ~~nine~~six months ended ~~November~~August 3, ~~2018~~2019 and ~~October 28, 2017.~~August 4, 2018.

NOTE 6:7: COMMITMENTS AND CONTINGENCIES

Plans for our Nordstrom NYC store, which we ~~currently~~ expect to open in October 2019, ultimately include owning a condominium interest in a mixed-use tower and leasing certain nearby properties. As of ~~November~~August 3, ~~2018,~~2019, we had approximately ~~$289~~$327 of fee interest in land, which is expected to convert to the condominium interest once the ~~store~~mixed-use tower 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.

NOTE 7:8: SHAREHOLDERS’ EQUITY

Under the February 2017 program until it expired and then under the August 2018 program, we repurchased 2.9 shares of our common stock under both programs for an aggregate purchase price of $157 during the nine months ended November 3, 2018. We had ~~$1,438~~$707 remaining in share repurchase capacity as of ~~November~~August 3, ~~2018.~~2019. The actual timing, price, manner and amounts of future share repurchases, if any, will be subject to market and economic conditions and applicable SEC rules.

In ~~November 2018,~~August 2019, subsequent to quarter end, we declared a quarterly dividend of $0.37 per share, which will be paid on ~~December 11, 2018~~September 16, 2019 to ~~holders~~shareholders of record asat the close of ~~November 26, 2018.~~business on August 30, 2019.

Table of Contents

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 8:9: STOCK-BASED COMPENSATION

In May 2019, our shareholders approved the adoption of the 2019 Plan, which replaced the 2002 Plan and the 2010 Plan. The 2019 Plan authorizes the grant of stock options, PSU, RSUs, stock appreciation rights and both restricted and unrestricted shares of common stock to employees and nonemployee directors. The aggregate number of shares to be issued under the 2019 Plan may not exceed 9.5 plus any shares currently outstanding under the 2010 Plan. No future grants will be made under the 2002 Plan and the 2010 Plan.

The following table summarizes our stock-based compensation expense:



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
RSUs		$14			$22			$28			$40
Stock options	3			3			7			6
Other¹	3			3			5			5
Total stock-based compensation expense, before income tax benefit	20			28			40			51
Income tax benefit	(5		)	(7		)	(10		)	(13		)
Total stock-based compensation expense, net of income tax benefit		$15			$21			$30			$38

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Restricted stock units
$17

$13

$57

$40
Stock options 3
5
9
13
Other 1
1
6
6
Total stock-based compensation expense, before income tax benefit 21
19
72
59
Income tax benefit (5 ) (7 ) (18 ) (22 )
Total stock-based compensation expense, net of income tax benefit
$16

$12

$54

$37
¹Other stock-based compensation expense includes PSUs, ESPP and nonemployee director stock awards.

The following table summarizes our grant allocations:



	Six Months Ended
	August 3, 2019			August 4, 2018
	Granted	Weighted-average grant-date fair value per unit		Granted	Weighted-average grant-date fair value per unit
RSUs	1.1		$41	2.1		$49
Stock options	1.0		$15	—	—
PSUs	0.3		$42	—	—

Nine Months Ended
November 3, 2018 October 28, 2017
Granted
Weighted-average grant-date fair value per unit
Granted
Weighted-average grant-date fair value per unit
Restricted stock units 2.2

$49
1.9

$42
Stock options —

—
0.3

$16
Performance share units —
—
0.1

$40
Under our deferred and stock-based compensation plan arrangements, the Company issued 0.3 and 1.4 shares of common stock during the quarter and six months ended August 3, 2019 and 1.2 and 2.3 shares during the quarter and six months ended August 4, 2018.

NOTE 9:10: EARNINGS PER SHARE

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Net earnings
$67

$114

$316

$286

Basic shares 168.8
166.6
168.1
166.7
Dilutive effect of common stock equivalents 3.6
2.2
2.9
2.1
Diluted shares 172.4
168.8
171.0
168.8

Earnings per basic share $0.40
$0.68
$1.88
$1.72
Earnings per diluted share $0.39
$0.67
$1.85
$1.70

Anti-dilutive common stock equivalents 1.8
10.0
5.5
10.8

Table of Contents

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

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

~~CAUTIONARY STATEMENT~~OVERVIEW

~~Certain statements~~In the second quarter of 2019, we delivered strong bottom-line results, demonstrating our inventory and expense execution. We exited the quarter in ~~this Quarterly Report on Form 10-Q contain~~a favorable inventory position and made significant strides in productivity. While net earnings of $141, or ~~may suggest “forward-looking” information (as defined~~$0.90 per diluted share, were ahead of our expectations, our net sales decrease of 5.1% was around the low end of our expectations. This reflected a challenging start to the quarter as well as softer performance for our Anniversary Sale and Off-Price business.

Last quarter, we emphasized our top-line focus related to loyalty, digital marketing and merchandising. We saw positive outcomes in the ~~Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties including, but not limited to, our anticipated financial outlook for~~second quarter from the fiscal year ending February 2, 2019, our anticipated annual total and comparable sales rates, our anticipated new store openings in existing, new and international markets, our anticipated Return on Invested Capital and trends in our operations. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Our actual future results may differ materially from historical results or current expectations depending upon factors including, but not limited to:

~~Strategic and Operational~~

Our Anniversary Sale is a unique event in our Full-Price business featuring new merchandise at reduced prices for a limited time. Our strategy for 2019 focused on three objectives: increase customer satisfaction, drive sales and improve the economics of the event. While we are seeing early indications that the event resonated well with customers and that we improved our operational metrics, sales were softer than expected. Based on feedback from our customers, we curated our offering to highlight their favorite brands. This resulted in better sell-through, which is expected to benefit merchandise margins in the third quarter. However, we did not have enough depth in key items, and we are addressing this in the second half of the year, particularly for the holidays.

In Off-Price, we are amplifying our marketing efforts and making strategic inventory investments to achieve a constant flow of newness. To drive traffic, we recently launched our Nordstrom Rack television campaign and are increasing the number and quality of flash sale events on HauteLook. In addition, we are being opportunistic in the marketplace by accelerating fall merchandise receipts.

Our expense performance exceeded expectations. We continued to bend the expense curve, tracking ahead of our annual expense savings plan of $150 to $200. These efficiency initiatives include realignment of our support structures in stores, end-to-end process improvements in supply chain and technology, and lower discretionary spend.

In this dynamic retail environment, we are evolving our business to enable a seamless shopping journey. Our local market strategy leverages our physical and digital assets to provide greater access to merchandise selection, with faster delivery and at a ~~differentiated~~lower cost to us. Our goal is to gain share in our most important markets by increasing customer engagement through services and ~~seamless experience across all Nordstrom channels,~~leveraging inventory.

Our framework to drive shareholder value remains consistent: gain market share, improve profitability and returns, and maintain a disciplined capital allocation approach. We are focused on our priorities to drive top-line results, improve profitability and execute key strategies to enhance the customer experience. We will continue to evolve our business ~~model, including development~~to better serve customers on their terms, no matter how they choose to shop.

