Bear Stearns 11th Annual Retail, Restaurants & Apparel Conference. New York - March 8-10, 2005

Transcription

1 Bear Stearns 11th Annual Retail, Restaurants & Apparel Conference New York - March 8-10, 2005

2 Safe-Harbor Statement [UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995] Today s presentation contains forwardlooking information. Nordstrom, Inc. cautions you that future results could differ materially from those that may be projected or implied in this discussion. Additional detailed information, concerning a number of factors that could cause actual results to differ materially from information shared today, is readily available in the Company s most recent Form 10-K. 2

3 Today s topics Recap Results Performance drivers Key Initiatives Drive top-line growth Improve operating efficiency 3. Beyond 2005 Industry leading performance 3

4 2004: a breakout year! MORE BALANCED APPROACH TO MANAGING OUR BUSINESS RESULTING IN IMPROVED PERFORMANCE. 15% 10% 8.3% Same-store Sales LY TY 7.2% 8.5% 38% 36% 36.2% Gross Margin 37.0% LY TY 34.6% 36.2% 5% 4.1% 34% 0% 4Q04 FYE % 4Q04 FYE % 29% 28% 27% 26% 25% 28.5% SG&A % EBT % 29.4% 14% 11.6% LY TY 12% LY TY 28.3% 10% 8.9% 8% 6.2% 26.9% 6% 4% 2% 0% 4Q04 FYE % 4Q04 FYE

5 A truly unique experience DEVELOPING LOYALTY REQUIRES CONNECTING WITH CUSTOMERS ON MORE THAN ONE LEVEL Personalized service Staffing Extra services & amenities Easy returns Compelling merchandise offering Fashion Uniqueness Value Pleasant shopping environment Easy to shop Clean Good lighting Unhurried ambience 5

6 Points of difference UNWAVERING FOCUS ON SERVICING THE CUSTOMERS SETS NORDSTROM APART Our core services: We stand behind everything we sell We have on-site tailors We won t be undersold We have live operators to answer your calls We provide prosthesis products and services We search to find what you want We stock more sizes We have certified fit experts We offer complimentary gift boxes We re family friendly 6

7 Performance drivers FOCUS ON IMPROVED DISCIPLINES AND ENHANCED CAPABILITIES Core competencies: Superior customer service Selecting great product Providing a unique customer experience Improved disciplines: Expenses Inventory Capital More consistent financial performance Fundamental improvement in performance 7

8 Performance drivers SYSTEM UPGRADES ENABLE PROCESS EFFICIENCIES & IMPROVED DECISION MAKING. System: Financial Warehouse Management Perpetual Inventory Human Resource Point of Sale Personal Book Vendor: Oracle Manhattan Assoc. Retek Oracle Fujitsu Blue Martini Completed: 1Q2002 1Q2002 1Q2003 1Q2004 3Q2004 3Q2004 8

9 Performance drivers IMPROVED REPORTING TRANSPARENCY ALLOWS FOR BETTER MONITORING OF PROGRESS More accessible data Improved controls Enhanced analytical capabilities Better business decisions Ability to monitor and track progress Clear accountability 9

10 2005 Key areas of focus POSITIONING THE COMPANY FOR LONG-TERM SUCCESS Goal: Deliver industry-leading performance 1.Driving same-store sales momentum Superior Service Compelling Product 2.Achieve superior operating performance Best practices Process efficiencies 10

11 Driving same-store sales increases GIVING CUSTOMERS A REASON TO BUY SOMETHING NEW! Focus on Fashion Identify and interpret trends React quickly to hot items Retain flexibility with OTB Seek out unique vendors Layer on complimentary categories 20% 15% 10% 5% 0% -5% 25% 20% 15% 10% 5% 0% Comp-sales vs. Competition Feb MarApr JWN May JunJul 2-Year Comp Trend JWN Feb Mar Apr May Jun Jul Aug SepOct Peer Avg Aug Sept Oct Nov DecJan Mall Anchor Nov DecJan Feb Feb 11

