mba-640 investment funding proposal - final

Nordstrom – 2020 Investment Funding Proposal


Thomas McDonald

Southern New Hampshire University


Executive Summary

As one of the most successful retail companies in North America over the past decade,

Nordstrom has able to grow a business that has brought the best products with exceptional

service and the industry’s most exceptional Omni-channel merchandise concept where customers

are able to maximize Nordstrom’s ability to deliver merchandise to them regardless of time or

location. Nordstrom is able to expand into being a national company with the successful launch

of the Nordstrom Rack off price sales division. Nordstrom has been able to expand its target

customers by giving their customers choices based on price as well as availability. Now the

company has expansive goals for sales and even with the expansion plans, both with their four

wall and ecommerce divisions, that it already has planned through 2018 it is having been

determined that there will not be enough combined sales and logistics space to make these goals.

After years of careful consideration, Nordstrom is poised to expand their retail operations

beyond the United States. Nordstrom expanded into Canada where recent success has bolstered

the company’s profits even with the declining Canadian Dollar. Anticipating economic

conditions globally it is indicated that further expansions of the company into the Pacific Rim

would give Nordstrom the opportunity to grow the company into a global business. This would

follow other US retailers into the Ecommerce portals in China to start expansion of company.

The proposed partnerships with trading companies in some locations and establish national

companies in others requires supplemental financing in order to get the business plans

implemented requires that this request be made.


Description of the Investment

The purpose of this investment Nordstrom will be making is for the expansion of our

retail operations outside of North America. As we are able to successfully grow our North

American business we see opportunities to expand our brand to countries looking to have

American retailers expand into their countries. After careful consideration, we choose to expand

across the Pacific to China, Hong Kong, Singapore and Hong Kong. These countries were

chosen due to the growth of these markets in both scope of the population growth and the either

the growth of upper and middle income segments of their populations or in the case of Singapore

and Australia have high per capita income.

These countries in their major metro markets are looking for retailers that will provide the

level of retail that American Stores like us and Macy’s provide as well as European Stores like

Marks and Spencer, Harrods’s and Galleries Lafayette. The key is that Macy’s is already in the

Persian Gulf and is doing business in China with Ali Baba. There is room available in these

markets will expand throughout Asia and other opportunity markets. Our regional expansion into

the Far East and Australian markets will consist of two phases. The first is to make an agreement

with Ali Baba to join the Tmall.com sales portal in first quarter 2017. This will give us additional

information on the Chinese marketplace particularly in the three locations considered initially

considered for expansion.

The key that in these location there is a need for a first level department store retailer

which in many developing countries is expanding from a niche market to more mainstream. In

Australia, American Brands are very popular and there many fashion and luxury retailers already

there. Our goal is to give these customers a new experience where they can get luxury but gather

better value for their money. This is Nordstrom’s primary goal going forward (Nordstrom, 2016).


With the plans for Nordstrom to expand in order to achieve its goal of having 20 billion dollars

in total revenue and maintain the same sales per square foot standards for the retailer there will

be a need to mix expansion plans in the United States expansion plans overseas. This is

especially the case that forecasts currently have sales with the current stores and online sales

only reaching about 16 million by 2018 (Appendix A).

Resources

Financing – At this point Nordstrom based on estimates will need to have available long term

financing primarily in order to set up logistical networks. The likeliest of sources will be the

acquisition of short term to set up online operations, particularly in China and Australia and

setting a logistical network as the foundation for build a brick and mortar network of stores in

those countries. It is likely that in China, Hong Kong and Singapore, we expect to enter licensing

agreements with local retail trading companies (CIA, 2016). They will be able to handle all

issues concerning set up. We will pay them to set up and operate our stores. This include getting

for our stores the all the resources needed to start and then successfully operate our business. Our

goal is to have the new stores by the first year of business collectively make about 1.25 billion

dollars’ annual business which will help as well in the North American Market as these

customers will in turn shop with us when they visit this country.

Cash flow forecasts also note that though there can be some cash on hand especially in 2018.

Long Term financing of about 2-3 billion dollars may not be out of the question. With this in

mind Cash Flow Analysis going into 2018 when this financing will be need may give

Nordstrom the cash on hand to make long term financing agreements a sound footing as they are

projected to have a 3.5-million-dollar cash flow by 2018 (Exhibit B). Loans and Bonds


Financing should allow Nordstrom to easily acquire the funds and capital needed to finance this

territorial expansion of Nordstrom’s services.

Current Expansion Project (Nordstrom and Others) - In 2014, when Macy’s announced its

agreement to expand to Abu Dhabi. It was revealed the long term licensing agreement for the

200,000 square foot store that is expected to sell to nearly 75 million visitors per annum at 1

billion dollars (Style, 2014). The logistical network in China with would require about a 1 to 2-

billion-dollar investment over a period of time. Singapore and Hong Kong investment depending

upon the square footage needed would depend on the development costs but would estimate at

$300 to 500 million dollars for each location.

Based on the costs of Canadian Expansion gives us the basis for the projected costs to

develop retail in Australia. For each of the Nordstrom Rack stores. Nordstrom had in 2014 initial

underestimated the cost of expansion when they began expansion into Canada. This did have a

short term effect on earnings. Any future investments will plan with this analysis in reflection

Cotton, 2014).

Logistical – We look at the needs of Nordstrom to effectively build a global market in Asian

markets. It is very clear that the way in order to start these business is by licensing a local retail

group to manage the creation of and the subsequent maintenance of our stores under utilization

of a licensing agreement. Nordstrom will agree to finance not just brick and mortar, but create an

effective online and store supply chain network that includes a greater concentration of online

purchasing. Australia is a country that it will require an extensive supply chain (Retail, 2016).

China will require a network that need to utilize a logistical network fortunately Australia and

China’s transportation network are quite suitable for long distance distribution networking.


China’s logistics can also be used for any development in Hong Kong, where Nordstrom can

take advantage of Hong Kong’s special status within China (CIA/Hong Kong, 2016).

Time Frame

Current Expansion – As we mentioned, Nordstrom is in the process of adding itself to the

Tmall.com in the Spring of 2017. This brings us into the Chinese market and allows us do full

analysis of the Chinese Marketplace. Meanwhile, the Brick and Mortar presence is delayed.

Nordstrom already is in the midst of expansions to several American Markets as well as to

Toronto, Canada in 2018. In a sluggish economy, Nordstrom has still been able to expand into

new markets in a steady clip. However, any further planned expansions must wait until planned

expansions are complete (Nordstrom, 2016).

In the financial analysis completed for this project Nordstrom will need a minimum of 1.5

million square feet for floor space added to meet long term goals set by executives (Appendix I).

This is the reason why expansion is now being planned for 2019 and beyond. This will also

allow for Nordstrom to have some room to expand in the United States. The reason for this as the

expected square footage the will be utilized in this three-year period in our expansion will leave

Nordstrom with the needs to continue some expansion in the United States even beyond these

minimum requirements for retail space going forward into the next decade.