17 of applications for electronic devices, improvement of customer-facing technologies, timely delivery of products purchased digitally, enhancement of inventory management systems, greater and more fluid inventory availability between our digital channels and retail store locations, increased reliance on third parties and greater consistency in marketing and pricing strategies, as well as our ability to manage the costs associated with this evolving business model,28

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

our ability to properly balance our investments in existing and new store locations, especially our investments in our Nordstrom Men’s Store NYC and Nordstrom NYC and our Los Angeles market integration,

~~successful execution of our information technology strategy, including engagement with third-party service providers,~~

~~our ability to effectively utilize internal and third-party data in strategic planning and decision making,~~

our ability to maintain or expand our presence, including timely completion of construction associated with new, relocated and remodeled stores and fulfillment and distribution centers, all of which may be impacted by third parties and consumer demand,

~~efficient and proper allocation of our capital resources,~~

~~effective inventory management processes and systems, fulfillment and supply chain 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 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,

~~our ability to safeguard our reputation and maintain relationships with our vendors and third-party service providers,~~

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

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

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

~~market fluctuations, increases in operating costs, exit costs and overall liabilities and losses associated with owning and leasing real estate,~~

potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames,

~~compliance with debt and operating covenants, availability and cost of credit, changes in our credit rating and changes in interest rates,~~

~~the timing, price, manner and amounts of future share repurchases by us, if any, or any share issuances by us,~~

~~Economic and External~~

~~the impact of the seasonal nature of our business and cyclical customer spending,~~

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

~~the impact of economic, environmental 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 and supply chain disruptions, including the effects of tariffs, or the prospects of these events and the resulting impact on consumer spending patterns or information technology systems and communications,

~~Legal and Regulatory~~

our compliance with applicable domestic and international laws, regulations and ethical standards, including those related to 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, health care, and tax reforms,~~

~~the impact of changes in accounting rules and regulations, changes in our interpretation of the rules or regulations, or changes in underlying assumptions, estimates or judgments.~~

~~16 of 30~~

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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 amounts)~~

These and other factors, including those factors described in Part I, “Item 1A. Risk Factors” in our 2017 Annual Report on Form 10-K and Part II, “Item 1A. Risk Factors” in subsequent Quarterly Reports, including this Quarterly Report on Form 10-Q, 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, except as may be required by law.

~~OVERVIEW~~

With our aspiration to be the best fashion retailer in a digital world, we are focused on better serving customers through our three strategic pillars: providing a compelling product offering, delivering exceptional services and experiences, and leveraging the strength of the Nordstrom brand.

For the third quarter, net earnings were $67, or $0.39 per diluted share, which included the Estimated Non-recurring Charge of $72, or $0.28 per diluted share (see Note 1: Basis of Presentation in Item 1). We sincerely apologize to cardmembers impacted by the Estimated Non-recurring Charge. We realize customers and shareholders place a great deal of trust in us, and that is a responsibility we take seriously. Excluding this charge, earnings were slightly ahead of our expectations, and we expect to achieve an inflection point for profitable growth this year. Our net sales grew 3.0% for the third quarter and comparable sales increased 2.3%, reflecting ongoing strength in our Full-Price and Off-Price businesses.

~~During the third quarter, we demonstrated ongoing progress in executing our strategy and delivering on our long-term financial commitments:~~

Our early investments in digital capabilities are paying off. The combination of our digital capabilities with our local market assets have enabled us to be at the forefront of serving customers on their terms. We recently celebrated the 20th anniversary of Nordstrom.com, which has grown to approximately 2.5 million visitors per day and ranks among the top 10 e-commerce retailers in the United States. Our overall digital sales increased by 20% on a year-to-date basis and made up 30% of our business.

Our generational investments continue to scale, contributing approximately half of our year-to-date sales increase. Nordstromrack.com/HauteLook is on track to exceed $1 billion in sales this year. Trunk Club has delivered sales growth of nearly 50% year-to-date, demonstrating successful efforts to improve the customer offer. We continued our expansion into Canada with three additional Nordstrom Racks and expect further synergies from having a Full-Price and Off-Price presence. In the Manhattan market, we’re building on our learnings from our men’s store opening last spring as we plan our Nordstrom NYC store opening in the fall of 2019.

Our strategic brand partnerships enable us to offer compelling products to customers and strengthen our product margins. This includes collaborations with fashion influencers, such as Something Navy and Atlantic-Pacific, to provide inspiration and a sense of discovery for customers. In the third quarter, strategic brand sales grew 8%, making up approximately 45% of Full-Price sales.

Our local market strategy leverages inventory, along with our digital and physical capabilities, to serve customers in new and relevant ways. Beginning in Los Angeles, our largest market, we have launched “Get It Fast”, a new feature that provides a significantly expanded view of merchandise selection that is available next day. In addition, we opened two additional Nordstrom Local neighborhood hubs, in Brentwood and downtown, to provide customers with more convenient access to our services.

Our loyalty program is another way for us to leverage the strength of the Nordstrom brand and engage with customers in more personalized ways. In October, we introduced The Nordy Club, an evolution of our loyalty program that offers enhanced services and personalized experiences, as well as a faster earn rate for credit cardmembers.

We remain focused on driving higher shareholder returns through three key deliverables: growing market share, improving profitability and shareholder returns, and continuing our disciplined capital allocation approach. We believe our combination of digital capabilities and local market assets - our people, product, and place - make us uniquely positioned for success in the market. We are well-positioned to execute against our long-term plans and deliver a differentiated customer experience.

~~17 of 30~~

~~Table of Contents~~

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

(Continued) (Amounts in millions except per share amounts)

RESULTS OF OPERATIONS

In our ongoing effort to enhance the customer experience, we are focused on providing customers with a seamless experience across our channels. We invested early in our ~~omni-channel~~Omni-channel capabilities, integrating our operations, merchandising and technology across our stores and online, in both our Full-Price and Off-Price businesses. 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. We have one Retail reportable segment ~~in 2018, Retail,~~ and analyze our results on a total ~~Company~~company basis.

We ~~may not calculate certain metrics used to evaluate~~measure our ~~business in a consistent manner among industry peers. Provided below are definitions of metrics~~performance through market share, operational and net sales metrics. As this is how we ~~present within~~measure our ~~analysis:~~

~~Comparable Sales~~ – ~~sales from stores that have been open at least one full year at the beginning of the year~~

~~Comparable sales include sales from our online channels~~performance, and ~~actual returns. Comparable sales do not include our estimate for sales return reserve.~~

~~Due to the 53rd week in 2017, our 2018~~as comparable sales ~~are reported on a like-for-like basis with no impact from calendar shifts or revenue recognition~~

Digital Sales – online sales and digitally assisted store sales which include Buy Online, Pickup in Store (“BOPUS”), Reserve Online, Try on in Store (Store Reserve) and Style Board, a digital selling tool

~~Gross Profit –~~growth is expected to approximate net sales ~~less cost of sales and related buying and occupancy costs~~

~~Inventory Turnover Rate – trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory~~growth in 2019, we only report changes in net sales.

Net Sales

During the first quarter of 2018, we adopted the new Revenue Standard using the modified retrospective adoption method (see Note 2: Revenue in Item 1). Results beginning in the first quarter of 2018 are presented under the new Revenue Standard, while prior period amounts are not adjusted. Also beginning in 2018, we aligned our sales presentation with how we view the results of our operations internally and how our customers shop with us, by our Full-Price and Off-Price businesses.

