UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~October~~April 29, ~~2022~~2023


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

For the transition period from ___________ to___________

Commission File Number: 001-15059

Nordstrom, Inc.

(Exact name of registrant as specified in its charter)


Washington						91-0515058
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1617 Sixth Avenue, Seattle, Washington 98101

(Address of principal executive offices)

206-628-2111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

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


☑	Large Accelerated Filer	☐	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Common stock outstanding as of ~~November 25, 2022: 160,081,323~~May 31, 2023: 161,493,792 shares

Table of Contents

TABLE OF CONTENTS


		Page
FORWARD-LOOKING STATEMENTS		3
DEFINITIONS OF COMMONLY USED TERMS		56
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited).	67
	Condensed Consolidated Statements of Earnings	67
	Condensed Consolidated Statements of Comprehensive Earnings	67
	Condensed Consolidated Balance Sheets	78
	Condensed Consolidated Statements of Shareholders’ Equity	89
	Condensed Consolidated Statements of Cash Flows	910
	Notes to Condensed Consolidated Financial Statements
	Note 1: Basis of Presentation	1011
	Note 2: ~~Revenue~~	11
	~~Note 3: Debt and Credit Facilities~~Canada Wind-down	12
	Note ~~4: Fair Value Measurements~~	13
	~~Note 5: Stock-based Compensation~~3: Revenue	14
	Note ~~6: Shareholders’ Equity~~4: Debt and Credit Facilities	14
	Note ~~7: Earnings Per Share~~5: Fair Value Measurements	15
	Note 6: Stock-based Compensation	16
	Note 7: Shareholders’ Equity	16
	Note 8: Earnings Per Share	17
	Note 9: Segment Reporting	1517
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1618
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	28
Item 4.	Controls and Procedures.	2829
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings.	2830
Item 1A.	Risk Factors.	2930
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2930
Item 6.	Exhibits.	2930
Exhibit Index		3031
Signatures		3132

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements regarding matters that are not historical facts, and are based on our management’s beliefs and assumptions and on information currently available to our management. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. In some cases, forward-looking statements can be identified 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 ~~January 28, 2023,~~February 3, 2024, trends in our operations and the following:

Strategic and Operational

•~~COVID-19, which may make it necessary to close our physical stores and facilities in affected areas, may have a negative impact on our business and results and may exacerbate the risks below,~~

•successful execution of our customer strategy to provide customers superior service, products and experiences, online, through our fulfillment capabilities and in stores,

•timely and effective implementation and execution of our evolving business model, including:

◦winning at our market strategy by providing a differentiated and seamless experience, which consists of the integration of our digital and physical assets, development of new supply chain capabilities and timely delivery of products,

◦broadening the reach of Nordstrom Rack, including ~~balancing our price range and selection~~delivering great brands at great prices and leveraging our digital and physical assets,

◦enhancing our platforms and processes to deliver core capabilities to drive customer, employee and partner experiences both digitally and ~~in-store,~~in stores,

•our ability to effectively manage our merchandise strategy, including our ability to offer compelling assortments and optimize ourinventory to ensure we have the right product mix and quantity in each of our channels and locations, allowing us to get closer to our customers,

•our ability to effectively allocate and scale our marketing strategies and resources, including Nordstrom Media Network, as well as realize the expected benefits between The Nordy Club, advertising and promotional campaigns,

•our ability to respond to the evolving retail environment, including new fashion trends, environmental considerations and our customers’ changing expectations of service and experience in stores and online, and our development and outcome of new market strategies and customer offerings,

•our ability to mitigate the effects of disruptions in the global supply chain, including factory closures, transportation challenges or stoppages of certain imports, and rising prices of raw materials and freight expenses,

•our ability to control costs through effective inventory management ~~fulfillment~~ and supply chain processes and systems,

•our ability to acquire, develop and retain qualified and diverse talent by providing appropriate training, compelling work environments and competitive compensation and benefits, especially in areas with increased market compensation, all in the context of any labor shortage and competition for talent,

•our ability to realize expected benefits, anticipate and respond to potential risks and appropriately manage costs associated with our credit card revenue sharing program,

•potential goodwill impairment charges, future impairment charges, fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames or if our strategic direction changes,

•COVID-19, which may have a negative impact on our business and results and may exacerbate any risks noted,

Data, Cybersecurity and Information Technology

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

•the impact of any system 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 that results in the interruption of business processes or causes financial loss, and our compliance with information security and privacy laws and regulations, as well as third-party contractual obligations in the event of such an incident,

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Reputation and Relationships

•our ability to maintain our reputation and relationships with our customers, employees, vendors and third-party partners and landlords,

•our ability to act responsibly and with transparency with respect to our corporate social responsibility practices and initiatives, ~~and~~ meet any communicated targets, goals or milestones and adapt to evolving reporting requirements,

•our ability to market our brand and distribute our products through a variety of third-party publisher or platform channels, as well as access mobile operating system and website identifiers for personalized delivery of targeted advertising,

~~Table~~•the impact of ~~Contents~~a concentration of stock ownership on our shareholders’ ability to influence corporate matters,

Investment and Capital

•efficient and proper allocation of our capital resources,

•our ability to properly balance our investments in technology, Supply Chain Network facilities and existing and new store locations, including the expansion of our market strategy,

•our ability to maintain or expand our presence, including timely completion of construction associated with Supply Chain Network facilities and new, relocated and remodeled stores, as well as any potential store closures, all of which may be impacted by third parties, consumer demand and other natural or man-made disruptions, and government responses to any such disruptions,

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

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

•the actual timing, price, manner and amounts of future share repurchases, dividend payments or share issuances, if any, subject to the discretion of our Board of Directors, contractual commitments, market and economic conditions and applicable SEC rules,

Economic and External

•the length and severity of epidemics or pandemics, ~~such as the COVID-19 pandemic,~~ or other catastrophic events, and the related impact on customer behavior, store and online operations and supply chain functions, as well as our future consolidated financial position, results of operations and cash flows,

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

•the impact of economic and market conditions, ~~in the U.S. and Canada,~~ including inflation and measures to control inflation, and resulting changes to customer purchasing behavior, unemployment and bankruptcy rates, as well as any fiscal stimulus or the cessation of any fiscal stimulus, and the resulting impact on consumer spending and credit patterns,

•the impact of economic, environmental or political conditions,

•the impact of changing traffic patterns at shopping centers and malls,

•financial insecurity or potential insolvency experienced by our vendors, suppliers, developers, landlords, competitors or customers, ~~as a result of any economic downturn,~~

•weather conditions, natural disasters, climate change, national security concerns, global conflicts, civil unrest, other market and supply chain disruptions, 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, and our vendors’, compliance with applicable domestic and international laws, regulations and ethical standards, ~~including those related to COVID-19,~~ minimum wage, employment and tax, information security and privacy, consumer credit and environmental regulations and the outcome of any claims, litigation and regulatory investigations and resolution of such matters,

•the impact of the current regulatory environment, financial system 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.~~judgments,

•the outcome of events or occurrences related to the wind-down of business operations in Canada.

These and other factors, including those factors we ~~discussed~~discuss in Part II, Item 1A. Risk Factors, could affect our financial results and cause our actual results to differ materially from any forward-looking information we may provide. Given these risks, uncertainties and other factors, undue reliance should not be placed on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this filing, and these estimates and assumptions may prove to be incorrect. This Quarterly Report on Form 10-Q should be read 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.

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All references to “we,” “us,” ~~“our”~~“our,” or the “Company” mean Nordstrom, Inc. and its subsidiaries. On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations (see Note 2: Canada Wind-down) and as of this date, Nordstrom Canada was deconsolidated from Nordstrom, Inc.’s financial statements. Nordstrom Canada results prior to March 2, 2023 are included in the Company’s Condensed Consolidated Financial Statements.

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. In addition, forward-looking statements may be impacted by the actual outcome of events or occurrences related to the wind-down of business operations in Canada.

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DEFINITIONS OF COMMONLY USED TERMS


Term						Definition


2019 Plan						2019 Equity Incentive Plan
~~2021~~2022 Annual Report						Annual Report on Form 10-K filed on March ~~11, 2022~~10, 2023
Adjusted EPS						Adjusted earnings (loss) per diluted share (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

~~CARES Act~~CCAA						~~Coronavirus Aid, Relief and Economic Security~~Companies’ Creditors Arrangement Act
~~CODM~~						~~Chief operating decision maker~~
~~COVID-19~~						~~Novel coronavirus~~
Digital sales						Sales conducted through a digital platform such as our websites or mobile apps. Digital sales may be self-guided by the customer, as in a traditional online order, or facilitated by a salesperson using a virtual styling or selling tool. Digital sales may be delivered to the customer or picked up in our Nordstrom stores, Nordstrom Rack stores or Nordstrom Local service hubs. Digital sales also includes a reserve for estimated returns.
EBIT						Earnings (loss) before interest and income taxes
EBIT Margin						Earnings (loss) before interest and income taxes as a percent of net sales
EBITDA						Earnings (loss) before interest, income taxes, depreciation and amortization
EBITDAR						Earnings (loss) before interest, income taxes, depreciation, amortization and rent, as defined by our Revolver covenant
EPS						Earnings (loss) per share
ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
~~Third~~First quarter of 2023						13 fiscal weeks ending April 29, 2023
First quarter of 2022						13 fiscal weeks ending ~~October 29,~~April 30, 2022
~~Third quarter of 2021~~Fiscal year 2023						1353 fiscal weeks ending ~~October 30, 2021~~February 3, 2024
Fiscal year 2022						52 fiscal weeks ending January 28, 2023

GAAP						U.S. generally accepted accounting principles
GMV						Gross merchandise value
Gross profit						Net sales less cost of sales and related buying and occupancy costs
Leverage Ratio						The sum of our funded debt and operating lease liabilities divided by the preceding twelve months of Adjusted EBITDAR as defined by our Revolver covenant
MD&A						Management’s Discussion and Analysis of Financial Condition and Results of Operations
NAV						Net asset value
NMN						Nordstrom Media Network, where we use our first party data and marketing infrastructure to drive cooperative marketing with vendors across both offsite and onsite marketing platforms
Nordstrom						Nordstrom.com, ~~Nordstrom-branded~~Nordstrom U.S. stores, Nordstrom Local and ASOS \| Nordstrom. Nordstrom also included Canada ~~which includes~~operations prior to March 2, 2023, inclusive of Nordstrom.ca, Nordstrom Canadian stores and Nordstrom Rack Canadian stores, ~~Nordstrom Local, ASOS \| Nordstrom~~ and TrunkClub.com prior to October ~~2022, TrunkClub.com.~~2022.
Nordstrom Canada						Nordstrom Canada Retail, Inc., Nordstrom Canada Holdings, LLC and Nordstrom Canada Holdings II, LLC
Nordstrom Local						Nordstrom Local service hubs, which offer order pickups, returns, alterations and other services

Nordstrom Rack						NordstromRack.com, Nordstrom ~~Rack-branded~~Rack U.S. stores and Last Chance clearance stores
The Nordy Club						Our customer loyalty program
NYSE						New York Stock Exchange
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 revolving credit facility
Rights Plan						Our limited-duration Shareholder Rights Agreement adopted by the Board of Directors in September 2022
ROU asset						Operating lease right-of-use asset
RSU						Restricted stock unit
SEC						Securities and Exchange Commission
SERP						Unfunded defined benefit Supplemental Executive Retirement Plan
~~Secured Notes~~						~~8.750% senior secured notes due May 2025~~
SG&A						Selling, general and administrative
Supply Chain Network						Fulfillment centers that primarily process and ship orders to our customers, distribution centers that primarily 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.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Amounts in millions except per share amounts)

(Unaudited)


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
Net sales	Net sales	$3,433	$3,534	$10,891	$10,020	Net sales		$3,064	$3,467
Credit card revenues, net	Credit card revenues, net	113	103	320	283	Credit card revenues, net		117	102
Total revenues	Total revenues	3,546	3,637	11,211	10,303	Total revenues		3,181	3,569
Cost of sales and related buying and occupancy costs	Cost of sales and related buying and occupancy costs	(2,294)	(2,294)	(7,211)	(6,646)	Cost of sales and related buying and occupancy costs		(2,028)	(2,331)
Selling, general and administrative expenses	Selling, general and administrative expenses	(1,249)	(1,216)	(3,722)	(3,464)	Selling, general and administrative expenses		(1,103)	(1,165)
Earnings before interest and income taxes		3	127	278	193
Canada wind-down costs						Canada wind-down costs		(309)	—
(Loss) earnings before interest and income taxes						(Loss) earnings before interest and income taxes		(259)	73
Interest expense, net	Interest expense, net	(32)	(36)	(101)	(213)	Interest expense, net		(28)	(35)
(Loss) earnings before income taxes	(Loss) earnings before income taxes	(29)	91	177	(20)	(Loss) earnings before income taxes		(287)	38
Income tax benefit (expense)	Income tax benefit (expense)	9	(27)	(51)	(2)	Income tax benefit (expense)		82	(18)
Net (loss) earnings	Net (loss) earnings	($20)	$64	$126	($22)	Net (loss) earnings		($205)	$20