Planned Expansion - In the interim years between 2017 and 2019 we have a firm analysis of

what it will take for us to expand to this region. Overall we see that 7 main stores overseas with

an average size of 145,000 sq. ft. are needed for this We could look to opening 1 store in Hong

Kong in 1919 and 2020. In Australia, in the years from 1919 to 2022 could see as many as two

Nordstrom and five Nordstrom Rack Stores in this time frame. Sydney and Melbourne are


proposed in this funding. Also Nordstrom Rack Stores are proposed in this document for Perth,

Adelaide, Brisbane/Gold Coast, Geelong and Canberra. A Singapore store, can be scheduled

upon local approval and licensing later in 2019 or 2020. China could have 3 stores in 2020 and

2021 with Shanghai, Beijing and Guangzhou as Metropolitan Areas. Chongqing is city/region if

sales prove correct would be a future site beyond the scope of this proposal.

Justification for Project

Why expand - It is expected that the global economy now sluggish, will be begin to move

forward starting in 2018. In the 1990’s through the early 2000’s there was an effort in this

country to grow what was local and regional chains in retail into national chains. Nordstrom was

one of several stores that became national labels. This is after changes in some forms of

consumption globally stabilize and evens some newer technologies begin to play greater roles in

both commerce and in the world in general. It is no surprise that as stores maximize their

effectiveness to grow the business in their country of origin they in turn plan to expand. As for

other American Stores Chains besides Wal-Mart primarily. The Retailer that is most involved in

global expansion is Macy’s. Macy’s will soon open a Macy’s Brand Department Store that will

coincide with a Bloomingdales Store already in operation in Dubai. They also have signed an

agreement with Ali Baba to be a part of the Tmall.com Website Portal.

As for why expand to particularly the places we have decided to take advantage of

expanding to. We are also expecting wages for those who would be our targets customers to

increase. China, even in the midst of an economic slowdown is still the fastest growing economy

in the world. As a lasting impact as the Chinese will continue to have a greater amount of

discretionary spending as their economy and wages improve. China and Hong Kong have middle

class and upper middle classes well established unlike India which wealth expansion into the


middle class is still in development. Singapore is a great trade destination and serves as a global

trade center which gives us easy access to sell to customers on a global scale (CIA/Singapore,

2016). Australia is one of this country greatest trading partners (Retail, 2016).

Nordstrom executives stated that their long term goals by 2020 were to be able to be a

20-billion-dollar operation (WWD, 2014). In order to do this Nordstrom needs to grow the

number of square feet of selling floors they have available to sell. Based on forecast estimates

even with all four wall assets currently in place the expansions planned from 2016 to 2018 and

projected increases in online sales for Nordstrom to expand to over 6.6 billion dollars there will

be about an estimated sales shortfall of 750 million dollars (Exhibit C). These being the bare

minimum of corporate expectations. With Expansion in Countries where Nordstrom already has

a presence in considered but not estimated the need for expansion is still justifiable based on the

number presented.

Priorities – In order to grow their retail business to new territories Nordstrom needs to be able to

meet criteria based on foundation principals set up as Nordstrom has looked to grow and

expand their business as part of their overall financial strategy. Nordstrom must also make sure

that the any location they are looking at that from a logistical standpoint and a level of service

standpoint that expansion can meet Nordstrom’s level of expectations. When Nordstrom

expanded into Canada, at the time it was considered a risk. For example, Target attempted a

venture into Canada and it failed. Nordstrom However chose their locations wisely with

Vancouver and Ottawa being two locations that opened in 2014 to great success. 2016 will see

two stores open in Toronto. This will lead Canada to be a Billion Dollar Business for Nordstrom

(Nordstrom, 2016).


Microeconomic Environment – In the case of the general microeconomic environment of the

countries we are considering expansion to provide great opportunities for Nordstrom to grow

their business into this part of the planet. It is important for any retail to expand in countries that

provide a balance of incentives along with productive work forces. In the case of growing

economies the increase of a middle and upper class population will aid in store growth. The

opportunity to grow and off-price market, particularly in China will be of great benefit

(CIA/China, 2016).

China is the most obvious opportunity. Expanding in can be impacted by the tax structure and by

any incentives these countries have to foreign investment. China and especially Hong Kong,

which is an autonomous economic opportunity zone of China provides businesses with an ideal

tax structure for both entrepreneurial business as well as for foreign investment. Though China

has its giant retail company Ali Baba as well as luxury designers stores in Hong Kong and in

Shanghai. The lack of a presence of a major department store gives any global retail chain (CIA-

China, 2016).

Singapore much like Hong Kong also is a very proactive for economic development as it

promotes a positive tax structure that encourages trade and investment. Singapore has also the

highest standard of living in the Southeast Asian region. The island country is also a trade mecca

as well so this allows Nordstrom the ability to direct trade with suppliers in the region as

Indonesia is viable trade partner (CIA-Singapore, 2016). Success here could lead to expansion

into Indonesia (Jakarta, Bali) in the distant future.

Australia could be deemed the most difficult of the countries we are planning expansion. It’s a

social-democracy based on the British Parliamentary Model. But like many other counties in the

region, encourages increased global investment. This is especially the case with companies it


deems as corporate forward in their approaches such as ours. Australia though it will have the

highest labor costs at ($A) 45,000/yr. average per employee has one of the most stable

economies on the planet with a high productivity rate comparable to countries already serviced

by Nordstrom’s four wall operations (Retail, 2016). Foreign Trade will encourage further growth

in this country. Though two main stores are eventually planned. A growing outlet market makes

Nordstrom Rack a great opportunity. Especially in smaller metropolitan area likes Perth,

Adelaide, Resorts like the Gold Coast and the Melbourne Suburb of Geelong (Retail, 2016).

Comparative Advantage – What Nordstrom will bring to these overseas markets is the ability to

create businesses in these countries. Nordstrom utilizes a fully integrated and seamless multi-

channel retail sales approach. It will be able to utilize licensing agreements, such as the Macy’s-

Al-Tayer model in the Persian Gulf in order (Style.com, 2014). Nordstrom’s Customer Service

standards are currently considered an industry standard. The level of quality of products and

services allow Nordstrom to sell to a range of customers from middle class and higher a level of

products with a competitive pricing and a quality that is not found at any other of level of service

(Nordstrom, 2016).

The ability for Nordstrom to bring products that are popular in this country and make them

successful through their Nordstrom.com Ecommerce portal and their expansion into Canada

showed to the company that continued Global Expansion. With additional stores and their

logistics available overseas will allows Nordstrom to have an easier reach to global on a global

scale to productive retail markets in Singapore, Hong Kong and Australia.

Description of Opportunities


(1) The expansion of the Ecommerce business that Nordstrom creates through the use of

Alibaba’s Tmall.com Ecommerce portal in 2017-2018 to utilize as a means to determine creating

a permanent presence in China as well expansion of services to other countries in the Pacific

Rim. If conditions continue to improve expansion for these areas could be achieved in Fiscal

Year 2019 or 2020.

(2) – The expansion of traditional retail operations into the Pacific Rim to match increased

regional retail demand coming from these nations as well as expand into an established country

with an economic systems similar to ours as well adapt to China’s economic system (CIA, 2016).

Stores will be established through a licensing agreement with a regional retail group.

Location of Opportunity – Expansion for Nordstrom will take place in diversified mix of

developing and developed countries along the Pacific Rim and in Southeast Asia. China, The

world’s largest economy. Singapore on the tip of the Malayan peninsula in the Southeast Asia.

Australia is adjacent to this region on the southwest corner of the Pacific rim.