~~Full-Price – Nordstrom U.S. full-line stores, Nordstrom.com, Canada, Trunk Club, Jeffrey and Nordstrom Local~~

~~Off-Price – Nordstrom U.S. Rack stores, Nordstromrack.com/HauteLook and Last Chance clearance stores~~

The following table summarizes net sales ~~and comparable~~by business:



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Net sales by business:
Full-Price		$2,530			$2,707			$4,657			$4,948
Off-Price	1,248			1,273			2,470			2,502
Total net sales		$3,778			$3,980			$7,127			$7,450

Net sales increase (decrease) by business:
Full-Price	(6.5		%)	(5.0		%)	(5.9		%)	(1.2		%)
Off-Price	(1.9		%)	7.0		%	(1.3		%)	6.9		%
Total Company	(5.1		%)	7.1		%	(4.3		%)	6.5		%

Digital sales as % of total net sales¹	30		%	28		%	31		%	28		%

Total Company net sales decreased 5.1% and 4.3% for the second quarter and ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, compared with the same periods in ~~fiscal 2017:~~

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Net sales by business¹:

Full-Price
$2,367

$2,173

$7,314

$7,179
Off-Price 1,281
1,178
3,783
3,519
Other —
190
—
(161 )
Total net sales
$3,648

$3,541

$11,097

$10,537

Comparable sales increase (decrease) by business:
Full-Price 0.4 % (1.9 %) 1.9 % (0.9 %)
Off-Price 5.8 % 0.8 % 3.4 % 2.0 %
Total Company 2.3 % (0.9 %) 2.4 % 0.1 %

Digital sales as % of total net sales 26 % 23 % 30 % 26 %

¹ ~~We present~~2018. The decrease in second quarter sales reflected softer performance for the Anniversary Sale and Off-Price business. However, we saw positive outcomes from the execution of our loyalty and digital marketing programs and continue to re-balance our merchandise assortment with customer demand. Digital sales increased 4% in the ~~way that management views~~second quarter of 2019 and increased 6% in the six months ended August 3, 2019, compared with the same periods in 2018. During the six months ended August 3, 2019, we opened four Nordstrom Rack stores and closed two FLS locations.

Full-Price net sales decreased 6.5% and 5.9% for the second quarter and six months ended August 3, 2019, compared with the same periods in 2018. Our Anniversary Sale in the second quarter of 2019 experienced softer sales performance over the prior year, but we saw improvement in operational metrics. Full-Price sales reflected a decrease in the number of items sold, partially offset by an increase in average selling price per item sold for the quarter and six months ended August 3, 2019. The top-performing merchandise category was Beauty for the second quarter of 2019. The top-performing merchandise categories were Shoes and Accessories for the six months ended August 3, 2019.

Off-Price net sales decreased 1.9% and 1.3% for the second quarter and six months ended August 3, 2019, compared with the same periods in 2018. Off-Price sales reflected a decrease in the average selling price per item sold for the second quarter of 2019. For the six months ended August 3, 2019, Off-Price sales reflected a decrease in average selling price per item sold partially offset by an increase in number of items sold. Women’s and Men’s were the top-performing merchandise categories for the second quarter of 2019. Women’s was the top performing merchandise category for the six months ended August 3, 2019.

Credit Card Revenues, Net

TD is the exclusive issuer of our ~~results internally, including presenting~~consumer credit cards and we perform account servicing functions. Credit card revenues, net include our portion of the ongoing credit card revenue, net of credit losses, pursuant to our program agreement with TD. Credit card revenues, net was $94 for the second quarter, compared with $87 for the same period in 2018 ~~under~~and $188 for the ~~new Revenue Standard~~six months ended August 3, 2019, compared with $179 for the same period in 2018. The increases of $7 and ~~allocating our sales return reserve~~$9 for the quarter and six months ended August 3, 2019 were primarily a result of growing the ~~loyalty~~ related ~~adjustments to Full-Price~~receivables and ~~Off-Price. For 2017, Other primarily included unallocated sales return, in-transit and loyalty related adjustments necessary to reconcile sales by business to total net sales.~~revenues.

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

(Continued) (Amounts in millions except per share amounts)

~~Total Company net sales increased 3.0% and 5.3%~~Gross Profit

The following table summarizes gross profit:



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Gross profit		$1,302			$1,391			$2,423			$2,573
Gross profit as a % of net sales	34.5		%	35.0		%	34.0		%	34.5		%

							August 3, 2019			August 4, 2018
Inventory turnover rate							4.71			4.74

Our gross profit rate decreased 50 basis points for the ~~third~~second quarter of 2019 and ~~nine~~55 basis points for the six months ended ~~November~~August 3, ~~2018,~~2019, compared with the same periods in ~~2017. This included a decrease of approximately 100 basis points in the third quarter~~2018. The decreases were primarily due to deleverage on occupancy expenses on lower sales volume. Lower sales volume led to a decrease in inventory turnover rate as of August 3, 2019. Ending inventory as of August 3, 2019 decreased6.5% compared with the ~~new Revenue Standard as it relates to~~prior period, reflecting two consecutive quarters of maintaining a positive spread between the ~~timing of~~change in inventory and sales.

Selling, General and Administrative Expenses

SG&A is summarized in the ~~Anniversary Sale and an increase of approximately 100~~following table:



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
SG&A expenses		$1,180			$1,232			$2,319			$2,353
SG&A expenses as a % of net sales	31.2		%	31.0		%	32.5		%	31.6		%

SG&A increased 26 basis points for the ~~nine months ended November 3, 2018, primarily due to timing shifts from the 53rd week in 2017. We do not expect the impact~~second quarter of ~~adopting the new Revenue Standard to be material for the year ended February 2, 2019. We do expect the impact of the 53rd week in 2017 to result in a decrease of approximately 100~~2019 and 93 basis points for the ~~year~~six months ended ~~February 2,~~August 3, 2019, ~~when~~primarily due to fixed expense deleverage on lower sales volume, partially offset by our ongoing efficiency initiatives and lower performance-related expenses. SG&A decreased $52 for the second quarter of 2019 and decreased $34 for the six months ended August 3, 2019, primarily due to ongoing efficiency initiatives and lower performance-related expenses.

Earnings Before Interest and Income Taxes

EBIT is summarized in the following table:



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
EBIT		$216			$246			$292			$399
EBIT as a % of sales	5.7		%	6.2		%	4.1		%	5.4		%

EBIT decreased $30 and 47 basis points for the second quarter of 2019 and $107 and 125 basis points for the six months ended August 3, 2019. The decreases were primarily due to lower sales volume.

Interest Expense, Net

Interest expense, net was $23 for the second quarter of 2019, compared with $28 for the ~~prior period. Digital sales increased 18%~~same period in 2018, and $46 for the six months ended August 3, 2019, compared with $56 for the same period in 2018. The decrease for the second quarter of 2019 and six months ended August 3, 2019 was primarily due to higher capitalized interest in 2019 associated with investments in our Nordstrom NYC store and Supply Chain Networks.

Income Tax Expense

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



	Quarter Ended						Six Months Ended
	August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Income tax expense		$52			$56			$69			$94
Effective tax rate	27.2		%	25.7		%	28.0		%	27.4		%

The effective tax rate increased for the second quarter of ~~2018~~2019 and ~~20% in~~for the ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, compared with the same periods in ~~2017. To date in fiscal~~ 2018, ~~we opened our Nordstrom Men’s Store NYC, twelve Nordstrom Rack stores, one Jeffrey boutique, and two Nordstrom Local stores. We closed one full-line store and one Trunk Club clubhouse.~~

Full-Price net sales increased 8.9% and 1.9% for the third quarter and nine months ended November 3, 2018, compared with the same periods in 2017. This included an increase of approximately 700 basis points for the third quarter due primarily to the sales return reserve allocation and a decrease of 100 basis points for the nine months ended November 3, 2018, due primarily to the new Revenue Standard. Full-Price sales reflected an increase in the average selling price per item sold, partially offset by a decrease in number of items sold for the third quarter of 2018. For the nine months ended November 3, 2018, Full-Price sales reflected an increase in both the average selling price per item sold and number of items sold. The top-ranking merchandise categories were Kids’ Apparel and Beauty for the quarter and nine months ended November 3, 2018.