(Loss) earnings per share:	(Loss) earnings per share:					(Loss) earnings per share:
Basic	Basic	($0.13)	$0.40	$0.79	($0.14)	Basic		($1.27)	$0.13
Diluted	Diluted	($0.13)	$0.39	$0.77	($0.14)	Diluted		($1.27)	$0.13

Weighted-average shares outstanding:	Weighted-average shares outstanding:					Weighted-average shares outstanding:
Basic	Basic	159.5	159.2	160.1	158.9	Basic		160.8	160.1
Diluted	Diluted	159.5	162.5	162.3	158.9	Diluted		160.8	162.9

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

NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Amounts in millions)

(Unaudited)

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Net (loss) earnings ($20) $64 $126 ($22)
Foreign currency translation adjustment (10) 1 (11) 7
Post retirement plan adjustments, net of tax 1 2 2 5
Comprehensive net (loss) earnings ($29) $67 $117 ($10)

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

~~Table of Contents~~

~~NORDSTROM, INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(Amounts in millions)~~

~~(Unaudited)~~

October 29, 2022 January 29, 2022 October 30, 2021
Assets
Current assets:
Cash and cash equivalents $293 $322 $267
Accounts receivable, net 288 255 273
Merchandise inventories 2,878 2,289 2,863
Prepaid expenses and other 348 306 374
Total current assets 3,807 3,172 3,777
Land, property and equipment (net of accumulated depreciation of $8,135, $7,737 and $7,617) 3,373 3,562 3,558
Operating lease right-of-use assets 1,490 1,496 1,527
Goodwill 249 249 249
Other assets 476 390 423
Total assets $9,395 $8,869 $9,534
Liabilities and Shareholders’ Equity
Current liabilities:
Borrowings under revolving line of credit $100 $— $200
Accounts payable 2,073 1,529 2,310
Accrued salaries, wages and related benefits 242 383 276
Current portion of operating lease liabilities 256 242 240
Other current liabilities 1,168 1,160 1,063
Total current liabilities 3,839 3,314 4,089
Long-term debt, net 2,855 2,853 2,851
Non-current operating lease liabilities 1,544 1,556 1,602
Other liabilities 551 565 633
Commitments and contingencies
Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 159.7, 159.4 and 159.3 shares issued and outstanding 3,334 3,283 3,269
Accumulated deficit (2,669) (2,652) (2,852)
Accumulated other comprehensive loss (59) (50) (58)
Total shareholders’ equity 606 581 359
Total liabilities and shareholders’ equity $9,395 $8,869 $9,534


	Quarter Ended
		April 29, 2023	April 30, 2022
Net (loss) earnings		($205)	$20
Foreign currency translation adjustment		(4)	(1)
Post retirement plan adjustments, net of tax		—	1
Comprehensive net (loss) earnings		($209)	$20

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

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NORDSTROM, INC.

CONDENSED CONSOLIDATED ~~STATEMENTS OF SHAREHOLDERS’ EQUITY~~BALANCE SHEETS

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

(Unaudited)

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Common stock
Balance, beginning of period $3,314 $3,245 $3,283 $3,205
Issuance of common stock under stock compensation plans 9 7 18 14
Stock-based compensation 11 17 33 50
Balance, end of period $3,334 $3,269 $3,334 $3,269
Accumulated deficit
Balance, beginning of period ($2,601) ($2,916) ($2,652) ($2,830)
Net (loss) earnings (20) 64 126 (22)
Dividends (30) — (90) —
Repurchase of common stock (18) — (53) —
Balance, end of period ($2,669) ($2,852) ($2,669) ($2,852)
Accumulated other comprehensive loss
Balance, beginning of period ($50) ($61) ($50) ($70)
Other comprehensive (loss) income (9) 3 (9) 12
Balance, end of period ($59) ($58) ($59) ($58)
Total shareholders’ equity $606 $359 $606 $359
Dividends per share $0.19 — $0.57 —


	April 29, 2023	January 28, 2023	April 30, 2022
Assets
Current assets:
Cash and cash equivalents	$581	$687	$484
Accounts receivable, net	279	265	297
Merchandise inventories	2,237	1,941	2,426
Prepaid expenses and other current assets	414	316	332
Total current assets	3,511	3,209	3,539

Land, property and equipment (net of accumulated depreciation of $8,133, $8,289 and $7,834)	3,197	3,351	3,505
Operating lease right-of-use assets	1,393	1,470	1,497
Goodwill	249	249	249
Other assets	478	466	384
Total assets	$8,828	$8,745	$9,174

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable	$1,674	$1,238	$1,898
Accrued salaries, wages and related benefits	246	291	241
Current portion of operating lease liabilities	249	258	250
Other current liabilities	1,236	1,203	1,198
Current portion of long-term debt	249	—	—
Total current liabilities	3,654	2,990	3,587

Long-term debt, net	2,608	2,856	2,854

Non-current operating lease liabilities	1,406	1,526	1,566
Other liabilities	609	634	578

Commitments and contingencies (Note 2)

Shareholders’ equity:
Common stock, no par value: 1,000 shares authorized; 161.4, 160.1 and 160.5 shares issued and outstanding	3,372	3,353	3,301
Accumulated deficit	(2,824)	(2,588)	(2,662)
Accumulated other comprehensive gain (loss)	3	(26)	(50)
Total shareholders’ equity	551	739	589
Total liabilities and shareholders’ equity	$8,828	$8,745	$9,174

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

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NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS’ EQUITY

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

(Unaudited)

Nine Months Ended
October 29, 2022 October 30, 2021
Operating Activities
Net earnings (loss) $126 ($22)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization expenses 453 477
Right-of-use asset amortization 141 130
Asset impairment 80 —
Deferred income taxes, net (85) 25
Stock-based compensation expense 50 64
Other, net (53) 81
Change in operating assets and liabilities:
Accounts receivable, net (6) (27)
Merchandise inventories (550) (687)
Prepaid expenses and other assets (55) 408
Accounts payable 469 90
Accrued salaries, wages and related benefits (142) (76)
Other current liabilities 10 15
Lease liabilities (201) (218)
Other liabilities 3 17
Net cash provided by operating activities 240 277
Investing Activities
Capital expenditures (325) (361)
Proceeds from the sale of assets and other, net 82 (17)
Net cash used in investing activities (243) (378)
Financing Activities
Proceeds from revolving line of credit 100 400
Payments on revolving line of credit — (200)
Proceeds from long-term borrowings — 675
Principal payments on long-term borrowings — (1,100)
Change in cash book overdrafts 21 (4)
Cash dividends paid (90) —
Payments for repurchase of common stock (53) —
Proceeds from issuances under stock compensation plans 18 14
Tax withholding on share-based awards (15) (15)
Make-whole premium payment and other, net (4) (85)
Net cash used in financing activities (23) (315)
Effect of exchange rate changes on cash and cash equivalents (3) 2
Net decrease in cash and cash equivalents (29) (414)
Cash and cash equivalents at beginning of period 322 681
Cash and cash equivalents at end of period $293 $267
Supplemental Cash Flow Information
Cash paid (received) during the period for:
Income taxes, net $161 ($486)
Interest, net of capitalized interest 108 136


	Quarter Ended
		April 29, 2023	April 30, 2022
Common stock
Balance, beginning of period		$3,353	$3,283
Issuance of common stock under stock compensation plans		11	8
Stock-based compensation		8	10
Balance, end of period		$3,372	$3,301

Accumulated deficit
Balance, beginning of period		($2,588)	($2,652)

Net (loss) earnings		(205)	20
Dividends		(30)	(30)
Repurchase of common stock		(1)	—
Balance, end of period		($2,824)	($2,662)

Accumulated other comprehensive gain (loss)
Balance, beginning of period		($26)	($50)
Accumulated translation loss reclassified to earnings		33	—
Other comprehensive loss		(4)	—
Balance, end of period		$3	($50)

Total shareholders’ equity		$551	$589

Dividends per share		$0.19	$0.19

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

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NORDSTROM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)


	Quarter Ended
	April 29, 2023	April 30, 2022
Operating Activities
Net (loss) earnings	($205)	$20
Adjustments to reconcile net (loss) earnings to net cash provided by operating activities:
Depreciation and amortization expenses	144	152
Canada wind-down costs	220	—

Right-of-use asset amortization	43	47
Deferred income taxes, net	(16)	(13)
Stock-based compensation expense	14	19
Other, net	(25)	(45)
Change in operating assets and liabilities:
Merchandise inventories	(296)	(19)
Other current and noncurrent assets	(112)	(42)
Accounts payable	301	233
Accrued salaries, wages and related benefits	(39)	(143)
Lease liabilities	(67)	(65)
Other current and noncurrent liabilities	54	43
Net cash provided by operating activities	16	187

Investing Activities
Capital expenditures	(106)	(96)
Decrease in cash and cash equivalents resulting from Canada deconsolidation	(33)	—
Proceeds from the sale of assets and other, net	16	85
Net cash used in investing activities	(123)	(11)

Financing Activities




Change in cash book overdrafts	29	16
Cash dividends paid	(30)	(30)

Proceeds from issuances under stock compensation plans	11	8
Other, net	(9)	(8)
Net cash provided by (used in) financing activities	1	(14)


Net (decrease) increase in cash and cash equivalents	(106)	162
Cash and cash equivalents at beginning of period	687	322
Cash and cash equivalents at end of period	$581	$484

Supplemental Cash Flow Information
Cash paid (received) during the period for:
Income taxes, net of refunds	$2	($22)
Interest, net of capitalized interest	40	40

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 Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its 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 ~~2021~~2022 Annual Report and reflect all adjustments of a normal recurring nature that are, in management’s opinion, necessary for the fair presentation of the results of operations, financial position and cash flows for the periods presented.

The Condensed Consolidated Financial Statements as of and for the periods ended ~~October~~April 29, ~~2022~~2023 and ~~October~~April 30, ~~2021~~2022 are unaudited. The Condensed Consolidated Balance Sheet as of January ~~29, 2022~~28, 2023 has been derived from the audited Consolidated Financial Statements included in our ~~2021~~2022 Annual Report. The interim Condensed Consolidated Financial Statements should be read together with the Consolidated Financial Statements and related footnote disclosures contained in our ~~2021~~2022 Annual Report.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the balances of Nordstrom, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation.

On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations (see Note 2: Canada Wind-down) and as of this date, Nordstrom Canada was deconsolidated from Nordstrom, Inc.’s financial statements. Nordstrom Canada results prior to March 2, 2023 are included in the Company’s Condensed Consolidated Financial Statements.

Fiscal Year

We operate on a 52/53-week fiscal year ending on the Saturday closest to January 31st. References to 2023 relate to the 53-week fiscal year ending February 3, 2024. References to any other years included within this document are based on a 52-week fiscal year.

Seasonality

Our business, like that of other retailers, is subject to seasonal fluctuations and cyclical trends in consumer spending. Our sales are typically higher in our second quarter, which usually includes most of our Anniversary Sale, and in the fourth quarter due to the holidays. Approximately one week of our Anniversary Sale ~~shifted~~will shift from the second quarter to the third quarter in ~~2021 to the second quarter in 2022.~~2023.

Results for any one quarter are not indicative of the results that may be achieved for a full fiscal year. We plan our merchandise purchases and receipts to coincide with expected sales trends. For instance, our merchandise purchases and receipts increase prior to the Anniversary Sale and in the fall as we prepare for the holiday shopping season in(typically from November through ~~December.~~December). Consistent with our seasonal fluctuations, our working capital requirements have historically increased during the months leading up to the Anniversary Sale and the holidays as we purchase inventory in anticipation of increased sales.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires that we make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities during the reporting period. Uncertainties regarding such estimates and assumptions are inherent in the preparation of financial statements and actual results may differ from these estimates and assumptions. Our most significant accounting judgments and estimates include revenue recognition, inventory valuation, long-lived asset recoverability, ~~and~~ income taxes and contingent liabilities, including assumptions related to our Canada wind-down, all of which involve assumptions about future events. ~~We may be unable to accurately predict changes in economic conditions going forward and as a result our estimates may change in the near term.~~

Leases

We incurred operating lease liabilities arising from lease agreements of ~~$212~~$72 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2022~~2023 and $~~108~~84 for the ~~nine months~~quarter ended ~~October~~April 30, ~~2021.~~2022.