Reasoning for Expansion – Of the global markets that are considered the best of expanding

Nordstrom global footprint. The following locations are seen as having the best potential:

1. China - even during the recent slowdown still the fastest growing economy of the

developing countries and offers considerable potential. The increase in Per Capita particularly in

China major Metropolitan Areas is creating a large middle class economy. Shanghai as well as

Beijing as well as national Ecommerce with Ali Baba can further help Nordstrom establish a

Chinese Foothold (CIA Factbook, 2016).

2. Hong Kong - well established with the consolidation of Mainland China as a major

international business destination thanks to few levies placed on imported goods. It is also easier


than most other countries to set up business with a low tax structure and a mainland government

wanting to promote the region economically (Hong Kong, 2016). It can also receive mainland

goods that can make this location very affordable for tourist and consumers alike (CIA

Factbook,2016).

3. Singapore – The small island nation is considered to be one of most stable countries in

the region as far as politically as well as economically. Average Income is higher than in the

United States and is a major business and trade destination with a global reach. Incentive is also

with neighbor country Indonesia across the Singapore Strait (CIA Factbook, 2016).

4. Australia – Though just 22.4 Million in population, Australia’s equitable economy

though facing pressures due to the fall of commodities market in recent should stabilize as the

country relies on trade and has a favorable business development structure (CIA Factbook,

2016).

Internal Risks

Internal Risks – In 2015 is was determined by Executives at Nordstrom to set a long term sales

goals for the company of reaching a sales goal of 20 Billion Dollars by Fiscal Year 2020 (Drain,

2015). Many business analysts were concerned with the development of the Nordstrom Rack off-

price branch of the Nordstrom brand, but it only enhanced the brand as a whole and encouraged

outlet and off-price to see the main stores themselves. The Ten to Twenty percent overlap

between the off-price Rack stores and the main stores (Hiiemma, 2015). As many now currently

believe at this point, that the building four walled stores in established markets, especially first

line retail stores are now a risky business considering the expansion to Ecommerce. Nordstrom


has through their Omni-channel approach been able to augment the logistical processes that

allow the company to maximize order fulfillment process.

Nordstrom also has an Audit Committee that oversees all internal risks including financial and

other enterprise risks Committee, 2016). Nordstrom also performs internal audit to monitors their

suppliers to ensure that no child or slave labor is used in the creation of products and in the

distribution of those products through Nordstrom’s Supply Chain (Chain, 2016). This covers

many internal issues that have given the company difficulty over the years. These include

managers misreporting hours worked to satisfy sales per hour quotas for example. This could

also concern Nordstrom particularly with the cultures in Singapore and China of bribery and

extortion for customers and suppliers to Nordstrom’s retail and logistical networks (Weiss,

2014).

Upon analysis, Nordstrom is a company that is not unafraid to take risks but does so in a

measured and deliberate approach at this point in the company’s history. It has a stable

leadership core and focuses on how it can best serve the customer. This led it to the Omni-

channel approach to how it serves their target customers with the integration of their Ecommerce

and Four Wall platforms (Nordstrom, 2016). These customer service standards have allowed it to

build a reputation of service that has allowed it to expand the company into Canada successfully

where other American Companies have failed. This makes Global Expansions not just possible

but in most scenarios, obtainable.

Opportunities related to the project

Measured expansion of the Nordstrom Rack off-price division to foster growth domestically. –

Nordstrom will be to expand all three of the retail divisions throughout the company in the 2018


to 2020 period as it expects to open 42 units of their now successful division in the United States

and Canada. Even with the planned global expansion planned, there will still be a need to expand

Domestically as demand for floor to meet basic sales goals planned for 2020 cannot be met with

the proposed stores (Appendix D). There can even be Nordstrom stores added as well as Rack

stores based on changes in demographics domestically.

Setting up a larger scale global logistical network -Nordstrom would both need and have the

opportunity to set up a global logistical network. For the needs of Ecommerce globally, it would

be in the best interest of major retailers to build their logistical networks in order to expand their

Ecommerce business. Nordstrom plans are to triple their Ecommerce business by 2020 to 6.7

billion dollars. In order to achieve this a global logistical structure will be required. Though

working with global carriers could be utilized and logistics be centralized, however,

regionalization of distribution networks around the globe could cut delivery times significantly.

This will result increasing customer satisfaction globally and enhancing global relationships.

External Risks

Cultural Risks - Often when you consider cultural risks, when doing business overseas often

when speaking diverse, traditional based cultures. China is often the first mentioned. Chinese

business society is based on the collective culture in which the entity is one and relationships or

Guangxi are cultures and revered. China is also a culture where space is desired, physical contact

limited and facial expressions a key language tool (Lunicheva, 2014). To gain face, or respect is

honored to lose face damages your reputation. Age, seniority is respected in China so life

experienced has great respect. Also in China the giving of gifts was essential in promotion in

Chinese culture. Though this has changed as the Chinese government considers this as Bribery,


the giving of gifts and strictly as gifts is now a private matter. The key is present the gifts in

setting where the exchange is witnessed so it stays as a formal gift (Lunicheva, 2014).

Hong Kong shares many of the cultural values of the country they are a part of including the

building of long term relationships and in the use of collectivism (Export.gov, 2016). However,

unlike Mainland China and Singapore, the colonial business influence with Great Britain makes

them more welcoming to taking risks which may make Hong Kong the likeliest first place to

build lasting relationships with in Asia and should be the best place to start a logistical network

for the rest of Asia (UK.gov, 2016).

Singapore like China and Hong Kong is a Confucian culture sharing collectivism Hong Kong

and Singapore are direct rivals for trade and commerce (Singapore, 2016). Where Hong Kong is

a great stepping stone to China, Singapore could become a steppingstone to the rest of South

Asia. This is due to allowance for open trade. However, like China they are a risk avoidance

culture so time is very important to setting up a business and developing a relationship with those

in the retail sector there will be essential.

Australia with its cultural heritage with England requires the least amount of adjustment on

cultural grounds. They share many economic systems with the United States and more so, Great

Britain. It is volume based and discount driven culture, this is where Nordstrom Rack will do

exceptionally well (Export, 2016).

Political Climates - The four locations that prospectively being considered for expansion are

distinctive in how their government operate. Australia and Singapore have distinctly different

political and social cultures though they are different all share relative Australia is a

Parliamentary based social democracy. Singapore is for all intended purpose a democratic city-


state, independent from neighboring countries Malaya and Indonesia (Singapore, 2016). Hong

Kong though now a part of China since 1997 has a semi-autonomous status within China and

exercises a democratic government inside its borders and has some authority to make laws based

on a combination of Chinese Law and Laws set while being a British Colony (Hong Kong,

2016). China is a single party (Communist) ruled state that over the last 30 years has modified its

economic stances to become a global player (China, 2016). Reforms are slow and steady to allow

foreign investment into the country while Chinese Companies are expanding globally. Australia

is shares some governmental and political processes similar to the United Kingdom which it is

still a part of the Commonwealth including a two level legislative branch (Australia, 2016).

With a center right coalition running Australia, the climate for expansion and foreign investment

is welcomed.

It is also important to note that political climate here domestically can have a major impact on

not trade currently. The results of the 2016 could make exporting our company more possible or

practically impossible depending on who is elected. Any person who decides trade agreements

are to be scrapped or significantly altered to benefit a nativist movement could jeopardize our

plans, even more so the economy as a whole.