Off-Price net sales increased 8.7% and 7.5% for the third quarter and nine months ended November 3, 2018, compared with the same periods in 2017. This reflected an increase in the number of items sold, partially offset by a decrease in the average selling price per item sold. The increase in sales included a decrease of approximately 100 basis points for the third quarter and 50 basis points for the nine months ended November 3, 2018 due primarily to the new Revenue Standard. Shoes was the top-performing merchandise category for the quarter and nine months ended November 3, 2018.

~~Credit Card Revenue, Net~~

~~Credit program revenues, net includes our portion of the credit card revenue, net of credit losses, from credit card receivables pursuant to our program agreement with TD.~~

Credit card revenue, net was $100 for the third quarter, compared with $88 for the same period in 2017 and $280 for the nine months ended November 3, 2018, compared with $239 for the same period in 2017. The increases of $12 and $41 for the quarter and nine months ended November 3, 2018 were a result of our strategic partnership with TD to responsibly grow our receivables and associated revenues as well as efforts to drive new account growth.

~~Gross Profit~~

~~The following table summarizes gross profit:~~

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Gross profit
$1,213

$1,226

$3,786

$3,616
Gross profit as a % of net sales 33.3 % 34.6 % 34.1 % 34.3 %

November 3, 2018
October 28, 2017
Inventory turnover rate 4.56
4.39

Our gross profit rate decreased 137 basis points for the third quarter of 2018 and 19 basis points for the nine months ended November 3, 2018, compared with the same periods in 2017. The decrease in the third quarter was primarily due to timing, including the $30 impact of the new Revenue Standard as it relates to the timing of the Anniversary Sale, and the mix impact of Off-Price growth at a lower product margin rate. The decrease in the nine months ended November 3, 2018 was primarily due to the mix impact of higher Off-Price growth. Overall, continued inventory execution led to improvements in inventory turnover rate as of November 3, 2018.decreased tax benefits from stock compensation.

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

(Continued) (Amounts in millions except per share amounts)

~~Selling, General and Administrative Expenses~~ Earnings Per Share

~~Selling, general and administrative expenses (“SG&A”) are summarized in the following table:~~Earnings per share is as follows:

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018

October 28, 2017
Selling, general and administrative expenses
$1,208

$1,106

$3,562

$3,280
Selling, general and administrative expenses as a % of net sales 33.1 % 31.2 % 32.1 % 31.1 %



	Quarter Ended				Six Months Ended
	August 3, 2019		August 4, 2018		August 3, 2019		August 4, 2018
Basic		$0.91		$0.97		$1.14		$1.48
Diluted		$0.90		$0.95		$1.14		$1.46

~~SG&A increased $102 and 188 basis points~~Earnings per diluted share decreased $0.05 for the ~~third~~second quarter of 2018 and $282 and 97 basis points for the nine months ended November 3, 2018. The dollar and basis points increases were primarily due to the Estimated Non-recurring Charge of $72 in the third quarter of 2018 (see Note 1: Basis of Presentation in Item 1). In addition, SG&A increased in the third quarter and nine months ended November 3, 2018 primarily due to higher supply chain expenses related to planned growth.

~~Earnings Before Interest and Income Taxes~~

~~Earnings before interest and income taxes (“EBIT”) are summarized in the following table:~~

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Earnings before interest and income taxes
$105

$208

$504

$575
Earnings before interest and income taxes as a % of net sales 2.9 % 5.9 % 4.5 % 5.5 %

EBIT decreased $103 and 298 basis points for the third quarter of 2018 and $71 and 92 basis points for the nine months ended November 3, 2018. The decreases were primarily due to the Estimated Non-recurring Charge of $72 (see Note 1: Basis of Presentation in Item 1).

~~Interest Expense, net~~

Interest expense, net was $25 for the third quarter of 2018, compared with $28 for the same period in 2017, and $81 for the nine months ended November 3, 2018, compared with $104 for the same period in 2017. The decrease for the nine months ended November 3, 2018, is due to a net interest expense charge of $18 related to the $650 debt refinancing completed in the first quarter of 2017 (see Note 4: Debt and Credit Facilities in Item 1).

~~Income Tax Expense~~

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

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Income tax expense
$13

$66

$107

$185
Effective tax rate 16.4 % 36.7 % 25.3 % 39.2 %

~~The effective tax rate decreased for the third quarter of 2018,~~2019, compared with the same period in ~~2017, primarily due to the lower statutory tax rate enacted under the Tax Act~~2018, and ~~the tax impact of the Estimated Non-recurring Charge (see Note 1: Basis of Presentation in Item 1). The effective tax rate~~ decreased $0.32 for the ~~nine~~six months ended ~~November~~August 3, ~~2018,~~2019, compared with the same period in ~~2017,~~2018, primarily due to lower sales volume, partially offset by the ~~lower statutory tax rate enacted under~~impact of common stock repurchases.

Fiscal Year 2019 Outlook

We revised our annual outlook to reflect second quarter results and expectations for the ~~Tax Act.~~ second half of the year. We are evaluating the fourth tranche of tariffs on goods from China and have not incorporated the associated impact in our annual outlook, although we expect the impact to be relatively immaterial for the year.



	Prior Outlook	Current Outlook
Net sales	2 percent decrease to flat	Approximately 2 percent decrease
Credit card revenues, net	Low to mid single-digit growth	Low to mid single-digit growth
EBIT	$805 to $890 million	$805 to $855 million
EBIT margin	5.3 to 5.8 percent	5.3 to 5.6 percent
Earnings per diluted share (excluding the impact of any potential future share repurchases)	$3.25 to $3.65	$3.25 to $3.50

20 of 3028

Table of Contents

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

(Continued) (Amounts in millions except per share amounts)

~~Earnings Per Share~~

~~Earnings per share is as follows:~~

Quarter Ended Nine Months Ended
November 3, 2018
October 28, 2017
November 3, 2018
October 28, 2017
Basic
$0.40

$0.68

$1.88

$1.72
Diluted
$0.39

$0.67

$1.85

$1.70

Earnings per diluted share decreased $0.28 for the third quarter of 2018, compared with the same period in 2017, primarily due to the Estimated Non-recurring Charge (see Note 1: Basis of Presentation in Item 1), which had an impact of $0.28 per share. Earnings per diluted share increased $0.15 for the nine months ended November 3, 2018, compared with the same period in 2017 due to higher sales volume and a lower tax rate, partially offset by the Estimated Non-recurring Charge.