~~Supply Chain Impairment~~

During the third quarter of 2022, as part of our supply chain optimization initiatives, we decommissioned certain supply chain technology and related assets and incurred a non-cash impairment charge of $70. This included $58 on long-lived tangible assets and $12 on ROU assets to adjust the carrying values to their estimated fair values. These charges are included in our Corporate/Other SG&A expense on the Condensed Consolidated Statement of Earnings and asset impairment on the Condensed Consolidated Statement of Cash Flows. We evaluated the assets for impairment by comparing the carrying values to the related projected future cash flows, among other quantitative and qualitative analyses. After impairment, the carrying values of the remaining long-lived tangible and ROU assets were not material.

Trunk Club Wind-down

During the first quarter of 2022, in conjunction with the decision to sunset the Trunk Club brand, we incurred non-cash impairment charges of $10 related to a Trunk Club property to adjust the carrying ~~values~~value to ~~their~~the estimated fair value. These charges are included in our Retail segment SG&A expense on the Condensed Consolidated Statement of Earnings and ~~asset impairment~~other operating, net on the Condensed Consolidated Statement of Cash Flows.

During the second quarter of 2022, we incurred additional costs of $8 associated with the wind-down of Trunk Club. These expenses are primarily included in our Retail segment cost of sales and related buying and occupancy costs on the Condensed Consolidated Statement of Earnings. These charges are classified as operating on the Condensed Consolidated Statement of Cash Flows.

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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)~~

Investments

~~In July 2021, we acquired a minority interest in the Topshop, Topman, Miss Selfridge and HIIT brands through a strategic partnership with ASOS.com Ltd.~~ From time to time, we invest in financial interests of private companies and venture capital funds that align with our business and omni-channel strategies, which are recorded in other assets in the Condensed Consolidated Balance Sheets and proceeds from the sale of assets and other, net on the Condensed Consolidated Statements of Cash Flows.

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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)

During the first quarter of 2022, in connection with the sale of a limited partnership interest in a corporate office building, we recognized a gain of $51 in our Corporate/Other SG&A expense in the Condensed Consolidated Statement of Earnings and $73 in proceeds from the sale of assets and other, net on the Condensed Consolidated Statement of Cash Flows.

~~Subsequent Event~~Reclassification

~~In November~~We reclassified amounts in our fiscal 2022 Condensed Consolidated Statement of Cash Flows to conform with current period presentation. As a result, we ~~amended our program agreement~~aggregated:

•Accounts receivable, net with ~~TD. We receive credit card revenue through this agreement, whereby TD is the exclusive issuer of our consumer credit cards~~prepaid expenses and ~~we perform account servicing functions. The original agreement was scheduled to expire in April 2024~~other assets into other current and ~~the amendment extends the term through September 2026.~~noncurrent assets

•Other current liabilities with other liabilities into other current and noncurrent liabilities

•Tax withholding on share-based awards with other financing, net

These reclassifications had no impact on cash flows from operations, cash flows from investing or cash flows from financing.

NOTE 2: ~~REVENUE~~CANADA WIND-DOWN

~~Contract Liabilities~~Background

~~Contract liabilities represent~~On March 2, 2023, as part of our ~~obligation~~initiatives to ~~transfer goods or~~drive long-term profitable growth and enhance shareholder value, and after careful consideration of all reasonably available options, we announced the decision to discontinue support for Nordstrom Canada’s operations. Accordingly, Nordstrom Canada has commenced a wind-down of its business operations, obtaining an Initial Order from the Ontario Superior Court of Justice under the CCAA on March 2, 2023 to facilitate the wind-down in an orderly fashion. Nordstrom Canada’s ecommerce platform ceased operations on March 2, 2023 and we anticipate the wind-down of our six Nordstrom and seven Nordstrom Rack stores, with the help of a third-party liquidator, to be completed by late June 2023.

The Ontario Superior Court of Justice has appointed a monitor to oversee the wind-down process. Subsequent to the CCAA filing, Nordstrom has been providing limited support to Nordstrom Canada for the purpose of supporting an orderly wind-down, including providing shared services ~~to customers~~ and ~~include deferred revenue for~~ temporary use of intellectual property.

Wind-down Costs and Deconsolidation of Nordstrom Canada

The ~~Nordy Club (including points and Nordstrom Notes) and gift cards. Our contract liabilities are classified as current on~~following table provides detail of pre-tax charges associated with the ~~Condensed Consolidated Balance Sheets and are as follows:~~

wind-down of operations in Canada:


			~~Contract Liabilities~~Quarter Ended April 29, 2023
~~Balance as of January 30, 2021~~Loss on Canada write-off1			$~~478~~187
~~Balance as of May~~ Accumulated translation loss reclassified to earnings1 ~~2021~~			~~436~~33
~~Balance as of July 31, 2021~~Contingent liabilities2			~~433~~77
~~Balance as of October 30, 2021~~Other exit costs3			12
Total pre-tax costs			~~417~~$309

~~Balance as of January 29, 2022~~			~~478~~
~~Balance as of April 30, 2022~~			~~442~~
~~Balance as of July 30, 2022~~			~~438~~
~~Balance as of October 29, 2022~~			~~430~~

~~Revenues recognized from our beginning contract liability balance were $100~~1 Non-cash amounts are included in Canada wind-down costs on the Condensed Consolidated Statement of Cash Flows.

2 Amounts are included in other current liabilities on the Condensed Consolidated Balance Sheets.

3 Other exit costs include funding an employee trust and ~~$232 for~~professional fees.

These charges are primarily included in corporate/other in Note 9: Segment Reporting. The decrease in cash due to the ~~quarter~~deconsolidation of Nordstrom Canada is included in investing activities on the Condensed Consolidated Statement of Cash Flows and ~~nine months ended October 29, 2022~~all other impacts are included in operating cash flows.

Loss on Canada Write-off and ~~$106~~Accumulated Translation Loss

While Nordstrom continues to own 100% of the shares of Nordstrom Canada, as of March 2, 2023, the date of the CCAA filing, we no longer have a controlling interest and ~~$212 for~~have deconsolidated Nordstrom Canada. We hold a variable interest in the ~~quarter and nine months ended October 30, 2021.~~

~~Disaggregation of Revenue~~Nordstrom Canada entities, which are considered variable interest entities, but are not consolidated, as we are no longer the primary beneficiary.

The ~~following table summarizes~~pre-tax loss on Canada write-off of $187 in the first quarter of 2023 included the derecognition of Nordstrom Canada’s assets and liabilities and the write-down of both our ~~disaggregated net sales:~~Nordstrom Canada investment and related-party receivables to estimated fair value. In addition, we recognized a charge of $33 related to the derecognition of the accumulated comprehensive loss on foreign currency translation.

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Nordstrom $2,264 $2,343 $7,324 $6,614
Nordstrom Rack 1,169 1,191 3,567 3,406
Total net sales $3,433 $3,534 $10,891 $10,020
Digital sales as a % of total net sales 34 % 40 % 37 % 42 %
To assess the estimated fair value of our Nordstrom Canada investment and our related-party receivables, we estimated the assets available for distribution in relation to expected claims at the time of filing. The estimated amount of Nordstrom Canada’s liabilities exceeded the estimated fair value of assets available for distribution to creditors, and in relation to the receivables, we may not recover any proceeds. As a result, our fair value is recorded as zero in our Condensed Consolidated Balance Sheets as of April 29, 2023.

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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)

Prior to deconsolidation, Nordstrom made loans to and incurred receivables from the Canadian subsidiaries. These loans were considered intercompany transactions and were eliminated in consolidation of Nordstrom. Subsequent to deconsolidation, these receivables were no longer eliminated through consolidation, are considered related-party transactions and are recorded in our Condensed Consolidated Balance Sheets at estimated fair value. Nordstrom has an outstanding liability to Nordstrom Canada of $62 related to certain intercompany charges incurred prior to deconsolidation, which will be addressed as part of the wind-down process.

Contingent Liabilities and Guarantees

In the first quarter of 2023, we recorded a contingent liability of $77 as our current best estimate of expected payments for claims that may be asserted against us, primarily consisting of lease guarantees. Nordstrom has guaranteed certain lease obligations of Nordstrom Canada, with payment required by Nordstrom, Inc. upon failure of Nordstrom Canada to fulfill its obligations under the leases. Our estimate is based on expectations that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable that we would be found liable were these claims to be litigated and for how much. The maximum potential undiscounted future minimum lease and real estate tax payments under these guarantees were approximately $178 as of April 29, 2023.

Employee Trust

In connection with the filing, Nordstrom established an employee trust to fund termination and severance payments to employees of Nordstrom Canada. We provided an initial contribution of $10 based on our best estimate to fully fund the employee trust, and we have committed to provide up to an additional $8 depending on eligible employee claims. The cash balance of the employee trust is not recorded in Nordstrom, Inc.’s Condensed Consolidated Balance Sheets.

Debtor-in-Possession Financing

If needed, Nordstrom has agreed to provide Nordstrom Canada debtor-in-possession financing up to $11. However, we believe Nordstrom Canada has sufficient liquidity to sustain operations through the wind-down period. As of April 29, 2023, there were no outstanding borrowings.

Estimates

All our estimates are dependent on the outcome of the Nordstrom Canada wind-down process, including the amount of third-party and Nordstrom claims asserted and recognized in the claims process, the amount of assets available for distribution, the negotiation of a CCAA plan of arrangement approved by the creditors and the Ontario Superior Court of Justice and the outcome of negotiations regarding the leases. We are in the early stages of the wind-down process and our estimates of losses are based on currently available information and our assessment of the validity of certain expected claims. These estimates may change as new information becomes available and it is reasonably possible that they may materially change from the estimated amounts. Increases in estimated costs to settle claims and decreases in estimated assets available for distribution may result in additional material charges. At the same time, any future decreases in estimated costs to settle claims or increases in estimated assets available for distribution may result in a gain, which will reduce our estimated charges.

Amendment of Revolver Agreement

On March 1, 2023, we amended our Revolver originally dated May 6, 2022. Prior to this amendment, Nordstrom Canada Retail, Inc. was a loan party under the Revolver and the obligations under the Revolver were secured, in part, by the assets of this subsidiary. As a result of this amendment, Nordstrom Canada Retail, Inc. has been removed as a loan party and obligations under the Revolver will no longer be secured by these assets. In addition, this amendment excludes as subsidiaries or affiliates all Nordstrom Canada entities and carves out certain CCAA-related expenses and obligations from financial covenants under the Revolver.

Income Taxes

In the first quarter of 2023, we recognized net tax benefits of $93 primarily related to the write-off of excess tax basis in our investment in Canada, net of tax expense related to an increase in valuation allowance for Canada deferred tax 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)

NOTE 3: REVENUE

Contract Liabilities

Contract liabilities represent our obligation to transfer goods or services to customers and include deferred revenue for The Nordy Club (including points and Nordstrom Notes), gift cards and our amended 2022 TD program agreement. Our contract liabilities are classified on the Condensed Consolidated Balance Sheets as follows:


	Other current liabilities	Other liabilities
Balance as of January 29, 2022	$478	$—
Balance as of April 30, 2022	442	—



Balance as of January 28, 2023	536	136
Balance as of April 29, 2023	489	123

Revenues recognized from our beginning contract liability balance were $137 for the quarter ended April 29, 2023 and $128 for the quarter ended April 30, 2022.