Natural Phenomenon’s = Regardless of the locations we have stores in or proposed to have them

come in there are certain natural risks involved with placing most of our stores. An example of

this is the floods of 2010 that swept Rhode Island. The Warwick Mall was flooded and

Nordstrom, Macy’s and Sears lost the use of their stores there for a year until the damage was

cleared up and the facility rebuilt.

Each of the countries we look at have natural phenomenon’s we consider a risks. Every country

except for the most part our planned Australian locations sit on or near Earthquake prone areas.


Singapore was fortunate to survive the 2010 Tsunami that devastated most of the Indian Ocean

rim. But Singapore is not prone to earthquakes as a whole. This is particularly the case with

earthquakes as well as Beijing both of which have experienced Earthquakes close by in the last

50 years. Typhoons and Monsoons can affect every proposed location except some of the

Australian locations on a practically yearly basis.

Australia is mainly sensitive to drought in which an extended dry period can bring wildfire to

temperate areas like Sydney, Melbourne, Canberra and semi-arid areas like Adelaide and Perth

that can interfere with commerce.

Microeconomic Factors

Competition

China – China is still primarily dominated by national and regional chains not unlike how

Department Store retail was in the United State until 20 years ago, Ballan Retail Group is largest

retailer in China with 118 billion in sales (Flannery, 2012). China has an established Department

Store Retail Market with regional retailers like companies, Wuhan, Beijing Wangfujing and

Yantai Zhenhua exemplify that approach along with retail groups like Chongqing General

Trading Group, for example. This does not mean foreign companies do not play a role here as

Walmart, Carrefour and Tesco have successfully entered the Chinese Market on their own

(Flannery, 2012). For our venture, a very strong consideration is made to partnering with a retail

group like Wuhan, to given them a license to open stores in the Nordstrom name as we possibly

can in Hong Kong and in Singapore.

Hong Kong – Hong Kong offers a perspective chain the most intense competition with retail, but

dues to Hong Kong global prominence the ability to sell to a regional clientele. Hong Kong


offers many Chinese retail groups, like Wuhan, access to the global markets that Hong Kong

provides and gives a wide array of European and North American Companies the opportunity to

break into the Chinese market (Hong Kong, 2016). Among our competitors Marks and Spenser,

H&M, the large numbers of designers that call Hong Kong a place of retail invite opportunities

for Nordstrom to provide a unique higher end retail experience with many famous American

Vendors in their stores and with a number of retail spaces under construction, the opportunity to

open a store as early as 2019 is worth finding a retail group to work with (Euromonitor, 2016).

The is being able to establish a successful Ecommerce operation to be sustainable. Provided

Nordstrom can set up a successful cross border Ecommerce channel could give the retailer an

advantage to gaining a foothold throughout China.

Singapore – If there is any country where the competition is intense and the ability to win a niche

market is most possible is Singapore. Like Hong Kong, Singapore has melting pot of Asian,

European and some American vendors as well (Export.gov). The key for any retailer here will be

to be able to bring their Ecommerce channels and be able to match their global prices to the four

wall prices in Singapore. The retailer that can accomplish this can make a sustainable business

successful for years to come (Apparel, 2015).

Australia – Australia has a reputation of being a tough place to put up a retail presence.

Woolworth’s and Coles are Australia’s leading retailers. In recent years, overseas competitors

have begun to become players in the Australian Marketplace (Export.gov, 2016). The key will be

to connect with the Australian Shopper who looks for value, quality, price. Recent trends in

Australia have placed the need for stores that have more modest square footage needs (Sydney,

2015). This is the reason why Nordstrom Rack and their 38,000 square foot average size per

store may be a perfect complement to the general Australian buying public.


Price Elasticity - The key with being able to win in foreign markets, especially Asia is keeping

four wall prices as close to what the global Ecommerce prices are. This is especially the case in

Singapore which has caused a considerable drop of four wall door store sales as the prices in

stores can average $S 5 to 10 dollars higher per item (Export.com, 2016). The concerns over

these types of policies, make these transfer of costs of shipping merchandise to the consumer

practically impossible in the entire region which makes the need to create logistical networks to

reduce the cost of shipping merchandise to stores an essential.

Financial Scenarios - As part of this risk analysis we look at two possible scenarios that

Nordstrom could face over the next three years. The first is a decrease in sales due to

macroeconomic constraints that restrain how Nordstrom will do business. The second scenario is

the possibility that Nordstrom exceeds expectation and increases sales even past an average

increase of sales of 5 percent per annual. The results could affect how Nordstrom plans to

expand beyond the completion of current expansion plans in 2018 (Nordstrom, 2016). In our

initial financial forecast (Appendix A), is was determined that Nordstrom would continue modest

growth, mostly on the placement of new stores that would grow overall sales from 2016 to 2018.

These sales would set the foundation for expansion plans for FY 2019 and 2020 to expand

overseas.

Significant Decrease in Sales- As part of our risk analysis, I looked at how a sales decrease

would affect how Nordstrom would perform financially starting their 2014 and 2015 financial

statements (Nordstrom, 2016). We then looked what a sales of loss of 6.5 percent annually over

each of the next three years, roughly 20 percent of business over this same period would lead to.

If there are adjustment to inventory that follow the sales drops and small adjustments to SG&A

expenses due to loss of processing those goods. Nordstrom would still have a positive net


income, but a net income of just 257 million dollars would not be beneficial to stakeholders

(Appendix F). This would have to result in further streamlining in order for Nordstrom not just to

meet stockholder satisfaction but to make any expansion plans feasible. A much greater effect

financial Need would be required in order to make expansion possible.

The future of the company would rely on the repositioning of existing four wall units the

expansion of the Nordstrom Rack off price group closing unproductive locations based on sales

per square foot, even down to reclassifying assortments in order to better meet the needs of the

current customer base. This expansion project would be greatly modified to become just a

fulfillment operation to meet the needs of the global customer in a more efficient way. A likely

drop in sales due to the changes of the buying habits of the customer would lead to this

conclusion. However, as we stated major micro and macro-economic issues in our targeted

markets can change any aspect of our plan. The further reliance of the customer to the utilization

of Ecommerce to acquire their merchandise a part of this plans long term goals and will be the

first step towards expansion.

Significant Increase in Sales – In this scenario we looked to determine how much a greater

increase net income and changes in the cash flow could affect the time framework in getting our

expansion plans moving forward. Though we did not change all figures in the cash flow such

financing added, this is due to financing already in the network for expansions taking place

(Appendix C). Having over 3 billion dollars in cash flow would give Nordstrom greater leverage

to be able to select the financing they need and allow them to be choose either to form overseas

companies or work with partnership with retail groups like Hissing in Singapore or Wuhan or

even Alibaba in China.


Nordstrom has historically been one of the most productive companies in the retail through FY

year 2015. Though same stores sales are projected to continued downward this year, new store

openings such as and particularly New Nordstrom Rack stores will continue to push sales up by

the end of FY 2016 (Nordstrom, 2016). A significant increase would allow for much great

internal investment opportunities to improve infrastructure in the company and allow great

expansion into domestic as well as global markets beyond the scope of this proposal. The key

will be to the degree of self-regulation Nordstrom Executives have in period of boom in order to

ensure the business continues to be sustainable in the face of an uncertain global economy.