~~Fiscal Year 2018 Outlook~~

Excluding the Estimated Non-recurring Charge of $72, or $0.28 per diluted share (see Note 1: Basis of Presentation in Item 1) we remain on track to achieve an inflection point for profitable growth in fiscal 2018. We updated our annual outlook to incorporate third quarter results. For comparability, the following table includes the current and prior outlook excluding the Estimated Non-recurring Charge:



	~~Prior Outlook~~	~~Current Outlook~~
~~Net sales~~	~~$15.4 to $15.5 billion~~	~~$15.5 to $15.6 billion~~
~~Comparable sales (percent)~~	~~1.5 to 2~~	~~Approximately 2~~
~~Credit card revenues~~	~~Mid-teens growth~~	~~Mid-teens growth~~
~~EBIT (including impact of Estimated Non-recurring Charge)~~	—	~~$863 to $888 million~~
~~Earnings per diluted share (excluding the impact of any future share repurchases)~~	—	~~$3.27 to $3.37~~
~~EBIT (excluding impact of Estimated Non-recurring Charge)~~	~~$925 to $960 million~~	~~$935 to $960 million~~
~~Earnings per diluted share (excluding the impact of Estimated Non-recurring Charge and any future share repurchases)~~	~~$3.50 to $3.65~~	~~$3.55 to $3.65~~

~~Our outlook includes the following considerations:~~

~~The 53rd week in 2017 added approximately $220 to total net sales and was estimated to impact earnings per diluted share by $0.05.~~

~~Fourth quarter EBIT is expected to reflect a favorable comparison of $16 from a one-time employee investment associated with last year’s tax reform.~~

~~21 of 30~~

~~Table of Contents~~

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

~~(Continued)~~ ~~(Amounts in millions except per share amounts)~~

Adjusted ROIC (Non-GAAP financial measure)

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

For 2019, income statement activity for adjusted net operating profit and balance sheet amounts for average invested capital are comprised of two quarters of activity under the Lease Standard for 2019, and the last two quarters of 2018 under the previous lease standard. Under the previous lease standard, we estimated the value of our operating leases as if they met the criteria for capital leases or we had purchased the properties. This ~~provides~~provided additional supplemental information that ~~reflects~~estimated the investment in our ~~off-balance sheet~~operating leases. Estimated depreciation on capitalized operating leases ~~controls~~and average estimated asset base of capitalized operating leases are not calculated in accordance with, nor an alternative for, ~~differences~~GAAP and should not be considered in ~~capital structure between us and~~isolation or as a substitution for our competitors and provides investors and credit agencies with another way to comparably evaluate the efficiency and effectiveness of our capital investments over time. In addition, we incorporate Adjusted ROIC into our executive incentive measures and it is an important indicator of shareholders’ return over the long term.results as reported under GAAP.

~~We define Adjusted ROIC as our adjusted net operating profit after tax divided by our average invested capital using the trailing 12-month average.~~ Adjusted ROIC is not a measure of financial performance under ~~generally accepted accounting principles (“GAAP”)~~GAAP and should be considered in addition to, and not as a substitute for, return on assets, net earnings, total assets or other GAAP financial ~~measures prepared in accordance with GAAP.~~measures. 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. Estimated depreciation on capitalized operating leases and average estimated asset base of capitalized operating leases are not calculated in accordance with, or an alternative for, GAAP and should not be considered in isolation or as a substitution of our results as reported under GAAP. The financial measure calculated under GAAP which is most directly comparable to Adjusted ROIC is return on assets.

~~For the 12 fiscal months ended November 3, 2018, our Adjusted ROIC decreased to 10.0% compared with 10.7% for the 12 fiscal months ended October 28, 2017.~~ The following is a reconciliation of the components of Adjusted ROIC and return on assets:


	12 Fiscal Months Ended						Four Quarters Ended
	November 3, 2018			October 28, 2017			August 3, 2019			August 4, 2018
Net earnings		$467			$488			$492			$513
Add: income tax expense¹	276			376
Add: income tax expense							144			329
Add: interest expense	124			139			109			124
Earnings before interest and income tax expense	867			1,003			745			966

Add: operating lease interest¹							47			—
Add: rent expense, net	251			237			127			249
Less: estimated depreciation on capitalized operating leases²	(134		)	(126		)	(68		)	(133		)
Adjusted net operating profit	984			1,114			851			1,082

Less: estimated income tax expense	(365		)	(486		)	(193		)	(422		)
Adjusted net operating profit after tax		$619			$628			$658			$660

Average total assets		$8,269			$8,009			$9,016			$8,175
Less: average non-interest-bearing current liabilities³	(3,429		)	(3,211		)
Less: average deferred property incentives and deferred rent liability³	(625		)	(646		)
Less: average non-interest-bearing current liabilities							(3,528		)	(3,371		)
Less: average deferred property incentives in excess of ROU assets³							(154		)	—
Add: average estimated asset base of capitalized operating leases²	1,994			1,718			1,005			1,962
Less: average deferred property incentives and deferred rent liability							(303		)	(635		)
Average invested capital		$6,209			$5,870			$6,036			$6,131

Return on assets⁴	5.6		%	6.1		%	5.5		%	6.3		%
Adjusted ROIC⁴	10.0		%	10.7		%	10.9		%	10.8		%

¹ ~~Results for~~ As a result of the ~~12 fiscal months ended November 3, 2018 include~~adoption of the Lease Standard, we add back the operating lease interest to reflect how we manage our business. Operating lease interest is a ~~$42 unfavorable impact related to~~component of operating lease cost recorded in occupancy costs and is calculated in accordance with the ~~Tax Act.~~Lease Standard.

²Capitalized operating leases is our best estimate of the asset base we would record for our leases that are classified as operating under the previous lease standard if they had met the criteria for a ~~capital~~finance lease or we had purchased the property. The asset base ~~is calculated based upon the trailing 12-month average of the monthly asset base. The asset base~~ for each ~~month~~quarter is calculated as the trailing ~~12 months~~four quarters of rent expense multiplied by ~~eight. The multiple of~~ eight, ~~times rent expense is~~ a commonly used method ~~of estimating~~to estimate the asset base we would record for our capitalized operating leases. ~~We do not expect~~

³ For leases with property incentives that exceed the ROU assets, we reclassify the amount from assets to other current liabilities and other liabilities. As a result of the adoption of the ~~new~~ Lease ~~standard to have a material impact on~~Standard, we reduce average total assets, as this better reflects how we manage our ~~Adjusted ROIC (see Note 1: Basis of Presentation in Item 1).~~business.

³ ~~Balances associated with our deferred rent liability have been classified as long-term liabilities as of January 28, 2017.~~

⁴ Results for the ~~12 fiscal months~~four quarters ended ~~November~~August 3, ~~2018 include~~2019 included the $72 impact ofrelated to the Estimated Non-recurring Charge, ~~(see Note 1: Basis~~which negatively impacted return on assets by approximately 50 basis points and Adjusted ROIC by approximately 70 basis points. In addition, the adoption of ~~Presentation in Item 1), which~~the Lease Standard negatively impacted return on assets by approximately 60 basis points and Adjusted ROIC by approximately 8020 basis points.

Table of Contents

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

(Continued) (Amounts in millions except per share 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 facility and potential future borrowings are sufficient to meet 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 ~~November~~August 3, ~~2018,~~2019, our existing cash and cash equivalents on-hand of ~~$1,127,~~$956, available credit facility of $800 and potential future operating cash flows and borrowings will be sufficient to fund these scheduled future payments and potential long-term initiatives.

The following is a summary of our cash flows by activity:

Operating Activities

Net cash provided by operating activities increased ~~$45~~$98 for the period ended ~~November~~August 3, ~~2018,~~2019, compared with the same period in ~~2017,~~2018, primarily due to ~~increased~~the timing of payroll and a decrease in inventory purchased, partially offset by a decrease in net earnings.

Investing Activities

Net cash used in investing activities ~~decreased $59~~increased $164 for the period ended ~~November~~August 3, ~~2018,~~2019, compared with the same period in ~~2017,~~2018, primarily due to ~~planned reductions~~an increase in capital expenditures ~~partially offset by the acquisitions of two retail technology companies, which were classified~~related to our Supply Chain Network, including our Omni-channel center in ~~other investing activities, net (see Note 1: Basis of Presentation in Item 1).~~Riverside, California, and Nordstrom NYC.