Disaggregation of Revenue

The following table summarizes our disaggregated net sales:


	Quarter Ended
		April 29, 2023		April 30, 2022
Nordstrom		$2,027		$2,289
Nordstrom Rack		1,037		1,178

Total net sales		$3,064		$3,467

Digital sales as a % of total net sales		36	%	39	%

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


		Quarter Ended				Nine Months Ended					Quarter Ended
		October 29, 2022		October 30, 2021		October 29, 2022		October 30, 2021				April 29, 2023		April 30, 2022
Women’s Apparel	Women’s Apparel	29	%	29	%	29	%	30	%	Women’s Apparel		29	%	30	%
Shoes	Shoes	27	%	26	%	26	%	25	%	Shoes		26	%	26	%
Men’s Apparel	Men’s Apparel	15	%	14	%	15	%	14	%	Men’s Apparel		15	%	14	%
Women’s Accessories		11	%	12	%	12	%	13	%
Accessories										Accessories		12	%	13	%
Beauty	Beauty	11	%	12	%	11	%	11	%	Beauty		12	%	11	%
Kids’ Apparel	Kids’ Apparel	4	%	4	%	4	%	4	%	Kids’ Apparel		3	%	3	%
Other	Other	3	%	3	%	3	%	3	%	Other		3	%	3	%
Total net sales	Total net sales	100	%	100	%	100	%	100	%	Total net sales		100	%	100	%

NOTE 3:4: DEBT AND CREDIT FACILITIES

~~Debt~~

During the first quarter of 2021, we issued $250 aggregate principal amount of 2.30% senior notes due April 2024 and $425 aggregate principal amount of 4.25% senior notes due August 2031. With the net proceeds of these new notes, together with cash on hand, we retired our $600 Secured Notes. We recorded $88 related to the redemption in interest expense, net, which primarily consisted of a one-time payment of $78 for a “make-whole” premium, and the write-off of unamortized balances associated with the debt discount and issuance costs. The “make-whole” premium payment was not included in cash paid during the period for interest, net of capitalized interest in the Supplemental Cash Flow Information.

~~During the second quarter of 2021, we retired our 4.00% senior notes that were due October 2021 using cash on hand.~~

Credit Facilities

~~During~~As of April 29, 2023, we had total short-term borrowing capacity of $800 and no outstanding borrowings under the ~~second quarter of 2022, we terminated and replaced our prior revolving credit facility set to expire in September 2023 with a new $800~~ Revolver that expires in May 2027. ~~Consistent with our prior revolving credit agreement, any~~Provided that we obtain written consent from the lenders, we have the option to increase the Revolver by up to $200, to a total of $1,000, and two options to extend the Revolver for additional one-year terms.

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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)

Any outstanding borrowings under the Revolver are secured by substantially all our personal and intellectual property assets and are guaranteed by certain of our subsidiaries. Under the Revolver, our obligation to secure any outstanding borrowings will be eliminated if no default exists and we either have an unsecured investment-grade debt rating from two of three specified ratings agencies, or we have one investment-grade rating and achieve two consecutive fiscal quarters with a Leverage Ratio of less than 2.5 times. On March 1, 2023, we amended our Revolver agreement (see Note 2: Canada Wind-down).

Under the Revolver, we have two financial covenant tests that need to be met on a quarterly basis: a Leverage Ratio that is less than or equal to 4 times and a fixed charge coverage ratio that is greater than or equal to 1.25 times. As of ~~October~~April 29, ~~2022,~~2023, we were in compliance with all covenants.

The Revolver ~~provides~~contains customary representations, warranties, covenants and terms, including paying a variable rate of interest and a facility fee based on our debt rating, and is available for working capital, capital expenditures and general corporate purposes. The Revolver allows us ~~with additional flexibility, compared with our prior revolving credit facility, for~~to issue dividends and ~~share repurchases,~~repurchase shares provided we are not in default and no default would arise as a result of such payments. If the pro-forma Leverage Ratio after such payments is less than 3 times, then such payments are unlimited. If the pro-forma Leverage Ratio is greater than or equal to 3 times but less than 3.5 times, then we are limited to $100 per fiscal quarter and if the pro-forma Leverage Ratio is greater than or equal to 3.5 times then the limit is $60 per fiscal quarter.

The Revolver contains customary representations, warranties, covenants and terms, including paying a variable rate of interest and a facility fee based on our debt rating, and 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 Revolver by up to $200, to a total of $1,000, and two options to extend the Revolver for additional one-year terms. During the third quarter of 2022, we borrowed $100 under our Revolver, which remained outstanding as of October 29, 2022 and is classified in total current liabilities on the Condensed Consolidated Balance Sheets. In November 2022, subsequent to quarter end, we repaid the outstanding balance on 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 $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 of reducing available liquidity under the Revolver by an amount equal to the principal amount of commercial paper outstanding. Conversely, borrowings under our Revolver have the effect of reducing the available capacity of our commercial paper program by an amount equal to the amount outstanding. As of ~~October~~April 29, ~~2022,~~2023, we had no issuances outstanding under our commercial paper program.

NOTE 4:5: FAIR VALUE MEASUREMENTS

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

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

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

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

Financial Instruments Measured at Carrying Value

Financial instruments measured at carrying value on a recurring basis include cash and cash equivalents, accounts receivable, accounts payable and our Revolver, which approximate fair value due to their short-term nature.

Long-term debt is recorded at carrying value. If long-term debt was measured at fair value, we would use quoted market prices of the same or similar issues, which is considered a Level 2 fair value measurement. The following table summarizes the carrying value and fair value estimate of our long-term debt, including current maturities:


		October 29, 2022	January 29, 2022	October 30, 2021		April 29, 2023	January 28, 2023	April 30, 2022
Carrying value of long-term debt	Carrying value of long-term debt	$2,855	$2,853	$2,851	Carrying value of long-term debt	$2,857	$2,856	$2,854
Fair value of long-term debt	Fair value of long-term debt	2,224	2,758	2,992	Fair value of long-term debt	2,224	2,278	2,544

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, long-lived tangible and ROU assets, in connection with periodic evaluations for potential impairment. In the first quarter of 2023, we also measured our investment in Nordstrom Canada, our related-party receivables and related lease guarantees at fair value (see Note 2: Canada Wind-down for additional information). We estimate the fair value of these assets and liabilities using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements. For more information regarding long-lived tangible asset impairment charges for the nine months ended October 29, 2022, see Note 1: Basis of Presentation. There were no material impairment charges for these assets for the nine months ended October 30, 2021.

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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)

Investments Measured at NAV

We have certain investments that are measured at fair value using the NAV per share, or its equivalent, as a practical expedient. This class of investments consists of partnership interests that mainly invest in venture capital strategies with a focus on privately held consumer and technology companies. The NAV is based on the fair value of the underlying net assets owned by the fund and the relative interest of each participating investor in the fair value of the underlying assets. Our interest in these partnerships is generally not redeemable and is subject to significant restrictions regarding transfers. Distributions from each fund will be received as the underlying assets of the funds are liquidated. Liquidation is triggered by clauses within the partnership agreements or at the funds’ stated end date. The contractual terms of the partnership interests range from six to ten years.

NOTE 5:6: STOCK-BASED COMPENSATION

The following table summarizes our stock-based compensation expense:


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
RSUs	RSUs	$10	$12	$32	$41	RSUs		$10	$12
Stock options	Stock options	1	5	12	19	Stock options		2	5
Other1	Other1	1	1	6	4	Other1		2	2
Total stock-based compensation expense, before income tax benefit	Total stock-based compensation expense, before income tax benefit	12	18	50	64	Total stock-based compensation expense, before income tax benefit		14	19
Income tax benefit	Income tax benefit	(3)	(5)	(12)	(17)	Income tax benefit		(4)	(5)
Total stock-based compensation expense, net of income tax benefit	Total stock-based compensation expense, net of income tax benefit	$9	$13	$38	$47	Total stock-based compensation expense, net of income tax benefit		$10	$14

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

The following table summarizes our grant allocations:


		Nine Months Ended					Quarter Ended
		October 29, 2022		October 30, 2021			April 29, 2023		April 30, 2022
		Granted	Weighted-average grant-date fair value per unit	Granted	Weighted-average grant-date fair value per unit		Granted	Weighted-average grant-date fair value per unit	Granted	Weighted-average grant-date fair value per unit
RSUs	RSUs	2.9	$22	1.7	$32	RSUs	2.1	$17	1.4	$23
Stock options	Stock options	1.1	$10	1.2	$13	Stock options	1.2	$8	1.1	$10
PSUs	PSUs	0.5	$23	—	—	PSUs	0.4	$16	0.5	$23

Under our deferred and stock-based compensation plan arrangements, we issued ~~0.7 and 2.6~~1.4 shares of common stock during the first quarter of 2023 and ~~nine months ended October 29, 2022 and 0.4 and 1.6~~1.2 shares during the first quarter ~~and nine months ended October 30, 2021.~~of 2022.

NOTE 6:7: SHAREHOLDERS’ EQUITY

Share Repurchases

In May 2022, our Board of Directors authorized a new program to repurchase up to $500 of our outstanding common stock, with no expiration date. ~~This new program replaced~~We repurchased 0.03 shares of common stock for $1 at an average purchase price per share of $19.41 during the ~~August 2018 program, which~~first quarter of 2023, compared with no shares repurchased in the first quarter of 2022, and had ~~no expiration date and $707 remaining in repurchase capacity at termination. Our share repurchases are summarized as follows:~~
Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Shares of common stock repurchased 0.8 — 2.3 —
Average price paid per share $22.52 — $22.95 —
Aggregate amount of common stock repurchased $18 — $53 —

~~We had $447~~$438 remaining in share repurchase capacity as of ~~October~~April 29, ~~2022.~~2023.

Dividends

In ~~November 2022,~~May 2023, subsequent to quarter end, we declared a quarterly dividend of $0.19 per share, which will be paid on ~~December~~June 14, ~~2022~~2023 to shareholders of record at the close of business on ~~November 29, 2022.~~May 30, 2023.

We have certain limitations with respect to the payment of dividends and share repurchases under our Revolver agreement (see Note 3:4: Debt and Credit Facilities).

Rights Plan

In September 2022, our Board of Directors approved a shareholder rights agreement and declared a dividend of one right for each outstanding share of Nordstrom common stock to shareholders of record on September 30, 2022. The Rights Plan expires September 19, 2023, unless redeemed, exchanged or terminated earlier by our Board of Directors. Each right entitles holders to purchase one newly issued share of Nordstrom common stock at an exercise price of $94 per right, subject to adjustment. Initially, the rights ~~will~~are not be exercisable and ~~will~~ trade with our shares of common stock.

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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)

In general, the rights become exercisable following a public announcement that a person acquires 10% or more of the outstanding shares of Nordstrom common stock. If the rights are exercised, each holder (except the acquiring person) will have the right to receive common stock equal to two times the exercise price of the right. The Company may redeem the rights for $0.001 per right anytime prior to the rights becoming exercisable. The agreement also provides for exceptions and additional terms for other certain situations and circumstances.

The Rights Plan is intended to protect the interests of Nordstrom and its shareholders by reducing the likelihood that any entity, person or group gains control of the Company through open-market accumulation or other means without payment of an adequate control premium and expires September 19, 2023, unless redeemed, exchanged or terminated earlier by our Board of Directors. There is currently no impact to our Condensed Consolidated Financial Statements.

In June 2023, subsequent to quarter end, shareholders voted at our Annual Meeting to approve the advisory vote on the extension of our Rights Plan until September 19, 2025.

NOTE 7:8: EARNINGS PER SHARE

The computation of EPS is as follows:


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
Net (loss) earnings	Net (loss) earnings	($20)	$64	$126	($22)	Net (loss) earnings		($205)	$20

Basic weighted average shares outstanding		159.5	159.2	160.1	158.9
Basic weighted-average shares outstanding						Basic weighted-average shares outstanding		160.8	160.1
Dilutive effect of common stock equivalents	Dilutive effect of common stock equivalents	—	3.3	2.2	—	Dilutive effect of common stock equivalents		—	2.8
Diluted weighted average shares outstanding		159.5	162.5	162.3	158.9
Diluted weighted-average shares outstanding						Diluted weighted-average shares outstanding		160.8	162.9

Basic EPS	Basic EPS	($0.13)	$0.40	$0.79	($0.14)	Basic EPS		($1.27)	$0.13
Diluted EPS	Diluted EPS	($0.13)	$0.39	$0.77	($0.14)	Diluted EPS		($1.27)	$0.13

Anti-dilutive common stock equivalents	Anti-dilutive common stock equivalents	10.1	7.5	9.2	11.6	Anti-dilutive common stock equivalents		11.4	10.1

NOTE 8:9: SEGMENT REPORTING

The following table sets forth information for our reportable segment:


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
Retail segment EBIT	Retail segment EBIT	$119	$197	$471	$335	Retail segment EBIT		$140	$87
Corporate/Other EBIT	Corporate/Other EBIT	(116)	(70)	(193)	(142)	Corporate/Other EBIT		(399)	(14)
Interest expense, net	Interest expense, net	(32)	(36)	(101)	(213)	Interest expense, net		(28)	(35)
(Loss) earnings before income taxes	(Loss) earnings before income taxes	($29)	$91	$177	($20)	(Loss) earnings before income taxes		($287)	$38

For information about disaggregated revenues, see Note 2:3: Revenue.