Time Value of Money

Are Nordstrom Goals Achievable – When we look at the time value of money, we first look to

the goals Nordstrom set in 2013 of reaching 20 billion in annual sales by the end of Fiscal Year

2020. Based on the three scenarios we had already laid out was the determine if this goal was

obtainable based on our findings. We begin this comparison based on the projected sales forecast

in our three scenarios matching the scenario set forth by members of Nordstrom’s Executive

Team. That is an expected increase, in sales, of existing and new stores of approximately 1.6

billion dollars and increased Ecommerce sales of over 3.8 billion dollars then add the expected

average sales of an additional 1.49 million square feet of retail deemed needed in order to make

the 20 billion dollar sales goal obtainable (Appendix I).

Based on the time value analysis, Nordstrom will have to continue to increase revenue

over the period of 2016 to 2018 in order to make the eventual goal of 20 billion dollars

obtainable. The Worst Case Scenario (Appendix H), where we are utilizing the 20 percent annual

sales loss even with secondary increases in sales would only reach 18 billion. This does not mean

that Nordstrom should expand. However, it should be considered that expansion into China in


particular should be a partnership with a Chinese trading company in order to get the maximum

value of the venture. The Best Case Scenario provides Nordstrom with the best options possible

in that their sales alone are demonstration that they could go into Asia if they desired without the

aid of a trading company. Though, general rules with doing business, in Asia, make licensing a

better alternative. But projected sales of 24 billion dollars under this scenario (Appendix H).

would allow Nordstrom to fully modernize and globalize their logistical networks in order to

maximize efficiency. Our Forecast though not as profitable as the best case scenario shows that

sales are obtainable in reaching Nordstrom 2020 sales goals. At the estimated sales of

approximately 21.4 billion (Appendix H) would make licensing in Asia the most desirable

situation for foreign investment. In Australia, this scenario in particular makes the plan of

bringing Nordstrom Rack very desirable and an opportunity to be a fast follower in this stable

region of the globe (Australia, 2016).

When looking at the numbers it was determined that the projections of the goals set forth by

Nordstrom are reachable but not without risk. Based on our scenarios we determined that the 20

million sales goal within the 24th percentile between the two variances which in our

determination to the slight risk of failure (Appendix H).

Justification

Financial Impact –

Expansion - The proposed expansion that is being planned is the first step in expanding

Nordstrom beyond North America. In this case it will expand the company to four major

locations, China, Hong Kong, Singapore and Australia. This proposal is based on the claim by

executives to make Nordstrom a twenty-billion-dollar company by 2020 (Drain, 2015). This is a


very ambitious goal and in order to make this goal based on the information we already have on

Nordstrom’s needs to generate income it will require more locations for the company to sell in in

order to make this goal possible even at a later date than the one suggested by executives. The

goals expressed by Nordstrom did not take into account the slowing of the economy globally and

due to this same store this year to last year will not be the same as in past years.

What will help Nordstrom keep growing will be the strength of robust new store openings and

the increased sales through their Omni-channel merchandising concepts. With this expansion

plan, Nordstrom should reach their 20 billion dollar sales goal in 2022 (Appendix D). It is

expected annual additional units that are opened will provide approximately 1.5 billion dollars in

added revenue upon the retail openings due to the completion of the plan in its primary phases

along with continuing domestic expansions (Appendix D ).

Nordstrom has successfully maintained a strong financial base along with the

maintenance of strong customer service principals that have allowed the company to maintain

excellent sales to income margin and even maintained sales growth in the current economic

outlook (Nordstrom. 2016). These will eventually increase our cash flow over this period to

allow quick payment of all long term notes while maintain a strong revenue stream to return to

our investors (Appendix C). Even so the startup costs require us to finance this project from

external funds in order to keep our cash flow margins at some measured growth. The countries

we are planned to expand into are beginning to show stabilization with any uncertainty and will

be in positions of growth by 2020 when this expansion is to be set forth. But it will be in

Ecommerce where most of Nordstrom’s growth will take place even with newer expansions,

though some of the fixed costs will be defrayed due to how business will be managed the


logistical needs of the company and the creating of a new company in Australia will require the

startup financing need to grow our business into being a global retailer.

Specific Goals, Needs and Expectations - Demand for the products and services Nordstrom’s

carries will have a modest global growth over the next 5-8 years this is based on both increased

sales through the Ecommerce portal. New stores like the new stores opened this year and

proposed for 2016 through 2018 will only services to add revenue at this period. Most income

will come from royalty payments which will be the case in Hong Kong, China and Singapore A

one store agreement for a trading company will bring 75 million in revenue for each main store

and 10 million for each rack stores.

SG&A costs will climb at a steady rate based on our projections (Appendix D). Though

some processes in the how Nordstrom’s infrastructure become more efficient the company’s

global expansions at least with the need logistical networks and in Australia staffing of stores

will increased these costs but the two changes will reduce the amounts of increase throughout

this period Canberra,2014).

Financial Impact – Consolidated - In order to accomplish the goals Nordstrom projects to have

over the next eight fiscal years we need to take a look at the projected differences between what

the revenue, pretax income should be between what would happen if Nordstrom was allowed to

expand with the financing they would receive for the project in 2019 and 2020 and if they were

not able to expand due to an inability to finance this project. Nordstrom needs to maintain the

percentage of dividend distribution to their stockholders (Nordstrom, 2016). This practice allows

Nordstrom to maintain the present value of the company and maintain that value based on the

revenues and income generated in the performance of their business. Nordstrom does not have

enough income to organically expand on this scale; however, if Nordstrom does successfully


expand, Nordstrom can generate a global revenue stream that make it only eventually achieve

long term goal of 20 billion but potentially make it within the 20 billion dollar guidelines of FY

in a best case scenario (Exhibit D).

In our analysis, an examination of the impact funding and execution of the project would

have on future fiscal performance of Nordstrom. The projection of first year performances with

the expansion plan completed is approximated at 1 billion dollars for the new stores and the

licensing agreements that are implemented (Appendix D). 500 million new store dollars added in

fiscal years 2019 and 2020 will impact the business with generated revenue that if the license

agreements work and sales continue to improve the perspective revenues 21.45 billion dollars

will allow Nordstrom to achieve their long goals for revenue and for market penetration in the

global market (Exhibit D).

The cash flow which this expansion is proposing has the potential to keep Nordstrom on

a growth path that could extend the company’s potential as a global retailer. The cash flow will

be expected to increase to 1.9 billion dollars in 2020 even after the borrowing cash flow from

this financial proposal has been received in 2018 (Exhibit C). Due to the fact that our licensees

pick up most of the SG&A cost associated with the operation of their businesses the expected

cash flow for Nordstrom in FY 2023 will be approximated at 5.6 billion dollar given the current

tax climates globally (Appendix D). This may allow Nordstrom to become even more

organically growth minded in future and make the company more self-sustaining.

If the expansion is not able to be financed is not implemented the limited industry growth

even with the already planned location in place demonstrates a much slower revenue growth

going forward through FY 2023. Based on the projection done for this plan, Nordstrom will


make revenues of just over 19 billion dollars for FY 2023 (Appendix E). This is an over 3.4

billion dollars’ differential in revenue.