Financing Activities

Net cash used in financing activities ~~decreased $177~~increased $97 for the period ended ~~November~~August 3, ~~2018,~~2019, compared with the same period in ~~2017,~~2018, primarily due to increased ~~proceeds from stock option exercises, driven by a higher stock price, and decreased~~ share repurchase ~~activity.~~

~~Borrowing Activity~~

~~During~~activity executed in the first quarter of 2017, 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. We recorded debt issuance costs incurred as a result of the 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 $650 senior unsecured notes that were due January 2018.2019.

~~Table of Contents~~

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

~~(Continued)~~ ~~(Amounts in millions except per share amounts)~~

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, we believe it provides investors with a meaningful analysis of our ability to generate cash from our business. ~~For the nine months ended November 3, 2018, we had Free Cash Flow of $247 compared with $58 for the nine months ended October 28, 2017.~~

Beginning in the first quarter of fiscal 2018, we no longer adjust free cash flow for cash dividends paid. We believe this presentation is more reflective of our operating performance and more consistent with the way we manage our business, how our peers calculate free cash flows and prevailing industry practice. Prior period Free Cash Flow financial measures have been recast to conform with current period presentation.

Table of Contents

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

(Continued) (Amounts in millions except per share amounts)

Adjusted EBITDA (Non-GAAP financial measure)

Adjusted ~~earnings before interest, income taxes, depreciation and amortization (“EBITDA”)~~EBITDA is our key financial metric to reflect our view of cash flow from net earnings. Adjusted EBITDA excludes significant items which are non-operating in nature in order to evaluate our core operating performance against prior periods. The financial measure calculated under GAAP which is most directly comparable to Adjusted EBITDA is net earnings. ~~As of November 3, 2018 and October 28, 2017, Adjusted EBITDA was $942 and $997.~~

Adjusted EBITDA is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for net earnings, overall change in cash or liquidity of the business as a whole. 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 following is a reconciliation of net earnings to Adjusted EBITDA:

~~Table of Contents~~

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

~~(Continued)~~ ~~(Amounts in millions except per share amounts)~~

Credit Capacity and Commitments

~~As of November 3, 2018, we had~~We have total short-term borrowing capacity ~~available~~ of ~~$800. In September 2018, we renewed our existing~~ $800 ~~senior unsecured revolving credit facility (“revolver”), extending~~under the ~~expiration from April 2020 to~~Revolver that expires September 2023. ~~Our revolver contains customary representations, warranties, covenants and terms, which are substantially similar to~~Provided that we obtain written consent from our ~~2015 revolver. Under the terms of our revolver,~~lenders, 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~~Revolver by up to $200, to a total of $1,000, ~~provided that we obtain written consent from the lenders. We also have~~and two options to extend the ~~revolving commitment~~Revolver by one ~~year, provided that we obtain written consent from the lenders.~~

Impact of Credit Ratings

Under the terms of our ~~revolver,~~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~~or (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:

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.

The ~~revolver~~Revolver requires that we maintain an adjusted debt to ~~earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”)~~EBITDAR leverage ratio of no more than four times. The Revolver’s ratio calculation methodology has not been impacted by the adoption of the new Lease Standard. As of ~~November~~August 3, ~~2018,~~2019, we were in compliance with this covenant.

Table of Contents

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

(Continued) (Amounts in millions except per share 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.~~measure, as it provides a reflection of our credit worthiness that could impact our credit rating and borrowing costs. 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~~

For 2019, income statement activity for Adjusted EBITDAR is comprised of two quarters of activity under the Lease Standard for 2019 and the last two quarters of 2018 under the previous lease standard. Balance sheet amounts are as of the end of the quarter, and under the new Lease Standard for 2019 and the previous lease standard for 2018. Under the previous lease standard, we estimated the value of our ~~credit worthiness~~operating leases as if they met the criteria for capital leases or we had purchased the properties. This provided additional supplemental information that ~~could impact~~estimated the investment in our ~~credit rating~~operating leases. Estimated capitalized operating lease liability is not calculated in accordance with, nor an alternative for, GAAP and ~~borrowing costs. We also have~~should not be considered in isolation or as a ~~debt covenant that requires an adjusted debt to EBITDAR leverage ratio of no more than four times. As of November 3, 2018,~~substitution for our ~~Adjusted Debt to EBITDAR was 2.6, and~~results as ~~of October 28, 2017, it was 2.5.~~reported under GAAP.

Adjusted Debt to EBITDAR is not a measure of financial performance under GAAP and should be considered in addition to, and not as a substitute for, debt to net earnings, net earnings, debt or other GAAP financial ~~measures prepared in accordance with GAAP.~~measures. 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. Estimated capitalized operating lease liability is not calculated in accordance with, or an alternative for, GAAP and should not be considered in isolation or as a substitution of our results as reported under GAAP. 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:

Add: estimated capitalized operating lease liability²

Add: income tax expense³

Add: operating lease cost³

Debt to Net Earnings⁴

Adjusted Debt to EBITDAR⁴

¹The components of Adjusted Debt are as of ~~November~~August 3, ~~2018~~2019 and ~~October 28, 2017,~~August 4, 2018, while the components of Adjusted EBITDAR are for the ~~12 months~~four quarters ended ~~November~~August 3, ~~2018~~2019 and ~~October 28, 2017.~~August 4, 2018.

²Based upon the estimated lease liability as of the end of the period, calculated as the trailing ~~12 months~~four quarters 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 As a result of the adoption of the Lease Standard, we add back the operating lease cost to calculate Adjusted EBITDAR.

⁴Results for the ~~12 fiscal months~~four quarters ended ~~November~~August 3, ~~2018 include a $42 unfavorable~~2019 included the $72 impact related to the ~~Tax Act.~~

⁴ ~~Results for the 12 fiscal months ended November 3, 2018 include the $72 impact of the~~ Estimated Non-recurring Charge, ~~(see Note 1: Basis of Presentation in Item 1),~~ which negatively impacted Debt to Net Earnings by ~~approximately~~ 0.5 and Adjusted Debt to EBITDAR by ~~approximately~~ 0.1. In addition, the adoption of the Lease Standard had no impact on Debt to Net Earnings nor Adjusted Debt to EBITDAR.

Table of Contents

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

(Continued) (Amounts in millions except per share amounts)

Off-Balance Sheet Arrangements

As of August 3, 2019, there have been no material changes to our off-balance sheet arrangements as disclosed in our 2018 Annual Report except for our operating leases, which are recorded on the balance sheet as a result of adopting the Lease Standard.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements requires that we make estimates and judgments 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. We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in our 2018 Annual Report ~~on Form 10-K for the year ended February 3, 2018~~ have the greatest potential effect on our financial statements, so we consider these to be our critical accounting policies and estimates. Our management has discussed the development and selection of these critical accounting estimates with the Audit & Finance Committee of our Board of Directors.

Except as disclosed in Note 2: ~~Revenue~~Leases of Item 1, pertaining to our adoption of the ~~new Revenue~~Lease Standard, there have been no ~~significant~~material changes to our significant accounting policies or critical accounting estimates as described in our 2018 Annual ~~Report on Form 10-K filed with the SEC on March 19, 2018.~~Report.

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 ~~2017~~2018 Annual ~~Report on Form 10-K filed with the SEC on March 19, 2018.~~Report. There have been no material changes to these risks since that time.

Item 4. Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, ~~the Company~~we 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

During the six months ended August 3, 2019, we adopted the Lease Standard. As a result of our adoption of the Lease Standard, we implemented a new lease accounting information system and modified our processes and internal controls over lease accounting.