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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 and where noted otherwise)

The following MD&A provides a narrative of our financial performance and is intended to promote understanding of our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, Item 1. Financial Statements (Unaudited) and generally discusses the results of operations for the quarter ~~and nine months~~ ended ~~October~~April 29, ~~2022~~2023 compared with the quarter ~~and nine months~~ ended ~~October~~April 30, ~~2021.~~2022. The following discussion and analysis contains forward-looking statements and should also be read in conjunction with cautionary statements and risks described elsewhere in this Form 10-Q before deciding to purchase, hold or sell shares of our common stock.


Overview			1719

Results of Operations			1820
Liquidity			24
Capital Resources			26
Critical Accounting Estimates			27
Recent Accounting Pronouncements			28

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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 and where noted otherwise)

OVERVIEW

~~We delivered both topline and bottom-line~~First quarter results ~~in line with~~reflected progress on our expectations in the third quarter, while enhancing our strategic capabilities. When customer demand decelerated in late June, we took action to manage through the short-term macroeconomic uncertainty and position our business for success. This included managing expenses to align with sales expectations and clearing through excess inventory to exit the year with healthy inventory levels and mix. These actions prepared us well for the third quarter, as macroeconomic pressures impacted all customer segments, with the most significant impact in the lowest income groups. However, customers continued to refresh their wardrobes and shop for occasions such as social events, travel, work and holidays, which drove demand for our core categories and services.

~~Net loss for the third quarter was $20, or $0.13 loss per diluted share. Excluding a supply chain technology and related asset impairment charge, Adjusted EPS was $0.20~~1~~. Net sales decreased 3% versus last year, in line with our expectations. This included a negative impact~~2023 key priorities of ~~approximately 200 basis points from one week of the Anniversary Sale shifting into the second quarter.~~

~~We remain focused on~~ improving Nordstrom Rack performance, increasing ~~profitability~~our inventory productivity and optimizing our supply ~~chain~~chain. We reported a net loss of $205 and ~~inventory flow.~~ a $1.27 loss per diluted share, and after excluding charges from the wind-down of Canadian operations, Adjusted EPS1 was $0.07. Loss before interest and tax was $259 in the first quarter of 2023, compared with EBIT of $73 during the same period in 2022. Adjusted EBIT1 was $50 in the first quarter of 2023 compared with $32 in the first quarter of 2022.

Total Company net sales decreased 11.6% compared with the first quarter of 2022 and included a negative 175 basis point impact from the wind-down of Canadian operations. Most categories were down compared with the first quarter of 2022, which benefited from strong pent-up demand for a return to occasions as the pandemic receded.

We are ~~making progress~~encouraged by the improvements in ~~these initiatives,~~efficiency and ~~we expect them to benefit~~profitability as a result of our ~~topline and bottom-line performance in the fourth quarter of this year, in 2023 and beyond.~~

~~While we take actions to address a shifting consumer backdrop, we are also building capabilities to better serve customers and deliver increased profitability, with a~~ focus on ~~improving Nordstrom Rack performance, winning in~~ our ~~most important markets and leveraging our digital capabilities.~~

~~Nordstrom Rack –~~key priorities. We ~~remain focused on~~are committed to delivering profitable growth while improving the customer experience. This quarter, we made the decision to reduce Rack store-based order fulfillment and raise the minimum order amount to receive free ship-to-store delivery on Rack.com. These actions reduced order cancellations, simplified Rack operations and improved profitability, but negatively impacted topline growth at the Rack by approximately 200 basis points.experience through three key initiatives.

~~We continue to focus on increasing our supply of premium brands at~~ Nordstrom Rack ~~improving~~– Consistent with our ~~assortment and growing brand awareness~~customer promise to ~~fuel future growth. Premium brands are a differentiator for the Rack, and we are dedicated to having~~deliver great brands at great prices, ~~at each of our locations. For example, 90% of~~we increased the ~~top brands at Nordstrom are sold at Nordstrom Rack. This quarter, sales~~penetration of our top ~~100 brands at~~performing strategic brands. We also continued to expand our reach and convenience for customers by opening two new stores during the quarter. Collectively, these new stores and the two stores opened last year have performed well so far, with sales productivity exceeding the fleet average. We believe that Rack ~~increased 9%,~~stores are a great investment, with returns that exceed our cost of capital and have a short payback period. We are excited to roll out to more markets and increase our Rack footprint, with six more stores opened in May 2023 and plans to open 13 additional stores later this year.

Inventory Productivity – We are focused on better inventory discipline to provide customers with relevant and new assortments and improve our earnings and returns on invested capital. In the first quarter of 2023, we managed with leaner and more current inventories after clearing out excess inventory in the second half of fiscal year 2022. We improved sell-through and had faster turns across most of our categories, resulting in a 110 basis point increase in our gross profit rate compared with the first quarter of 2022. Overall inventory levels were 8% lower than last year with non-Designer inventory down 11%. Moving into the second quarter, we are focusing on clearing excess Designer product, which ~~underscores~~will include incremental markdowns over the ~~growth opportunity from increasing~~balance of the year. Designer sales in the first quarter of 2023 remained above pre-pandemic levels, and the category overall continues to be a strong contributor to our core offering and a key differentiator to our unique breadth of selection.

Supply Chain Optimization – We continue to make significant progress on our supply ~~of premium brands.~~

~~Market Strategy –~~ ~~Our market capabilities help us engage with~~chain initiatives, which drive improvement in customer experience and profitability. During the quarter, we increased productivity throughout our network and reduced transportation costs, while also delivering better service to our customers through shortened delivery times. For the third consecutive quarter, variable supply chain costs fell by delivering convenience, connection and greater access to product, no matter how they choose to shop. Customers clearly value our interconnected model, with a strong store fleet, two unique banners and omnichannel capabilities linked at the market level. Order pickup represented 12% of Nordstrom.com demand this quarter, an increase of 200over 100 basis points ~~versus last year.~~

~~Digital Capabilities –~~ ~~We are also leveraging~~compared with the prior year, helping to mitigate overall SG&A deleverage on lower sales. Supply chain is the largest component of our digital capabilities to extend our unmatched one-to-one store experience to a digital world. Our goal is to personalize the digital experience with discovery supported by a broad product assortment, convenience powered by our market strategySG&A expenses, and connection via our people and experiences. We are evolving digital discovery and driving higher engagement with enhanced content, a refreshed shopping experience including redesigned product pages and smarter product search capabilities. We are also improving the digital purchase journey with better imagery and product descriptions to help customers make more informed purchase decisions and minimize returns.

~~Although~~we believe there is more opportunity to improve our efficiency and help drive overall expense leverage as sales improve.

Despite continued ~~macro~~macroeconomic uncertainty, we are making progress on our priorities to improve profitability. We believe continued focus and execution will drive incremental improvement over the ~~capabilities we have built with our Closer to You strategy, digital assets~~remainder of the year and ~~supply chain optimization prepare~~will position us to manage short-term pressures. With our strong balance sheet and cash position, we also have the flexibility to respond to shifting demand. We are navigating short-term headwinds, while also continuingwell to build capabilities to better serve our customers, drive profitable growth and increase shareholder value.

1 Adjusted EBIT and Adjusted EPS ~~is a~~are non-GAAP financial ~~measure.~~measures. For a reconciliation between GAAP and non-GAAP financial measures, see Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures) below.

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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 and where noted otherwise)

RESULTS OF OPERATIONS

In our ongoing effort to enhance the customer experience, we are focused on providing a seamless retail experience across our Company. We invested early in integrating our operations, merchandising and technology across our stores and online ~~and~~ in both our Nordstrom and Nordstrom Rack banners. By connecting our digital and physical assets across Nordstrom and Nordstrom Rack, we are able to better serve customers when, where and how they want to shop. We have one Retail reportable segment and analyze our results on a total ~~company~~Company basis, using customer, market share, operational and net sales metrics.

Our Anniversary Sale, historically the largest event of the year, typically falls in the second quarter. Approximately one week of our Anniversary Sale shifted from the third quarter in 2021 to the second quarter in 2022.

We monitor a number of key operating metrics to evaluate our Company’s performance. In addition to net sales, net earnings (loss) and other results under GAAP, two other key operating metrics we use are GMV and inventory turnover rate. Beginning in the first quarter of 2023, we made changes to how we calculate these metrics to more closely align with how our business is operated. Changes in the methodologies are discussed below and prior periods have been adjusted to reflect a comparable presentation.

•GMV: ~~Our GMV represents~~calculated as the total dollar value of ~~items~~merchandise sold through our digital platforms and stores. GMV includes net merchandise sales from inventory we own, as well as the retail value of merchandise sold under our ~~alternative partnership~~unowned inventory models with our ~~vendors in our Nordstrom banner.~~vendors. We use GMV as an indicator of the scale and growth of our operations and the impact of our ~~alternative partnership~~unowned inventory models. Prior to the first quarter of 2023, we also included non-merchandise sales in our GMV calculation.

•Inventory Turnover Rate: calculated as the trailing 4-quarter merchandise cost of sales divided by the trailing 13-month average inventory. Inventory turnover rate is an indicator of our success in optimizing inventory volumes in accordance with customer demand. Prior to the first quarter of 2023, we calculated inventory turnover rate as the trailing 4-quarter cost of sales and related buying and occupancy costs divided by the trailing 4-quarter average inventory. ~~Inventory turnover rate is an indicator of our success in optimizing inventory volumes in accordance with customer demand.~~

Net Sales

The following table summarizes net sales:


		Quarter Ended				Nine Months Ended		Quarter Ended
		October 29, 2022		October 30, 2021			October 29, 2022		October 30, 2021			April 29, 2023		April 30, 2022
Net sales:	Net sales:										Net sales:
Nordstrom	Nordstrom	$2,264		$2,343			$7,324		$6,614		Nordstrom	$2,027		$2,289
Nordstrom Rack	Nordstrom Rack	1,169		1,191			3,567		3,406		Nordstrom Rack	1,037		1,178

Total net sales	Total net sales	$3,433		$3,534			$10,891		$10,020		Total net sales	$3,064		$3,467

Net sales (decrease) increase:	Net sales (decrease) increase:										Net sales (decrease) increase:
Nordstrom	Nordstrom	(3.4	%)	10.5	%		10.7	%	45.6	%	Nordstrom	(11.4	%)	23.5	%
Nordstrom Rack	Nordstrom Rack	(1.9	%)	35.2	%		4.7	%	50.6	%	Nordstrom Rack	(11.9	%)	10.3	%
Total Company	Total Company	(2.9	%)	17.7	%		8.7	%	47.2	%	Total Company	(11.6	%)	18.7	%

Digital sales as a % of total net sales	Digital sales as a % of total net sales	34	%	40	%		37	%	42	%	Digital sales as a % of total net sales	36	%	39	%
Digital sales (decrease) increase		(16	%)	(12	%)		(4	%)	10	%
Digital sales decrease											Digital sales decrease	(17	%)	—	%

Nordstrom GMV (decrease) increase	Nordstrom GMV (decrease) increase	(2.9	%)	11.9	%		11.4	%	47.3	%	Nordstrom GMV (decrease) increase	(11.8	%)	24.1	%
Total Company GMV (decrease) increase	Total Company GMV (decrease) increase	(2.5	%)	18.6	%		9.2	%	48.4	%	Total Company GMV (decrease) increase	(11.9	%)	19.1	%

Total Company net sales and GMV decreased for the ~~third~~first quarter of ~~2022,~~2023, compared with the same period in ~~2021. The timing shift~~2022. Approximately 175 basis points of the ~~Anniversary Sale, with one day falling into~~decrease was due to the ~~third~~deconsolidation of our Canadian operations as of March 2, 2023 (see Note 2: Canada Wind-down). Most categories were down in the first quarter of 2022 versus roughly one week in 2021, had a negative impact on net sales of approximately 200 basis points compared with the third quarter of 2021. Total Company net sales and GMV increased for the nine months ended October 29, 2022,2023, compared with the same period in ~~2021. In~~2022, which benefited from strong pent-up demand for a return to occasions after the ~~third quarter, core categories including men’s and women’s apparel, shoes and designer had~~pandemic. Active was the strongest ~~growth versus 2021, as customers continued to shop for occasions, travel, work~~category, while beauty and ~~holidays. For~~men’s apparel performed above average.

Total Company digital sales decreased in the ~~nine months ended October 29, 2022, the same core categories~~first quarter of ~~shoes, men’s and women’s apparel and designer had the strongest growth~~2023, compared with the same period in ~~2021. During the nine months ended October 29,~~ 2022, ~~we opened two Nordstrom Rack stores~~ and ~~one ASOS | Nordstrom store.~~

~~Digital sales decreased for the third quarter and nine months ended October 29, 2022, compared with the same periods in 2021. The timing~~represented 36% of ~~the Anniversary Sale had a negative impact on digital sales in the third quarter of approximately 300 basis points compared with the same period in 2021. Reducing store-based order~~total net sales. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of 2022 and sunsetting Trunk Club earlier in ~~fiscal~~ 2022 ~~had a negative impact on~~negatively impacted first quarter digital sales ~~for the third quarter and nine months ended October 29, 2022.~~

~~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 and where noted otherwise)~~

by approximately 800 basis points.