The cash flow that Nordstrom would potentially receive if global expansion is not

implemented or strictly limited to Ecommerce growth is considerable. Though growth would

occur and due to greater efficiencies in logistics and training as a result of the Omni-channel

concept (Nordstrom, 2016). Nordstrom will generate a cash flow of 4.1 billion dollars. Though

this is very positive as a result it is 1.4-billion-dollar differential which in line with the amount of

financial acquisition of 1.25 billion being barrowed for this project (Appendix F).

Financing

Funding vs Capital Financial Markets – In the analysis of looking at the needs of the

company, Nordstrom can and should continue to utilizes Capital Investment when it comes to

domestic projects however when a partner or a licensee needs financial assistance to get our

projects off the ground we shall need to guarantee that that investment is made to be able to

expand that business. (Veterinary, 2014). Nordstrom proves the past 5 years has shown steady

growth in both its income, profits (Appendix C) and the availability to hive sustainable and

expandable retails channels and have appropriate financing to create and manage those organic

and acquisition growth opportunities and maintain a healthy return on investments for their

stockholders and enhance the company’s general image to their stakeholders (Nordstrom, 2016).

It is in the best interest of the company, in order to maintain a return on prior investments and

stock holdings in order to assist in maintaining the organizations value that we come forward to

propose this External Funding Proposal through the use on long term funding with a diversified


approach of loans and bonds to supplement any internal Capital Investment based on historical

financial history (Nordstrom, 2016).

It is important to note that in the case of investments in China, Hong Kong and Singapore

will in all likelihood be a first follower in structure to that of Macy’s joint venture in China. As

this likely joint ventures progress through their life cycle, there will also likely be times when

additional funding is required (Mauboussin, 2014). Depending on the circumstances, it may not

be possible or practical to raise external debt financing. In accordance with the agreement.

Nordstrom makes in Asia these contracts will determine how the funding requirement will be

satisfied, this includes when and to what extent funds will be utilized. Any contact that is joint

venture, license and or franchise must stipulate terms as to the consequences of contact when

terms of the agreements are breached when either side cannot live to the financial obligations of

the agreement (Ross, 2013).

It is important to note we will choose to primarily use capital when investing into

Australia. We are making a separate company altogether in Australia. With this the use of

corporate assets and cash flow can be utilized to set up stores and infrastructure (Canberra,

2014). The need to be able to use cash for the placement of structure and do through direct

capital investment will prove proven to be cost effective for the materials supplies and then the

need to hired and train personnel. Australian financing should have limited though if needed be

convenient utilize revenue from Australian Stores to assist in the payment of those finances.

Especially in creating initial inventories. We will also need to set up SG&A structure for

Australia on particular as we will need to account for wages and labor as well as all corporate

expenditures inside Australia which could ultimately determine of financing will be needed in

Australia.


Business Combinations – Most of the proposed expansions will utilize Nordstrom’s status as a

leading retailer to develop business relationship that will help the company grow their business

investments overseas. In many overseas, locations most retailers utilize locally and regionally

based retail groups in order to be to have someone with local knowledge of the marketplace

(Boontanapibul, 2010). Though several retailers have successfully entered the Chinese Market

on their own like Wal-Mart and Tesco, for the size of our initial expansion plans into China

expansion going alone would be very risky in these countries for the amount of sales volume and

expenditures were would need to make a larger scale operation viable (Ross, 2013). This will be

the reason why Nordstrom will choose to pursue building business relationship with a particular

retail group in China, Hong Kong and Singapore.

The result of this analysis leads to the combinations for these locations will be a limited

joint venture derived from licensing agreements. The key to how a joint venture agreement could

work is that of Nordstrom has to provide greater physical assistance up front the royalties

Nordstrom could ask for can and should go higher these startup costs can be a matter of

negotiation. Unlike with franchising, a joint venture and license combination allow Nordstrom to

maintain some control over pricing, merchandising, allotment and distribution. Several retail

group like Ballan and Wuhan can work in Joint Ventures; meanwhile, Macy’s is already working

with retail group in a joint venture in the expansion of their web portal and is showing some

success already.

In the case of Australia, there is an absence of trading companies that would allow us

greater ease of licensing or franchising unlike in Asia (Australia, 2016). The inability to see a

suitable pool of trading companies and retail groups make joint ventures and franchising difficult

especially in country that has until recently limited retail investment. For this country, a more


organic approach to growing a retail business is necessary (Canberra,2014). To do this we will

choose to create a separate company Nordstrom Australia, Ltd. This will allow us the physically

create a company that will be locally managed with localized control of the merchandising and

marketing with the financial prowess of the main company in Seattle.

Nordstrom will need most of its financing for future expansion mostly for infrastructure to allow

Nordstrom to expand their Four wall and Ecommerce business by creating overseas distribution

centers and help build or lease-in stores overseas particularly in Australia where Nordstrom

Australia, Pty. The conclusion is Nordstrom will require financing to cover start-up costs in

order to implement this expansion plan.

Track Record

Financial Performance – Nordstrom (NASDAQ symbol JWN), has been consistent growth

company over the past five years and has until first quarter 2016 avoided any major slowdown in

sales. Though there has been a slowdown in sales, efficiencies in sales and in inventory cost

reductions have maintained Corporate profitability.

Executives have recognized and with the implementation of their Omni-channel concepts been

able to plan for the expansion of the Ecommerce channel of their business with expectation that

Ecommerce will grow to 6 billion dollars by 2020 (Drain, 2014). Nordstrom is proposing to enter

into agreements with local retailing groups overseas. These retail group will either create joint

ventures or become pure licensees depending on the process of negotiating based on what suits

both parties in the best interest though assets will be exchanged in the midst of these agreements

the need for to provide funding for any startup costs requires the need to finance any considered

expansion plan (Mauboussin, 2014).


With this information it is the conclusion that through the setting up of agreements with retail

group will provide initial additional cash flow in order to pay installments of the financing

during the term of these agreements.

Ethical Behavior – Nordstrom gives their employees a basic book that describes ethics and

policies regarding their conduct and how to deal with others conduct inside the company. Among

the subjects covered includes sexual harassment, racial profiling and company privacy when it

comes posting on social media (Ethicsworld, 2014). Currently there is just one ethics related

lawsuit been filed and that is a product infringement lawsuit over the design of a private label

handbag. It is also important that Nordstrom takes a role in being Socially Responsible in their

relations with the communities they are a part of globally. The most important of Nordstrom’s

Code of Ethics was in the fair and honest treatment of customers, coworkers, suppliers,

competitors and other business partners. That the company will continue to place the need to

provide confidentiality and fair dealing to all businesses is also a vital tenet of Nordstrom Ethical

Philosophy (Nordstrom, 2016).

Legal Behavior- There is an adage in retail that says learn from what find in court you can and

cannot do. Though there are been individual instances where Nordstrom and other companies

had to settle cases about material claims, labor issues and pricing claims in general Nordstrom

performs to the ethical standards the company sets in their code of ethics and their employee’s

handbook (Nordstrom,2016). to in one case though it was found that Nordstrom initially did not

violate pricing laws in 2015 at the Nordstrom Rack stores but changed their “Compare at”

pricing promotions they chose to settle by giving those who took part in the class action lawsuit a

code for a $20.00 discount (Unis, 2015). When they realize they had been improper in their

corporate conduct. They have settled rather further protract these include.