12 Exploit hot categories & brands 12

13 Unique vendors provide differentiation 13

14 Driving same-store sales increases LEVERAGE EXISTING SYSTEM TOOLS TO DRIVE ADDITIONAL IMPROVEMENT IN SALES AND MARGIN 38% 36% 34% 32% Gross Margin % LY TY Merchandise Optimization: Building analytical capabilities Establishing best practices Driving process efficiencies 30% 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 11% 8% YOY change Opportunity: Improve store-to-store allocation 5% 2% Edit unproductive merchandise -1% -4% -7% Inv Turn MD % Fullprice sales % GMROI Maximize replenishment Identify hot sellers quickly Timely markdowns 14

15 Driving same-store sales increases ENHANCING THE CUSTOMER EXPERIENCE AT THE STORE LEVEL BUILDS LOYALTY & DRIVES VOLUME Personal Book: Improve follow-through Drive regular price sales More easily respond to customer needs Remodel program: Keeping stores fresh and updated Opportunity to enhance store features 5 remodels planned for

16 Superior operating performance TAKING A STRATEGIC APPROACH TO LOWERING EXPENSE LEVELS 32% 30% 28% 26% 24% 30% 28% 26% 24% 22% 20% SG&A % Relative SG&A % JWN SKS* FD* NMGa MAY* Expense management: Innovation is key Focus on value added activities Automate manual processes Distinguish between fixed and variable costs Actively manage expense pressure points *Excludes one-time charges, credit revenue &/or estimated occupancy costs 16

17 2005 and beyond DELIVERING VALUE TO CUSTOMERS MORE EFFICIENTLY IS TRANSLATING INTO IMPROVED VALUE FOR SHAREHOLDERS 2% 0% 8% 6% 12% 10% 8% 6% 4% 2% 0% 31.2% 30.6% 30.2% 29.4% 28.3% 27.8% 26.8% % 3.6% 4.4% 6.1% SG&A % EBT % 9.2% 10.0% 11.0% Continue to gain market share LSD same-store sales Incremental new store growth Execute efficiently Inventory & expense discipline Continuous improvement focus There is no finish line! e 2006e 2007e NOTE: Excludes one-time charges 17

18 2005 & beyond LAYERING ON ADDITIONAL CAPABILITIES. Applications: Replenishment Optimization Markdown Optimization Vendor: Retek Profit Logic Complete: 1Q2005 2H2005 Applications: Enterprise Data Warehouse Management Dashboards Merchandise Planning Assortment & Allocation Planning Vendor: N/A N/A TBD TBD Starting: 2Q2005 2Q2005 1H2007 TBD 18

19 2005 and beyond FINANCIAL FLEXIBILITY ALLOWS CONSIDERATION OF A WIDE RANGE OF STRATEGIC OPPORTUNITIES. $600 Cash from Ops 3-Year Capital Plan $850-$875m $400 $200 Technology 16% Other 14% 30% New Stores 40% $ Remodels/Relocations $1,600 $1,200 $800 $400 $0 Total Debt & Debt to Cap. 52.1% 49.0% 49.6% 43.0% 36.5% % 45% 35% 25% Capital Priorities: 1. Selective real estate acquisitions 20% dividend payout ratio 3. $500m share repurchase program 4. Fund current capital plan 19

20 2005 and beyond ACHIEVE INDUSTRY LEADING PERFORMANCE ACROSS KEY METRICS $600 $500 $400 $300 $200 $100 $547 Sales per Square Foot $347 $207 $189 $186 $180 35% 30% 25% 20% 20.6% 22.7% SG&A % * 27.5% 24.2% 24.3% 28.3% $0 NMGa JWN KSS SKS FD MAY 15% KSS MAY NMGa FD SKS JWN 12% 10% 8% 6% 4% 2% 10.4% 10.0% EBT % * 9.1% 7.1% 5.9% 1.4% 25% 20% 15% 10% 5% 23.0% Return on Average Equity % 16.0% 13.0% 11.4% 4.7% 0% NMGa KSS JWN FD MAY SKS 0% JWN NMGa KSS MAY FD SKS* *Excludes one-time charges, credit revenue &/or estimated occupancy costs; ROE for SKS is an estimate 20

21 Q&A