There ~~have been~~were no other 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.

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~~accruals 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.



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)~~



☑	Large ~~accelerated filer~~ þ Accelerated Filer	☐	Accelerated ~~filer~~ ¨ Filer
☐	Non-accelerated ~~filer~~ ¨ Filer	☐	Smaller ~~reporting company~~ ¨ Reporting Company
		☐	Emerging ~~growth company~~ ¨ Growth Company



Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, without par value	JWN	New York Stock Exchange



		Page
FORWARD-LOOKING STATEMENTS		3

DEFINITIONS		5

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).

	Condensed Consolidated Statements of Earnings Quarter and ~~Nine~~Six Months Ended ~~November~~August 3, ~~2018~~2019 and ~~October 28, 2017~~	3

	~~Condensed Consolidated Statements of Comprehensive Earnings~~ ~~Quarter and Nine Months Ended November 3,~~August 4, 2018 ~~and October 28, 2017~~	3

	~~Condensed Consolidated Balance Sheets~~ ~~November 3, 2018, February 3, 2018, and October 28, 2017~~	4

	~~Condensed Consolidated Statements of Shareholders’ Equity~~ ~~Nine Months Ended November 3, 2018 and October 28, 2017~~	5

	~~Condensed Consolidated Statements of Cash Flows~~ ~~Nine Months Ended November 3, 2018 and October 28, 2017~~	6

	~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Comprehensive Earnings Quarter and Six Months Ended August 3, 2019 and August 4, 2018	6

	Condensed Consolidated Balance Sheets August 3, 2019, February 2, 2019, and August 4, 2018	7

	Condensed Consolidated Statements of Shareholders’ Equity Quarter and Six Months Ended August 3, 2019 and August 4, 2018	8

	Condensed Consolidated Statements of Cash Flows Six Months Ended August 3, 2019 and August 4, 2018	9

	Notes to Condensed Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1617

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2725

Item 4.	Controls and Procedures.	2725

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	2826

Item 1A.	Risk Factors.	2826

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2826

Item 6.	Exhibits.	2826

Exhibit Index		2927

Signatures		3028



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



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Term	Definition
2002 Plan	2002 Nonemployee Director Stock Incentive Plan
2010 Plan	2010 Equity Incentive Plan
2019 Plan	2019 Equity Incentive Plan
2018 Annual Report	Annual Report on Form 10-K filed on March 18, 2019
Adjusted EBITDA	Adjusted earnings before interest, income taxes, depreciation and amortization (a non-GAAP financial measure)
Adjusted EBITDAR	Adjusted earnings before interest, income taxes, depreciation, amortization and rent (a non-GAAP financial measure)
Adjusted ROIC	Adjusted return on invested capital (a non-GAAP financial measure)
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
BOPUS	Buy Online, Pickup in Store
CDOR	Canadian Dollar Offered Rate
CODM	Chief operating decision maker
Estimated Non-recurring Charge	Estimated non-recurring credit-related charge recognized during the third quarter of 2018
Digital sales	Online and digitally-assisted store sales, which include BOPUS, Ship to Store and Style Board, a digital selling tool
EBIT	Earnings before interest and income taxes
EPS	Earnings per share
ESPP	Employee Stock Purchase Plan
Exchange Act	Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
Second quarter of 2019	13 fiscal weeks ending August 3, 2019
Second quarter of 2018	13 fiscal weeks ending August 4, 2018
Fiscal year 2019	52 fiscal weeks ending February 1, 2020
Fiscal year 2018	52 fiscal weeks ending February 2, 2019
FLS	Full-line stores
Full-Price	Nordstrom U.S. FLS, Nordstrom.com, Canada, Trunk Club, Jeffrey and Nordstrom Local
GAAP	Generally accepted accounting principles
Generational Investments	NRHL, Canada, Trunk Club and Nordstrom NYC
Gross profit	Net sales less cost of sales and related buying and occupancy costs
Inventory turnover rate	Trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory
IRS	Internal Revenue Service
Lease Standard	ASU No. 2016-02, Leases, and all related amendments (ASC 842)
LIBOR	London Inter-bank Offered Rate
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Nordstrom Local	Nordstrom Local neighborhood hubs
Nordstrom NYC	Our Manhattan, New York FLS store, including the existing Men’s store and the Women’s store (upon opening in October 2019)
The Nordy Club	Our evolved customer loyalty program launched in October 2018
NRHL	Nordstromrack.com/HauteLook
NYSE	New York Stock Exchange
Off-Price	Nordstrom U.S. Rack stores, NRHL and Last Chance clearance stores
Operating Lease Cost	Fixed rent expense, including fixed common area maintenance expense, net of developer reimbursement amortization
PCAOB	Public Company Accounting Oversight Board (United States)
Property incentives	Developer and vendor reimbursements
PSU	Performance share unit
Revolver	Senior unsecured revolving credit facility
ROU asset	Operating lease right-of-use asset
RSU	Restricted stock unit
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
SERP	Unfunded defined benefit Supplemental Executive Retirement Plan
SG&A	Selling, general and administrative
Supply Chain Network	Fulfillment centers that process and ship orders to our customers, distribution centers that process and ship merchandise to our stores and other facilities and Omni-channel centers that both fulfill customer orders and ship merchandise to our stores
TD	Toronto-Dominion Bank, N.A.


	Quarter Ended						Nine Months Ended						Quarter Ended						Six Months Ended
	November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017			August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Net sales		$3,648			$3,541			$11,097			$10,537			$3,778			$3,980			$7,127			$7,450
Credit card revenues, net	100			88			280			239			94			87			188			179
Total revenues	3,748			3,629			11,377			10,776			3,872			4,067			7,315			7,629
Cost of sales and related buying and occupancy costs	(2,435		)	(2,315		)	(7,311		)	(6,921		)	(2,476		)	(2,589		)	(4,704		)	(4,877		)
Selling, general and administrative expenses	(1,208		)	(1,106		)	(3,562		)	(3,280		)	(1,180		)	(1,232		)	(2,319		)	(2,353		)
Earnings before interest and income taxes	105			208			504			575			216			246			292			399
Interest expense, net	(25		)	(28		)	(81		)	(104		)	(23		)	(28		)	(46		)	(56		)
Earnings before income taxes	80			180			423			471			193			218			246			343
Income tax expense	(13		)	(66		)	(107		)	(185		)	(52		)	(56		)	(69		)	(94		)
Net earnings		$67			$114			$316			$286			$141			$162			$177			$249

Earnings per share:
Basic		$0.40			$0.68			$1.88			$1.72			$0.91			$0.97			$1.14			$1.48
Diluted		$0.39			$0.67			$1.85			$1.70			$0.90			$0.95			$1.14			$1.46

Weighted-average shares outstanding:
Basic	168.8			166.6			168.1			166.7			155.0			167.8			155.0			167.8
Diluted	172.4			168.8			171.0			168.8			155.6			170.3			155.9			170.3


	November 3, 2018			February 3, 2018			October 28, 2017			August 3, 2019			February 2, 2019			August 4, 2018
Assets
Current assets:
Cash and cash equivalents		$1,127			$1,181			$672			$956			$957			$1,343
Accounts receivable, net	190			145			211			211			148			200
Merchandise inventories	2,614			2,027			2,434			1,932			1,978			2,065
Prepaid expenses and other	366			150			162			384			291			439
Total current assets	4,297			3,503			3,479			3,483			3,374			4,047