Questions

When there is projected cash flow that might sustain this project why does Nordstrom

require Financing?

It is important to note that the cash flow for Nordstrom may already allow the company to invest

in projects and renovations as well as fund dividends to pay their shareholders. Any other

investments Nordstrom wishes to make require finances up front to perspective contractors and

joint venture partners that Nordstrom will need to start expansion.

Why is Europe not in immediate consideration for Nordstrom’s Expansion? What Impact

does Brexit play in the Expansion?

It is natural to consider Europe for any expansion, per capita income in Europe makes the

consumer a very attractive place to expand. But Europe’s population is shrinking and has

traditionally is a home to many of Nordstrom’s competitors. Lease space in major cities is cost

inefficient. This does not mean Nordstrom would not expand here. Part of the Ecommerce

divisions job will be to analyze sales in this region as part of a determination for future

expansions. Brexit also needs to be looked at as the changes in trade in Europe could make it

easier or harder, outcome depending, for American Companies to do business there.

Why is Australian Expansion hinged on creating an Australian based Nordstrom Company

and the other countries going to be set up differently?

For Nordstrom, the expansion in Australia mirrors that of the Canadian expansion where there

will be several Nordstrom Rack stores as well the two regular Nordstrom stores immediately

planned will require a logistical network of their own. This why the creation of an Australian

Division of the company is seen as the best option.


Why is Nordstrom asking presently for the money they need in 2018?

Nordstrom, will need cash on hand in order to work with the Trading Companies they will

partner with in order to assist those companies with the necessary capital to start with either

construction or prepare leased property, hire personnel and set logistical networks to get stores

operational within the scheduled time frame.

What other opportunities could Nordstrom make based on the result with this and other

expansions?

The major key with development in the next 10 years will be the growth of the Ecommerce

business. With an Omni-channel logistical approach, sales information from all channels can

have a global reach. For example, we open a store in Singapore and we discover that sales from

residents of India increase to 100 million dollars. This could lead to further expansion there; this

is an example of the impact this expansion can have on Nordstrom’s global outlook much like

Nordstrom’s Canada expansion helped the company look overseas for expansion.


Appendix A - Five Year Income Statement

Nords trom, Inc.

Income Statement Values in (000,000) FY 2018 FY 2017 FY 2016 FY 2015

(Nordstrom, 2016) FY 2014

(Nordstrom, 2016)

Sa les and Interest Income 15,395$ 15,093$ 14,654$ 14,437$ 13,506$

Cost of Goods Sold 9,474$ 9,334$ 9,241$ 9,168$ 8,406$

Se l l ing, General and Admin Exp. (SG&A) 4,060$ 4,122$ 4,185$ 4,168$ 3,777$

Tota l Operati ng Expens es 13,534$ 13,456$ 13,426$ 13,336$ 12,183$

EBIT 1,861$ 1,638$ 1,228$ 1,101$ 1,323$

Depreciati on and Amorti zati on -$ -$ -$

Ea rning before interes t and taxes 1,861$ 1,074$ 1,012$ 1,101$ 1,323$

Interest Expens e 195$ 113$ 106$ 125$ 138$

Ea rning Before Taxes 1,666$ 961$ 906$ 976$ 1,185$

Ta xes 583$ 360$ 340$ 376$ 465$

Net Income 1,083$ 601$ 566$ 600$ 720$

Ea rning Per Share 4.85$ 3.14$ 2.78$ 3.15$ 4.30$

Dividends PerShare 1.35$ 1.15$ 1.05$ 1.48$ 1.19$

Specia l Cas h Dividend per Share -$ -$ 4.85$ -$

Book Value Per Sha re 18.75$ 15.95$ 14.75$ 16.35$ 19.07$

Stock Pri ce 48.75$ 51.15$ 45.85$ 83.16$ 80.54$

Shares Outs tanding 350.00$ 368.00$ 371.60$ 376.40 383.60


Appendix B – 5 Year Balance Sheet

Balance Sheet (values in 000's) FY Ending 1/31/2019 1/31/2018 1/31/2017 42,400$ 42,035$

Current Assets

Ca sh and Cas h Equiva lents 700,000$ 600,000$ 525,000$ 595,000$ 827,000$

Short Term Inves tments -$ -$ -$

Net Receivables 365,000$ 350,000$ 275,000$ 196,000$ 2,562,000$

Inventory 2,094,552$ 2,043,466$ 1,993,625$ 1,945,000$ 1,733,000$

Other Current Ass ets 330,000$ 315,000$ 290,000$ 278,000$ 102,000$

Total Current Assets 3,489,552$ 3,308,466$ 3,083,625$ 3,014,000$ 5,224,000$

Long Term Assets

Long Term Inves tments -$ -$ -$ -$ -$

Fi xed As sets 4,061,427$ 3,924,084$ 3,828,375$ 3,735,000$ 3,340,000$

Goodwi l l 435,000$ 435,000$ 435,000$ 435,000$ 435,000$

Intangible Ass ets -$ -$ -$ -$ -$

Other Ass ets 525,000$ 475,000$ 465,000$ 514,000$ 246,000$

Deferred Ass et Charges

Total Assets 8,510,980$ 8,142,550$ 7,812,000$ 7,698,000$ 9,245,000$

Current Liabilities

Account Pa ya ble 1,625,000$ 1,600,000$ 1,800,000$ 1,740,000$ 1,744,000$

Short-Term Debt/ Current Porti on of Long Term Debt 17,000$ 14,000$ 12,000$ 10,000$ 8,000$

Other Current Liabi l ities 1,235,067$ 1,210,850$ 1,181,318$ 1,161,000$ 1,048,000$

Total Current Liabilities 2,877,067$ 2,824,850$ 2,993,318$ 2,911,000$ 2,800,000$

Long Term Debt 2,758,638$ 2,836,646$ 2,781,025$ 2,795,000$ 3,123,000$

Other Liabi l iti es 593,925$ 586,592$ 595,525$ 581,000$ 372,000$

Deferred Liabi l i ty Charges 545,192$ 538,461$ 549,450$ 540,000$ 510,000$

Mis c. Stocks -$ -$ -$ -$ -$

Minority Interes t -$ -$ -$ -$ -$

Total Liabilities 6,774,821$ 6,786,549$ 6,919,318$ 6,827,000$ 6,805,000$

Stockholders Equity

Common Stock 2,200,000$ 2,300,000$ 2,400,000$ 2,539,000$ 2,338,000$

Ca pita l Surplus -$ -$ -$ -$ -$

Reta ined Earnings (90,347)$ (850,000)$ (1,540,000)$ (1,610,000)$ 166,000$

Treas ury Stock -$ -$ -$ -$ -$

Other Equi ty (85,535)$ 99,275$ 88,582$ (58,000)$ (64,000)$

Total Equity 2,024,118$ 1,549,275$ 948,582$ 871,000$ 2,440,000$

Total Liabilities and Equity 8,798,939$ 8,335,824$ 7,867,900$ 7,698,000$ 9,245,000$


Appendix C - 5-year income statement and ratios

Annual Cash Flow Statement (000's)

