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Net earnings head southwards at Nordstrom Inc
Nov '08
Nordstrom, Inc. today reported net earnings of $71 million, or $0.33 per diluted share, for the third quarter ended November 1, 2008. For the same quarter last year, Nordstrom reported net earnings of $166 million and earnings per diluted share of $0.68.

Total sales in the third quarter were $1.81 billion, a decrease of 8.4 percent compared with sales of $1.97 billion during the same period in fiscal 2007. Third quarter same-store sales decreased 11.1 percent.

Results for the third quarter ended November 3, 2007, included a $20.9 million gain, net of tax, or $0.09 per diluted share, from the sale of the Faconnable business, which closed during the third quarter of fiscal 2007.

Third quarter results include two non-comparable items that had a benefit to earnings per share of approximately $0.03. The company's third quarter earnings outlook did not include these items because they were not part of our view of ongoing operations.

Nordstrom, Inc. same-store sales decreased 11.1 percent for the quarter. Results in full-line stores continued to be challenging, as same-store sales decreased 15.6 percent in the quarter. Nordstrom Rack outperformed its off-price competition with a same-store sales increase of 3.6 percent. Sales for the Direct segment, which is nordstrom.com, increased 8.5 percent. Sales in all of our businesses were significantly impacted after the financial markets began to experience severe stress in mid-September.

Gross profit, as a percentage of sales, decreased 332 basis points compared with last year's third quarter as we responded to slower sales trends and the competitive environment with increased markdowns. Quarter-end inventory per square foot was down 3 percent from the prior year.

Selling, general and administrative expenses increased 2.6 percent, or $14 million, compared with last year's third quarter. The company's continued focus on expense control resulted in expense growth well below annual square footage growth of 5.7%.

In the third quarter of 2008, Nordstrom repurchased 0.8 million shares of stock totaling $26 million, with an average price of $30.82. The company suspended its share repurchase program in September. The company may resume the program in the future when economic conditions improve. Third quarter share repurchases had a minimal impact on third quarter earnings per diluted share.

The company's capital expenditures are expected to total approximately $350 million in fiscal year 2009, compared to approximately $510 million in fiscal year 2008. Given current economic conditions and delays in real estate development, the company now expects to relocate one full-line store and open 3 new full-line stores in 2009 and 4-5 new full-line stores in 2010.

On November 6, 2008 Nordstrom opened a new Rack store at Liberty Tree Mall in Danvers, Mass., onNovember 7, 2008 it opened a 77,000-square-foot full-line store at Waterside Shops in Naples, Fla. and today it opened a new Rack store at The Rim in San Antonio, Tex.

Fiscal Year 2008 Outlook:
For the fiscal year ending January 31, 2009, the company anticipates earnings per diluted share in the range of $1.87 to $1.97. Outlined in the table below are the company's expectations for fiscal year 2008:


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