Land, property and equipment (net of accumulated depreciation of $6,517, $6,105 and $5,952)	3,858			3,939			3,940
Land, property and equipment (net of accumulated depreciation of $6,813, $6,647 and $6,393)										4,036			3,921			3,860
Operating lease right-of-use assets										1,801			—			—
Goodwill	249			238			238			249			249			249
Other assets	305			435			529			366			342			334
Total assets		$8,709			$8,115			$8,186			$9,935			$7,886			$8,490

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable		$2,106			$1,409			$1,815			$1,819			$1,469			$1,840
Accrued salaries, wages and related benefits	526			578			433			442			580			394
Current portion of operating lease liabilities										237			—			—
Other current liabilities	1,202			1,246			1,166			1,427			1,324			1,380
Current portion of long-term debt	8			56			57			500			8			54
Total current liabilities	3,842			3,289			3,471			4,425			3,381			3,668

Long-term debt, net	2,678			2,681			2,681			2,178			2,677			2,680
Deferred property incentives, net	465			495			510			5			457			480
Non-current operating lease liabilities										1,912			—			—
Other liabilities	521			673			670			656			498			522

Commitments and contingencies (Note 6)
Commitments and contingencies (Note 7)

Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 168.9, 167.0 and 166.6 shares issued and outstanding	3,029			2,816			2,785
Common stock, no par value: 1,000 shares authorized; 154.9, 157.6 and 167.5 shares issued and outstanding										3,084			3,048			2,899
Accumulated deficit	(1,777		)	(1,810		)	(1,899		)	(2,286		)	(2,138		)	(1,712		)
Accumulated other comprehensive loss	(49		)	(29		)	(32		)	(39		)	(37		)	(47		)
Total shareholders’ equity	1,203			977			854			759			873			1,140
Total liabilities and shareholders’ equity		$8,709			$8,115			$8,186			$9,935			$7,886			$8,490


								Accumulated						Quarter Ended						Six Months Ended
								Other						August 3, 2019			August 4, 2018			August 3, 2019			August 4, 2018
Common stock
Balance, beginning of period															$3,067			$2,852			$3,048			$2,816
Issuance of common stock under stock compensation plans														—			25			11			49
Stock-based compensation														17			22			25			34
Balance, end of period															$3,084			$2,899			$3,084			$2,899
	Common Stock				Accumulated			Comprehensive
	Shares		Amount		Deficit			Loss			Total
Balance at February 3, 2018	167.0			$2,816		($1,810	)		($29	)		$977
Accumulated deficit
Balance, beginning of period															($2,370	)		($1,738	)		($2,138	)		($1,810	)
Cumulative effect of adopted accounting standards	—		—		60			(5		)	55			—			—			(25		)	60
Net earnings	—		—		316			—			316			141			162			177			249
Other comprehensive loss	—		—		—			(15		)	(15		)
Dividends ($1.11 per share)	—		—		(186		)	—			(186		)
Issuance of common stock under stock compensation plans	3.9		160		—			—			160
Stock-based compensation	0.9		53		—			—			53
Dividends														(57		)	(62		)	(114		)	(124		)
Repurchase of common stock	(2.9	)	—		(157		)	—			(157		)	—			(74		)	(186		)	(87		)
Balance at November 3, 2018	168.9			$3,029		($1,777	)		($49	)		$1,203
Balance, end of period															($2,286	)		($1,712	)		($2,286	)		($1,712	)

Accumulated other comprehensive loss
Balance, beginning of period															($46	)		($44	)		($37	)		($29	)
Cumulative effect of adopted accounting standards														—			—			—			(5		)
Other comprehensive income (loss)														7			(3		)	(2		)	(13		)
Balance, end of period															($39	)		($47	)		($39	)		($47	)

Total															$759			$1,140			$759			$1,140
								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	—		—		286			—			286
Other comprehensive earnings	—		—		—			11			11
Dividends ($1.11 per share)	—		—		(185		)	—			(185		)
Issuance of common stock under stock compensation plans	0.7		25		—			—			25
Stock-based compensation	0.5		53		—			—			53
Repurchase of common stock	(4.6	)	—		(206		)	—			(206		)
Balance at October 28, 2017	166.6			$2,785		($1,899	)		($32	)		$854
Dividends per share															$0.37			$0.37			$0.74			$0.74



Fiscal year	Operating Leases
2019 (excluding the six months ended August 3, 2019)		$154
2020	354
2021	339
2022	314
2023	287
2024	242
Thereafter	1,065
Total lease payments	2,755

Less: amount representing interest	(606		)
Present value of net lease payments¹		$2,149



	November 3, 2018
	As Reported			Revenue Standard Adjustment			Excluding Impact of Revenue Standard
Assets
Merchandise inventories		$2,614			$46			$2,660
Prepaid expenses and other	366			(130		)	236
Other assets	305			96			401

Liabilities and Shareholders’ Equity
Other current liabilities	1,202			(17		)	1,185
Other liabilities	521			110			631
Accumulated deficit	(1,777		)	(81		)	(1,858		)



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



	Base Interest Rate	Applicable Margin
Euro-Dollar Rate Loan	LIBOR	1.03	%
Canadian Dealer Offer Rate Loan	CDOR	1.03	%
Base Rate Loan	various	0.03	%


	2018¹		2017¹		2019¹		2018¹
Debt		$2,686		$2,738		$2,678		$2,734
Add: operating lease liabilities					2,149		—
Add: estimated capitalized operating lease liability²	2,011		1,896		—		1,993
Adjusted Debt		$4,697		$4,634		$4,827		$4,727

Net earnings		$467		$488		$492		$513
Add: income tax expense³	276		376
Add: income tax expense					144		329
Add: interest expense, net	111		135		95		115
Earnings before interest and income taxes	854		999		731		957

Add: depreciation and amortization expenses	686		644		653		683
Add: operating lease cost³					138		—
Add: rent expense, net	251		237		127		249
Add: non-cash acquisition-related charges	—		10		—		1
Adjusted EBITDAR		$1,791		$1,890		$1,649		$1,890

Debt to Net Earnings⁴	5.8		5.6		5.4		5.3
Adjusted Debt to EBITDAR⁴	2.6		2.5		2.9		2.5



	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
August 2018 (August 5, 2018 to September 1, 2018)¹	0.2		$50.96	0.2		$1,500
September 2018 (September 2, 2018 to October 6, 2018)	0.4		$60.64	0.4		$1,471
October 2018 (October 7, 2018 to November 3, 2018)	0.5		$61.23	0.5		$1,438
Total	1.1		$59.58	1.1



Exhibit		Method of Filing
10.1	~~Press release dated August 22, 2018 announcing that its Board of Directors authorized a $1.5 billion share repurchase program and approved a quarterly dividend~~Nordstrom, Inc. 2019 Equity Incentive Plan	Incorporated by reference ~~from~~to Appendix B to the Registrant’s Form ~~8-K~~DEF 14A filed on ~~August 27, 2018, Exhibit 99.1~~April 12, 2019.

~~10.2~~31.1	Revolving Credit Agreement dated September 26, 2018, between Registrant and each of the initial lenders named therein as lenders; Bank of America, N.A. as administrative agent; and Wells Fargo Bank, National Association and U.S. Bank, National Association as co-syndication agents.	~~Incorporated by reference from the Registrant’s Form 8-K filed on October 2, 2018, Exhibit 10.1~~

~~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 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 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



NORDSTROM, INC.
(Registrant)

/s/ Anne L. Bramman
Anne L. Bramman
Chief Financial Officer
(Principal Financial Officer)

Date:	~~December 10, 2018~~September 4, 2019