Nordstrom net sales and GMV decreased for the ~~third~~first quarter of 2023, compared with the first quarter of 2022, and increased for the nine months ended October 29, 2022, compared with the same periods in 2021. The timing shift of the Anniversary Sale had a negative impact on Nordstrom banner net sales of approximately 300 basis points compared with the third quarter of 2021. For the third quarter of 2022, Nordstrom net saleswhich reflected a decrease in the number of items sold, partially offset by an increase in the average selling price per item ~~sold, compared with the same period in 2021. For the nine months ended October 29, 2022,~~sold. The wind-down of Canadian operations had a negative impact on Nordstrom net sales ~~reflected an increase in the average selling price per item sold, while the number~~ of ~~items sold remained flat, compared with the same period in 2021.~~

Nordstrom Rack net sales decreased for the third quarter of 2022 and increased for the nine months ended October 29, 2022, compared with the same periods in 2021. For the third quarter of 2022, Nordstrom Rack net sales reflected a decrease in the number of items sold, while the average selling price per item sold remained flat, compared with the same period in 2021. For the nine months ended October 29, 2022, Nordstrom Rack net sales reflected an increase in the average selling price per item sold, partially offset by a decrease in the number of items sold, compared with the same period in 2021.

~~See Note 2: Revenue in Item 1 for information about disaggregated revenues.~~

~~Credit Card Revenues, Net~~

Credit card revenues, net increased $10 and $37 for the third quarter and nine months ended October 29, 2022, compared with the same periods in 2021, primarily as a result of higher finance charges due to larger outstanding balances, partially offset by higher losses from bad debt for the third quarter of 2022.

~~Gross Profit~~

~~The following table summarizes gross profit:~~

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Gross profit $1,139 $1,240 $3,680 $3,374
Gross profit as a % of net sales 33.2% 35.1% 33.8% 33.7%
October 29, 2022 October 30, 2021
Inventory turnover rate 3.85 4.20

~~Gross profit decreased $101 and 190~~approximately 270 basis points as a rate of net sales for the third quarter of 2022, compared with the same period in 2021, primarily due to higher markdown rates and lower sales. We incurred approximately $100 in incremental markdowns in the third quarter. Gross profit increased $306 and 10 basis points as a rate of net sales for the nine months ended October 29, 2022, compared with the same period in 2021, primarily due to higher sales, partially offset by higher markdown rates.

Ending inventory as of October 29, 2022 increased 0.6%, compared with the same period in 2021, versus a 2.9% decrease in sales for the third quarter of 2022. Inventory turnover rate, which is calculated using trailing 4-quarter average inventory, decreased primarily due to higher inventory levels across most channels as a result of supply chain disruptions and softening customer demand trends.

~~Selling, General and Administrative Expenses~~

~~SG&A is summarized in the following table:~~

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
SG&A expenses $1,249 $1,216 $3,722 $3,464
SG&A expenses as a % of net sales 36.4% 34.4% 34.2% 34.6%

SG~~&A increased $33 and 200 basis points as a rate of net sales for the third quarter of 2022, compared with the same period in~~ ~~2021~~, primarily due to a supply chain technology and related asset impairment charge of $70, partially offset by fulfillment expense efficiencies. SG&A increased $258 for the nine months ended October 29, 2022, compared with the same period in ~~2021, primarily due to increased~~ variable costs on higher sales volume and a supply chain technology and related asset impairment charge, partially offset by fulfillment expense efficiencies. SG&A rate decreased 40 basis points as a rate of net sales for the nine months ended October 29, 2022, compared with the same period in ~~2021, primarily due to leverage on higher sales volume and fulfillment expense efficiencies, partially offset by a supply chain technology and related asset impairment charge.~~

~~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 and where noted otherwise)~~

~~Earnings Before Interest and Income Taxes~~

~~EBIT is summarized in the following table:~~

Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
EBIT $3 $127 $278 $193
EBIT as a % of net sales 0.1% 3.6% 2.6% 1.9%

~~EBIT decreased $124 and 350 basis points as a rate of net sales for the third quarter of 2022, compared with the same period in~~ ~~2021~~, ~~primarily due to higher markdowns and a supply chain technology and related asset impairment charge, partially offset by fulfillment expense efficiencies.~~ ~~EBIT increased $85 and~~ ~~65 b~~asis points as a rate of net sales for the nine months ended October 29, 2022, compared with the same period in 2021, primarily due to higher sales, partially offset by higher markdowns and a supply chain technology and related asset impairment charge.

~~Interest Expense, Net~~

Interest expense, net was $32 for the third quarter of 2022, and was relatively flat compared with $36 for the same period in 2021. Interest expense was $101 for the nine months ended October 29, 2022, compared with $213 for the same period in 2021. The decrease for the nine months ended October 29, 2022 was primarily due to debt refinancing charges of $88 related to the redemption of the Secured Notes in the first quarter of 2021 and the redemption of the 4% senior notes in the second quarter of 2021.

~~Income Tax~~

~~Income tax (benefit) expense is summarized in the following table:~~
Quarter Ended Nine Months Ended
October 29, 2022 October 30, 2021 October 29, 2022 October 30, 2021
Income tax (benefit) expense ($9) $27 $51 $2
Effective tax rate 30.6 % 29.9 % 29.0 % (7.6 %)

The effective tax rate in the third quarter of 2022 was roughly flat, compared with the same period in 2021. The effective tax rate increased for the nine months ended October 29, 2022, compared with the same period in 2021, due to an overall increase in earnings before income taxes. Income tax expense for the nine months ended October 30, 2021, when compared with a loss before income taxes, resulted in a negative rate in 2021.points.

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 and where noted otherwise)

Nordstrom Rack net sales decreased for the first quarter of 2023 compared with the same period in 2022, which reflected a decrease in the number of items sold, partially offset by an increase in the average selling price per item sold. Eliminating store fulfillment for Nordstrom Rack digital orders during the third quarter of 2022 negatively impacted Nordstrom Rack sales by approximately 600 basis points.

There were two Nordstrom Rack store openings during the first quarter of 2023. Subsequent to quarter end, we opened five Nordstrom Rack stores and relocated one Nordstrom Rack store. We deconsolidated six Nordstrom and seven Nordstrom Rack stores in Canada as of March 2, 2023 (see Note 2: Canada Wind-down in Item 1).

Credit Card Revenues, Net

Credit card revenues, net were $117 for the first quarter of 2023, compared with $102 for the same period in 2022. The increase was due to higher finance charges from both higher rates and outstanding balances, and higher revenue recognized in connection with our 2022 TD program agreement amendment. The increase was partially offset by increased credit losses.

Fiscal Year 2023 Total Revenue Outlook

In fiscal 2023, which includes a 53rd week, we expect total revenue, including retail sales and credit card revenues, to decline 4 to 6 percent compared with fiscal 2022. Our outlook includes approximately 250 basis points of negative impact from the wind-down of business operations in Canada (see Note 2: Canada Wind-down for more information) and approximately 130 basis points of positive impact from the 53rd week.

Gross Profit

The following table summarizes gross profit:


	Quarter Ended
	April 29, 2023		April 30, 2022
Gross profit	$1,036		$1,136
Gross profit as a % of net sales	33.8	%	32.8	%
Inventory turnover rate	3.4		3.4

Gross profit decreased $100 during the first quarter of 2023, compared with the same period in 2022, due to lower sales, partially offset by increased inventory productivity. Gross profit increased 110 basis points as a rate of net sales, primarily due to our focus on increasing inventory productivity. Ending inventory decreased 8% compared with the same period in 2022, versus a 12% decrease in sales.

Selling, General and Administrative Expenses

SG&A is summarized in the following table:


	Quarter Ended
	April 29, 2023		April 30, 2022
SG&A expenses	$1,103		$1,165
SG&A expenses as a % of net sales	36.0	%	33.6	%

SG&A decreased $62 during the first quarter of 2023, compared with the same period in 2022, due to a decrease in variable expenses on lower sales and supply chain efficiencies. The first quarter of 2022 included a $51 gain on sale of our interest in a corporate office building. SG&A rate increased 240 basis points primarily due to a 120 basis point net impact in the first quarter of 2022 from a gain on sale of our interest in a corporate office building and an impairment charge related to costs associated with the wind-down of Trunk Club. SG&A rate also increased due to deleverage on lower sales volume, partially offset by improvements in variable costs from supply chain efficiency initiatives.

Canada Wind-down Costs

We recognized charges associated with the wind-down of Nordstrom Canada of $309 in the first quarter of 2023 (see Note 2: Canada Wind-down in Item 1).

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 and where noted otherwise)

Earnings (Loss) Before Interest and Income Taxes

EBIT is summarized in the following table:


	Quarter Ended
	April 29, 2023		April 30, 2022
EBIT	($259)		$73
EBIT as a % of net sales	(8.5	%)	2.1	%

EBIT decreased $332 and 1,060 basis points during the first quarter of 2023, compared with the same period in 2022. The decrease was due to $309 of expenses associated with the wind-down of Canadian operations in the first quarter of 2023 and lower sales volume, partially offset by supply chain efficiencies and improved inventory productivity. The first quarter of 2022 also included a $51 gain on sale of our interest in a corporate office building and a $10 impairment charge related to costs associated with the wind-down of Trunk Club.

Interest Expense, Net

Interest expense, net was$28for the first quarter of 2023, compared with $35 for the same period in 2022. The decrease was primarily due to an increase in interest income.

Income Tax Expense

Income tax expense is summarized in the following table:


	Quarter Ended
		April 29, 2023		April 30, 2022
Income tax (benefit) expense		($82)		$18
Effective tax rate		28.6	%	46.8	%

The effective tax rate decreased in the first quarter of 2023, compared with the same period in 2022, primarily due to net tax benefits of $93 related to the wind-down of Canadian operations recorded in the first quarter of 2023. Excluding the approximate 22 percentage point impact of the wind-down, income tax expense in the first quarter of 2023 was 50.7% of pretax earnings. Both periods were impacted by additional tax expense related to stock-based compensation, however the loss before income taxes in the first quarter of 2023 resulted in a favorable impact on the overall effective tax rate compared with an unfavorable impact to the first quarter of 2022, which had earnings before income taxes.

Earnings Per Share

EPS is as follows:


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
Basic	Basic	($0.13)	$0.40	$0.79	($0.14)	Basic		($1.27)	$0.13
Diluted	Diluted	($0.13)	$0.39	$0.77	($0.14)	Diluted		($1.27)	$0.13

Diluted EPS decreased ~~$0.52~~$1.40 for the ~~third~~first quarter of 2023, compared with the same period in 2022, primarily due to ~~higher markdowns and~~charges related to the wind-down of Canadian operations that reduced diluted EPS by $1.34 per share. The quarter ended April 30, 2022 includes a net favorable impact of ~~a supply chain technology and related asset impairment charge. For the nine months ended October 29, 2022,~~$0.19 per diluted ~~EPS increased $0.91 primarily~~share due to ~~higher sales volumes and the net impact from~~ the gain on sale of our interest in a corporate office building, partially offset by ~~a supply chain technology and related asset~~an impairment charge ~~Trunk Club wind-down costs and higher markdowns. In~~ ~~the first quarter of 2021, we recorded an interest expense charge of $88~~ related to costs associated with the ~~redemption~~wind-down of ~~the Secured Notes, which reduced diluted EPS by $0.41 per share.~~

~~Fiscal Year 2022 Outlook~~

~~The following are our financial expectations for fiscal 2022:~~

•~~Revenue growth, including retail sales and credit card revenues, of 5 to 7 percent~~

•~~EBIT margin, as percent of sales, of 4.1 to 4.4 percent~~

•~~Adjusted EBIT margin of 4.3 to 4.7 percent~~

•~~Income tax rate of approximately 27 percent~~

•~~EPS, excluding the impact of share repurchase activity, if any, of $2.13 to $2.43~~

•~~Adjusted EPS, excluding the impact of share repurchase activity, if any, of $2.30 to $2.60~~

•~~Leverage ratio below 2.9 times by year-end~~

Our adjusted EBIT as a percent of net sales (“adjusted EBIT margin”) and Adjusted EPS outlook for fiscal year 2022 excludes the impacts from certain items that we do not consider representative of our core operating performance. These items include a supply chain technology and related asset impairment charge recognized in the third quarter of 2022, Trunk Club wind-down costs recognized in the first half of 2022 and the gain on the sale of our interest in a corporate office building recognized in the first quarter of 2022. For a reconciliation of the fiscal year 2022 forward-looking GAAP to non-GAAP measures, see page 23.Club.

