FOURTH QUARTER SUMMARY

Nordstrom's fourth quarter performance reflected a continuation of the discipline and execution the company demonstrated throughout the year. The breadth and quality of its merchandise offering, combined with a steady flow of fashion into the stores, led to same-store sales increases in each month of the quarter.

• Full-line same-store sales in the fourth quarter increased 3.9 percent and sales for Nordstrom Direct increased 32.1 percent, combining for a multi-channel same-store sales increase of 7.1 percent compared with the same period in fiscal 2008. Most of the company's merchandise categories generated positive same-store sales during the quarter. Highlights for multi-channel sales performance included Women's Better Apparel, Women's Shoes and Jewelry. The Midwest, South, and Northwest regions were the top-performing geographic areas for full-line stores relative to the fourth quarter of 2008.
• Nordstrom Rack experienced its fourth consecutive quarter of positive performance with a same-store sales increase of 4.6 percent in the fourth quarter compared with the same period in fiscal 2008. During the fourth quarter, the company opened two Nordstrom Rack stores.
• Gross profit, as a percentage of net sales, increased approximately 530 basis points compared with last year's fourth quarter. The improvement was mainly driven by merchandise margin as a percentage of net sales. Additionally, the increase in sales allowed for some leverage in buying and occupancy costs as a percentage of net sales, despite higher performance-related expenses. Markdowns were reduced considerably from last year's fourth quarter, which was a highly promotional period. The company saw improvement in its management of inventory and ended the year with an inventory turn of 5.4, the highest in recent company history despite a decline in annual same-store sales.
• Retail selling, general and administrative expenses increased $56 million compared with last year's fourth quarter. The increase was due primarily to higher performance-related and variable expenses which increased as a result of the improvement in sales, partially offset by a decrease in fixed expenses. Retail selling, general and administrative expenses also were impacted by an additional $13 million from stores opened since the fourth quarter of 2008. The company opened 3 full-line stores and 13 Nordstrom Rack stores since the fourth quarter of 2008, increasing retail square footage by 0.9 million, or 4.1 percent.
• Credit selling, general, and administrative expenses increased $16 million compared with last year's fourth quarter. The majority of the increase reflects higher bad debt expense. Based on fourth quarter trends and continuing uncertainty regarding the overall economic environment, the company increased its reserve for bad debt by $20 million in the quarter.