2122

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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 and where noted otherwise)

Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin and Adjusted EPS (Non-GAAP financial measures)

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

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

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


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023		April 30, 2022
Net (loss) earnings	Net (loss) earnings	($20)	$64	$126	($22)	Net (loss) earnings		($205)		$20
Income tax (benefit) expense	Income tax (benefit) expense	(9)	27	51	2	Income tax (benefit) expense		(82)		18
Interest expense, net	Interest expense, net	32	36	101	213	Interest expense, net		28		35
Earnings before interest and income taxes		3	127	278	193
(Loss) earnings before interest and income taxes						(Loss) earnings before interest and income taxes		(259)		73

Supply chain impairment		70	—	70	—

Canada wind-down costs						Canada wind-down costs		309		—
Trunk Club wind-down costs	Trunk Club wind-down costs	—	—	18	—	Trunk Club wind-down costs		—		10
Gain on sale of interest in a corporate office building	Gain on sale of interest in a corporate office building	—	—	(51)	—	Gain on sale of interest in a corporate office building		—		(51)
Adjusted EBIT	Adjusted EBIT	73	127	315	193	Adjusted EBIT		50		32

Depreciation and amortization expenses	Depreciation and amortization expenses	152	156	453	477	Depreciation and amortization expenses		144		152
Amortization of developer reimbursements	Amortization of developer reimbursements	(18)	(19)	(54)	(59)	Amortization of developer reimbursements		(17)		(18)

Adjusted EBITDA	Adjusted EBITDA	$207	$264	$714	$611	Adjusted EBITDA		$177		$166

Net sales						Net sales		$3,064		$3,467
Net earnings as a % of net sales						Net earnings as a % of net sales		(6.7	%)	0.6	%
EBIT margin %						EBIT margin %		(8.5	%)	2.1	%
Adjusted EBIT margin %						Adjusted EBIT margin %		1.6	%	0.9	%

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


		Quarter Ended		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021	October 29, 2022	October 30, 2021			April 29, 2023	April 30, 2022
Diluted EPS	Diluted EPS	($0.13)	$0.39	$0.77	($0.14)	Diluted EPS		($1.27)	$0.13
Supply chain impairment		0.44	—	0.44	—

Canada wind-down costs						Canada wind-down costs		1.92	—
Trunk Club wind-down costs	Trunk Club wind-down costs	—	—	0.11	—	Trunk Club wind-down costs		—	0.06
Gain on sale of interest in a corporate office building	Gain on sale of interest in a corporate office building	—	—	(0.31)	—	Gain on sale of interest in a corporate office building		—	(0.32)
Debt refinancing charges included within interest expense, net		—	—	—	0.56
Income tax impact on adjustments1	Income tax impact on adjustments1	(0.11)	—	(0.06)	(0.15)	Income tax impact on adjustments1		(0.58)	0.07
Adjusted EPS2		$0.20	$0.39	$0.95	$0.27
Adjusted EPS						Adjusted EPS		$0.07	($0.06)

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

2 We used the same number of weighted average diluted shares in our denominator for adjusted per share amounts as was used in the calculation of diluted EPS under GAAP, regardless of the adjusted net loss or earnings position, as the impact to Adjusted EPS is not significant.

~~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 and where noted otherwise)~~

~~Fiscal Year 2022 Forward-Looking Non-GAAP Measures~~

~~The following is a reconciliation of expected net earnings as a percent of net sales to expected adjusted EBIT margin included within our Fiscal Year 2022 Outlook:~~
52 Weeks Ending January 28, 2023
Low High
Expected net earnings as a % of net sales 2.3 % 2.6 %
Income tax expense 0.9 % 0.9 %
Interest expense, net 0.9 % 0.9 %
Expected EBIT margin, as a % of net sales 4.1 % 4.4 %
Supply chain impairment 0.4 % 0.5 %
Trunk Club wind-down costs 0.1 % 0.1 %
Gain on sale of interest in a corporate office building (0.3 %) (0.3 %)
Expected adjusted EBIT margin 4.3 % 4.7 %

~~The following is a reconciliation of expected diluted EPS to expected Adjusted EPS included within our Fiscal Year 2022 Outlook:~~
52 Weeks Ending January 28, 2023
Low High
Expected diluted EPS $2.13 $2.43
Supply chain impairment 0.43 0.43
Trunk Club wind-down costs 0.11 0.11
Gain on sale of interest in a corporate office building (0.31) (0.31)
Income tax impact on adjustments (0.06) (0.06)
Expected Adjusted EPS $2.30 $2.60

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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 and where noted otherwise)

Adjusted ROIC (Non-GAAP financial measure)

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

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


		Four Quarters Ended					Four Quarters Ended
		October 29, 2022		October 30, 2021			April 29, 2023		April 30, 2022
Net earnings	Net earnings	$326		$11		Net earnings	$20		$364
Income tax expense (benefit)		117		(49)
Income tax (benefit) expense						Income tax (benefit) expense	(8)		142
Interest expense	Interest expense	138		262		Interest expense	138		145
Earnings before interest and income tax expense	Earnings before interest and income tax expense	581		224		Earnings before interest and income tax expense	150		651

Operating lease interest1	Operating lease interest1	85		89		Operating lease interest1	85		86
Adjusted net operating profit	Adjusted net operating profit	666		313		Adjusted net operating profit	235		737

Estimated income tax expense2		(177)		(406)
Adjusted net operating profit (loss) after tax		$489		($93)
Estimated income tax benefit (expense)2						Estimated income tax benefit (expense)2	166		(206)
Adjusted net operating profit after tax						Adjusted net operating profit after tax	$401		$531

Average total assets	Average total assets	$9,227		$9,489		Average total assets	$9,061		$9,228
Average deferred property incentives in excess of ROU assets3	Average deferred property incentives in excess of ROU assets3	(205)		(243)		Average deferred property incentives in excess of ROU assets3	(188)		(223)
Average non-interest bearing current liabilities	Average non-interest bearing current liabilities	(3,369)		(3,423)		Average non-interest bearing current liabilities	(3,203)		(3,347)
Average invested capital	Average invested capital	$5,653		$5,823		Average invested capital	$5,670		$5,658

Return on assets	Return on assets	3.5	%	0.1	%	Return on assets	0.2	%	3.9	%
Adjusted ROIC		8.7	%	(1.6	%)
Adjusted ROIC4						Adjusted ROIC4	7.1	%	9.4	%

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

2 Estimated income tax ~~expense~~benefit (expense) is calculated by multiplying the adjusted net operating profit by the effective tax rate for the trailing ~~twelve month~~twelve-month periods ended ~~October~~April 29, ~~2022~~2023 and ~~October~~April 30, ~~2021.~~2022. The effective tax rate is calculated by dividing income tax by earnings before income taxes for the same trailing ~~twelve month~~twelve-month periods.

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

4 Results for the four quarters ended April 29, 2023 included the $309 impact of the Canada wind-down in the first quarter of 2023, which negatively impacted return on assets by approximately 240 basis points and had an immaterial impact on Adjusted ROIC.

LIQUIDITY

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. In the short term, our ongoing working capital and capital expenditure requirements, and any dividend payments or share repurchases, are generally funded through cash flows generated from operations. In addition, we have access to the commercial paper market and can draw on our ~~revolving credit facility~~Revolver for working capital, capital expenditures and general corporate purposes. 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, share repurchases and other future investments.

We ended the ~~third~~first quarter of ~~2022~~2023 with ~~$293~~$581 in cash and cash equivalents and ~~$700~~$800 of additional liquidity available on our Revolver. Cash and cash equivalents in the ~~third~~first quarter of 2023 increased from $484 in the first quarter of 2022, ~~increased from $267 in 2021,~~ driven by ~~higher net~~cash flow from earnings, partially offset by ~~payments for merchandise inventory.~~capital expenditures and dividends. We believe that our operating cash flows are sufficient to meet our cash requirements for the next 12 months and beyond. Our cash requirements are subject to change as business conditions warrant and opportunities arise and we may elect to raise additional funds in the future through the issuance of either debt or equity.

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 and where noted otherwise)

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


		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021		April 29, 2023	April 30, 2022
Net cash provided by operating activities	Net cash provided by operating activities	$240	$277	Net cash provided by operating activities	$16	$187
Net cash used in investing activities	Net cash used in investing activities	(243)	(378)	Net cash used in investing activities	(123)	(11)
Net cash used in financing activities		(23)	(315)
Net cash provided by (used in) financing activities				Net cash provided by (used in) financing activities	1	(14)

Operating Activities

Net cash provided by operating activities decreased ~~$37~~$171 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2022,~~2023 due to a seasonal increase in working capital in the first quarter of 2023, compared with a reduction of excess inventory levels in the ~~same period in 2021, primarily due to receipt~~first quarter of ~~the income tax refund related to the loss carryback provision of the CARES Act in 2021,~~2022, partially offset by ~~the timing of inventory flows and related payments and an increase in net earnings.~~performance-related payments.

Investing Activities

Net cash used in investing activities ~~decreased $135~~increased $112 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2022,~~2023, compared with the same period in ~~2021,~~2022, primarily due to the sale of our interest in a corporate office building in 2022 and ~~our investment~~the decrease in ~~ASOS.com Ltd.~~cash and cash equivalents resulting from the deconsolidation of Canada in ~~2021~~2023 (see Note 1: Basis of Presentation and Note 2: Canada Wind-down in Item 1).

Capital Expenditures

Our capital expenditures, net are summarized as follows:


		Nine Months Ended					Quarter Ended
		October 29, 2022		October 30, 2021			April 29, 2023		April 30, 2022
Capital expenditures	Capital expenditures	$325		$361		Capital expenditures	$106		$96
Deferred property incentives1	Deferred property incentives1	(10)		(10)		Deferred property incentives1	(4)		(5)
Capital expenditures, net	Capital expenditures, net	$315		$351		Capital expenditures, net	$102		$91

Capital expenditures as a % of net sales	Capital expenditures as a % of net sales	3.0	%	3.6	%	Capital expenditures as a % of net sales	3.4	%	2.8	%

1 Deferred property incentives are included in our cash provided by operations in our Condensed Consolidated Statements of Cash Flows in Item 1. We operationally view the property incentives we receive from our developers and vendors as an offset to our capital expenditures.

Financing Activities

Net cash ~~used in~~from financing activities ~~decreased $292~~increased $15 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2022,~~2023, compared with the same period in ~~2021,~~2022, primarily due to ~~net activity in 2021 related to long-term debt.~~payment timing of cash book overdrafts.

Share Repurchases

We repurchased ~~$53~~$1 for the ~~nine months~~quarter ended ~~October~~April 29, ~~2022,~~2023, compared with no share repurchases in the ~~same period of 2021.~~quarter ended April 30, 2022.

Dividends

We paid ~~$90,~~$30, or ~~$0.57~~$0.19 per share, for both the ~~nine months~~quarter ended ~~October~~April 29, ~~2022 compared with no dividends~~2023 and the quarter ended April 30, 2022.

Table of Contents

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

(Dollar and share amounts in ~~the same period of 2021.~~millions except per share amounts and where noted otherwise)

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.

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


		Nine Months Ended			Quarter Ended
		October 29, 2022	October 30, 2021		April 29, 2023	April 30, 2022
Net cash provided by operating activities	Net cash provided by operating activities	$240	$277	Net cash provided by operating activities	$16	$187
Capital expenditures	Capital expenditures	(325)	(361)	Capital expenditures	(106)	(96)
Change in cash book overdrafts	Change in cash book overdrafts	21	(4)	Change in cash book overdrafts	29	16
Free Cash Flow	Free Cash Flow	($64)	($88)	Free Cash Flow	($61)	$107

~~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 and where noted otherwise)~~

CAPITAL RESOURCES

Borrowing Capacity and Activity

~~During~~As of April 29, 2023, we had total short-term borrowing capacity of $800 under the ~~second quarter of 2022, we terminated and replaced our prior revolving credit facility set to expire in September 2023 with a new $800~~ Revolver that expires in May 2027. ~~During the third quarter~~As of ~~2022,~~April 29, 2023, we ~~borrowed $100~~had no borrowings outstanding under our Revolver ~~which remained outstanding as of October 29, 2022. As of October 29, 2022, we had~~and no issuances outstanding under our commercial paper program. ~~In November 2022, subsequent to quarter end, we completely repaid the outstanding balance on our Revolver.~~ For more information about our credit facilities, see Note 3:4: Debt and Credit Facilities in Item 1.

Impact of Credit Ratings and Revolver Covenants

Changes in our credit ratings may impact our costs to borrow, whether our personal property secures our Revolver and whether and to what extent we are permitted to pay dividends or conduct share repurchases.

For our Revolver, the interest rate applicable to any borrowings we may enter into depends upon the type of borrowing incurred plus an applicable margin, which is determined based on our credit ratings. At the time of this report, our credit ratings and outlook were as follows:


	Credit Ratings	Outlook
Moody’s	Ba1	~~Stable~~Negative
~~Standard & Poor’s~~S&P Global Ratings	BB+	~~Stable~~Negative
Fitch	~~BBB-~~BB+	~~Negative~~Stable

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

As of ~~October~~April 29, ~~2022,~~2023, we were in compliance with all covenants. We have certain limitations with respect to the payment of dividends and share repurchases under our Revolver agreement. For more information about our Revolver covenants, see Note 3:4: Debt and Credit Facilities in Item 1.

On March 1, 2023, we amended our Revolver agreement. See Note 2: Canada Wind-down in Item 1.

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 and where noted otherwise)

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, as it provides a reflection of our creditworthiness which could impact our credit ratings and borrowing costs. This metric is calculated in accordance with the updates in our ~~new~~ Revolver covenant and is a key component in assessing whether our revolving credit facility is secured or unsecured, as well as our ability to make dividend payments and share repurchases. Our goal is to manage debt levels to achieve and maintain investment-grade credit ratings while operating with an efficient capital structure. For more information regarding our Revolver, see Note 3:4: Debt and Credit Facilities in Item 1.

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


			~~October~~April 29, ~~2022~~2023
Debt			$~~2,955~~2,857


Operating lease liabilities			~~1,800~~1,655
Adjusted debt			$~~4,755~~4,512

Four Quarters Ended ~~October~~April 29, ~~2022~~2023
Net earnings			$~~326~~20
Income tax ~~expense~~benefit			~~117~~(8)
Interest expense, net			~~134~~121

Earnings before interest and income taxes			~~577~~133

Depreciation and amortization expenses			~~591~~597
Operating Lease Cost			~~276~~275
Amortization of developer reimbursements1			7471
Other Revolver covenant adjustments2			47418
Adjusted EBITDAR			$~~1,565~~1,494

Debt to Net Earnings			~~9.1~~141.4
Adjusted debt to EBITDAR			3.0

1 Amortization of developer reimbursements is a non-cash reduction of Operating Lease Cost and is therefore added back to Operating Lease Cost for purposes of our Revolver covenant calculation.

2 Other adjusting items to reconcile net earnings to Adjusted EBITDAR as defined by our Revolver covenant include interest income, certain non-cash charges and other gains and losses where relevant. For the four quarters ended ~~October~~April 29, ~~2022,~~2023, other Revolver covenant adjustments primarily included costs associated with the wind-down of our Canadian operations, a supply chain technology and related asset impairment and the wind-down of Trunk ~~Club, partially offset by a gain on sale of the Company’s interest in a corporate office building.~~Club.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in conformity with GAAP requires that we make estimates, judgments and ~~judgments~~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. We believe that the estimates, assumptions and judgments involved in the accounting policies referred to in our ~~2021~~2022 Annual Report 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. There have been no material changes to our significant accounting policies or critical accounting estimates as described in our ~~2021~~2022 Annual ~~Report.~~Report, except as noted below, and the following should be read in conjunction with Note 2: Canada Wind-down in Item 1.

Canada Wind-down

To assess the estimated fair value of our Nordstrom Canada investment and our related-party receivables, we estimated the assets available for distribution in relation to expected claims at the time of filing. The estimated amount of Nordstrom Canada’s liabilities exceeded the estimated fair value of assets available for distribution to creditors, and in relation to the receivables, we may not recover any proceeds. As a result, our fair value is recorded as zero in our Condensed Consolidated Balance Sheets as of April 29, 2023.

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 and where noted otherwise)

In the first quarter of 2023, we recognized a liability for certain Nordstrom, Inc. guarantees related to a portion of Nordstrom Canada leases. The estimated liability is our current best estimate and is based on expectations that claims will be asserted against us and negotiated settlements will be reached, and not on any determination that it is probable that we would be found liable were these claims to be litigated and for how much.

Our estimates are dependent on the outcome of the Nordstrom Canada wind-down process, including the amount of third-party and Nordstrom claims asserted and recognized in the claims process, the amount of assets available for distribution, the negotiation of a CCAA plan of arrangement approved by the creditors and the Ontario Superior Court of Justice and the outcome of negotiations regarding the leases. We are in the early stages of the wind-down process and our estimates of losses are based on currently available information and our assessment of the validity of certain expected claims. These estimates may change as new information becomes available and it is reasonably possible that they may materially change from the estimated amounts. Increases in estimated costs to settle claims and decreases in estimated assets available for distribution may result in additional material charges. At the same time, any future decreases in estimated costs to settle claims or increases in estimated assets available for distribution may result in a gain, which will reduce our estimated charges. See Note 2: Canada Wind-down for additional information.

RECENT ACCOUNTING PRONOUNCEMENTS

~~There are no recent accounting pronouncements~~In May 2023, the SEC adopted the final rule under SEC Release No. 34-97424, Share Repurchase Disclosure Modernization, requiring disclosures related to issuers’ share repurchases that ~~are~~will provide investors with enhanced information to assess the purposes and effects of the repurchases.Disclosure requirements under this rule will be effective for us in the fourth quarter of 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

In December 2022, the SEC adopted the final rule under SEC Release No. 33-11138, Insider Trading Arrangements and Related Disclosures, which requires new disclosures regarding insider trading policies and procedures, the use of certain insider trading plans and director and executive compensation regarding equity compensation awards made close in time to our disclosure of material nonpublic information. Quarterly disclosure requirements under this final rule will be effective for us in the second quarter of 2023 and annual disclosure requirements will be effective for us in the fourth quarter of 2023. The adoption of this final rule is not anticipated to have a material impact on our results of operations, liquidity or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We discussed our interest rate risk and foreign currency exchange risk in our ~~2021~~2022 Annual Report. There have been no material changes to these risks since that time.

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Item 4. Controls and Procedures.

DISCLOSURE CONTROLS AND PROCEDURES

On ~~October 18, 2022,~~May 10, 2023, we filed an 8-K announcing the appointment of Cathy R. Smith to Chief Financial Officer and Treasurer, and the Company’s principal financial officer, effective May 29, 2023. The 8-K also announced the departure of ~~Anne L. Bramman~~Michael W. Maher, who has been serving as our interim principal financial officer since the third quarter of 2022, as an officer, employee and the Company’s principal financial officer for the purposes of the Exchange Act. ~~Her last day with us will be on or about December 2, 2022.~~ We do not believe that the announcement of ~~Ms. Bramman’s~~Mr. Maher’s resignation has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ~~Michael W. Maher, our Chief Accounting Officer, will serve as our interim principal financial officer upon Ms. Bramman’s departure.~~ Our Chief Executive Officer, Erik B. Nordstrom, serves as our principal executive officer for the purposes of the Exchange Act.

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we have performed an evaluation of the design and effectiveness of our disclosure controls and procedures as of the last day of the period covered by this report.

Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified within the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed 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

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

Table of Contents

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 may 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 accruals in our Condensed Consolidated Financial Statements are adequate in light of the probable and estimable liabilities.

On March 2, 2023, Nordstrom Canada commenced a wind-down of its business operations. Nordstrom Canada entities obtained an Initial Order from the Ontario Superior Court of Justice under the CCAA to facilitate the wind-down in an orderly fashion. See Note 2: Canada Wind-down in Part I for more information.

As of the date of this report, we do not believe any other currently identified claim, proceeding or litigation, either alone or in the aggregate, will have a material impact on our results of operations, financial position or cash flows. Since these matters are subject to inherent uncertainties, our view of them may change in the future.

Item 1A. Risk Factors.

There have been no material changes to the Risk Factors described in our ~~2021~~2022 Annual Report.

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

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

The following is a summary of our ~~third~~first quarter share repurchases:
Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of Shares Purchased
as Part of Publicly Announced
Plans or Programs Approximate Dollar Value
of Shares that may
yet be Purchased Under
the Plans or Programs
August 2022
(July 31, 2022 to August 27, 2022) 0.6 $23.46 0.6 $449
September 2022
(August 28, 2022 to October 1, 2022) 0.2 $18.33 0.2 $447
October 2022
(October 2, 2022 to October 29, 2022) — — — $447
Total 0.8 $22.52 0.8


	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs
February 2023 (January 29, 2023 to February 25, 2023)	0.03	$19.41	0.03	$438
March 2023 (February 26, 2023 to April 1, 2023)	—	—	—	$438
April 2023 (April 2, 2023 to April 29, 2023)	—	—	—	$438
Total	0.03	$19.41	0.03

See Note 6:7: Shareholders’ Equity in Item 1 for more information about our ~~August 2018 and~~ May 2022 share repurchase ~~programs.~~program.

Item 6. Exhibits.

(a) The information required under this item is incorporated herein by reference or filed or furnished as part of this report at:


			Page
Nordstrom, Inc. and Subsidiaries Exhibit Index			3031

All other exhibits are omitted because they are not applicable, not required or because the information required has been given as part of this report.

2930

Table of Contents

NORDSTROM, INC.

Exhibit Index

Incorporated by Reference

Exhibit

Form

Exhibit

Filing Date

Exhibit

Form

Exhibit

Filing Date

4.1

Shareholder Rights Agreement, dated as of September 19, 2022, by and between the Company and Computershare Trust Company, N.A., as rights agent (which includes the Form of Rights Certificate as Exhibit A thereto)

8-K

4.1

September 20, 2022

10.1

Nordstrom, Inc. 2019 Equity Incentive Plan (2023 Amendment)

DEF 14A

Appendix B

4/28/2023

10.1

†

Amendment No. 7 to the Credit Card Program Agreement by and between Nordstrom, Inc., and TD Bank USA, N.A.

10.2

Form of 2023 Restricted Stock Unit Agreement – Supplemental Award under the 2019 Equity Incentive Plan

8-K

10.1

5/10/2023

31.1

†

Certification of Chief Executive Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002

31.1

†

Certification of Chief Executive Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002

31.2

†

Certification of Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002

31.2

†

Certification of Chief Financial Officer required by Section 302(a) of the Sarbanes-Oxley Act of 2002

32.1

‡

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.1

‡

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

†

Inline XBRL Instance Document

101.INS

†

Inline XBRL Instance Document

101.SCH

†

Inline XBRL Taxonomy Extension Schema Document

101.SCH

†

Inline XBRL Taxonomy Extension Schema Document

101.CAL

†

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

†

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

†

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.LAB

†

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

†

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

†

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

†

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

†

Inline XBRL Taxonomy Extension Definition Linkbase Document

104

†

Cover Page Interactive Data File (Inline XBRL)

104

†

Cover Page Interactive Data File (Inline XBRL)

* Management contract, compensatory plan or arrangement

† Filed herewith electronically

‡ Furnished herewith electronically

3031

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


NORDSTROM, INC.
(Registrant)

/s/ ~~Anne L. Bramman~~Michael W. Maher
~~Anne L. Bramman~~Michael W. Maher
Chief ~~Financial~~Accounting Officer
(Principal ~~Financial~~Accounting Officer)

Date:			~~December 2, 2022~~June 7, 2023

3132


	52 Weeks Ending January 28, 2023
	Low		High
Expected net earnings as a % of net sales	2.3	%	2.6	%
Income tax expense	0.9	%	0.9	%
Interest expense, net	0.9	%	0.9	%
Expected EBIT margin, as a % of net sales	4.1	%	4.4	%

Supply chain impairment	0.4	%	0.5	%
Trunk Club wind-down costs	0.1	%	0.1	%
Gain on sale of interest in a corporate office building	(0.3	%)	(0.3	%)
Expected adjusted EBIT margin	4.3	%	4.7	%


	52 Weeks Ending January 28, 2023
	Low	High
Expected diluted EPS	$2.13	$2.43
Supply chain impairment	0.43	0.43
Trunk Club wind-down costs	0.11	0.11
Gain on sale of interest in a corporate office building	(0.31)	(0.31)
Income tax impact on adjustments	(0.06)	(0.06)
Expected Adjusted EPS	$2.30	$2.60