Period Ending 1/31/2019 1/31/2018 1/31/2017 1/31/2016 1/30/2015

Net Income 1,327,109$ 600,769$ 566,082$ 600,000$ 720,000$

Cash Flow - Operating Activities

Depreciati on 569,993$ 542,850$ 517,000$ 497,000$ 432,000$

Net Income Adjustments 443,038$ 385,250$ 335,000$ 238,000$ 114,000$

Changes in Operating Activities

Accounts Recievable (15,000)$ (75,000)$ (79,000)$ (56,000)$ (161,000)$

Changes in Inventories (51,087)$ (49,841)$ (48,625)$ (203,000)$ (176,000)$

Other Operati ng Acti viti es 140,000$ 120,000$ 55,000$ 1,327,000$ 106,000$

Liabi l ities 11,728$ 132,768$ (92,318)$ 48,000$ 185,000$

Net Cash Flow Operating 2,425,780$ 1,656,797$ 1,253,139$ 2,451,000$ 1,220,000$

Cash Flows - Investing Activities

Ca pita l Expenditures (975,000)$ (985,000)$ (1,028,000)$ (1,082,000)$ (861,000)$

Investments 250,000$ 350,000$ 458,000$ 924,000$ (8,000)$

Other Inves ti ng Acti vities -$ -$ -$ 14,000$ (20,000)$

Net Cash Flows Investing (725,000)$ (635,000)$ (570,000)$ (144,000)$ (889,000)$

Cash Flows - Financing Activities

Sa le and Purchase of Stock (17,940)$ (19,007)$ (17,258)$ (1,098,000)$ (469,000)$

Net Borrowings 1,761,619$ 981,089$ 559,818$ (308,000)$ 23,000$

Other Financing Acti viti es 35,000$ 12,000$ 25,000$ 37,000$ (23,000)$

Net Cash Flows Investing 1,778,679$ 974,081$ 567,560$ (2,539,000)$ (698,000)$

Effect of Exchange Rate

Net Cash Flow 3,479,458$ 1,995,878$ 1,250,699$ (232,000)$ (367,000)$

Financial Ratios

Period Ending

Liquidity Ratios

Current Rati o 126% 120% 113% 113% 136%

Quick Rati o 37% 34% 27% 27% 121%

Ca sh Rati o 20% 18% 17% 20% 16%

Profitability Ratios

Gros s Margin 42% 39% 37% 36% 38%

Opera ting Margin 16% 7% 7% 8% 10%

Pre-Tax Margin 14% 6% 6% 7% 9%

Profi t Margin 9% 4% 4% 4% 5%

Pre-Tax ROE 128% 71% 101% 112% 49%

After-Tax ROE 83% 44% 63% 69% 30%

Dividend Rati o 33% 70% 69% 93% 63%

Return on As s ets 17% 7% 7% 8% 8%

Extra Financing Needed Values in (000,000) 1,761.62$ 981.09$ 559.82$ 1,676.74$ N/A

Growth Ratios

Plowback Rati o 67% 30% 31% 7% 37%

Internal Growth Rate 13% 2% 2% 1% 3%

Susta ina ble Growth Ra te 2.22% 0.16% 0.17% 0.04% 0.23%

COGS/Revenue 61.54% 61.84% 63.07% 63.50% 62.24%

SG&A/Revenue 26.37% 27.31% 28.56% 28.87% 27.97%

ROR (Return on Revenue) 7.03% 3.98% 3.86% 4.16% 5.33%

Fixed As set Turnover (Income/Fixed As sets) 3.79 3.85 3.83 3.87 4.04

Inventory Turnover (COGS/Inventory 4.52 4.57 4.64 4.71 4.85

Receivables Turnover 42.18 43.12 53.29 73.66 5.27

Pa ya bles Turnover 5.83 5.83 5.13 5.27 4.82

Working Capi tol Turnover 25.14 31.21 162.26 140.17 5.57

Return on Invested Capitol (ROIC) 49.17% 60.81% 66.18% 63.76% 26.54%


Appendix D - 8 yr. perspective

Fiscal Year FY2023 FY2022 FY2021 FY2020 FY2019 FY 2018 FY 2017 FY 2016

FY 2015 (Nordstrom,

2016)

FY 2014 (Nordstrom,

2016) Sales and Interest Income 21,448.67$ 21,028.11$ 19,833.92$ 18,680.11$ 17,565.33$ 16,053.46$ 15,343.16$ 14,653.56$ 14,437.00$ 13,506.00$ Cost of Goods Sold 10,357.26$ 10,204.19$ 10,004.11$ 9,760.11$ 9,615.87$ 9,473.76$ 9,333.76$ 9,241.34$ 9,168.00$ 8,406.00$ Selling, General and Admin Exp. (SG&A) 4,751.21$ 4,612.82$ 4,522.38$ 4,433.70$ 4,242.78$ 4,060.07$ 4,121.90$ 4,184.67$ 4,168.00$ 3,777.00$ Total Operating Expenses 15,108.46$ 14,817.02$ 14,526.49$ 14,193.81$ 13,858.65$ 13,533.84$ 13,455.66$ 13,426.02$ 13,336.00$ 12,183.00$ EBIT 6,340.20$ 6,211.09$ 5,307.43$ 4,486.30$ 3,706.68$ 2,519.62$ 1,887.50$ 1,227.54$ 1,101.00$ 1,323.00$ Depreciation and Amortization -$ -$ -$ Earning before interest and taxes 6,340.20$ 6,211.09$ 5,307.43$ 4,486.30$ 3,706.68$ 2,519.62$ 1,074.00$ 1,012.00$ 1,101.00$ 1,323.00$ Interest Expense 665.72$ 652.16$ 557.28$ 471.06$ 389.20$ 264.56$ 112.77$ 106.26$ 125.00$ 138.00$ Earning Before Taxes 5,674.48$ 5,558.92$ 4,750.15$ 4,015.24$ 3,317.48$ 2,255.06$ 961.23$ 905.74$ 976.00$ 1,185.00$ Taxes 1,986.07$ 1,945.62$ 1,662.55$ 1,405.33$ 1,161.12$ 789.27$ 360.46$ 339.65$ 376.00$ 465.00$ Net Income 3,688.41$ 3,613.30$ 3,087.60$ 2,609.91$ 2,156.36$ 1,465.79$ 600.77$ 566.09$ 600.00$ 720.00$

Earning Per Share 4.85$ 3.14$ 2.78$ 3.15$ 4.30$ Dividends PerShare 1.35$ 1.15$ 1.05$ 1.48$ 1.19$ Special Cash Dividend per Share -$ -$ 4.85$ -$ Book Value Per Share 18.75$ 15.95$ 14.75$ 16.35$ 19.07$ Stock Price 62.50$ 53.24$ 52.14$ 51.15$ 49.57$ 48.75$ 51.15$ 45.85$ 83.16$ 80.54$ Shares Outstanding 315 320 325 325 335 350.00 368.00 371.60 376.40 383.60

Balance Sheet (values in 000's) FY Ending 2/1/2020 1/31/2019 1/31/2018 1/31/2017 1/31/2016 42,035.00$ Current AssetsCash and Cash Equivalents 1,250,000.00$ 1,100,000.00$ 1,000,000.00$ 1,200,000.00$ 800,000.00$ 700,000.00$ 600,000.00$ 525,000.00$ 595,000.00$ 827,000.00$ Short Term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Net Receivables 365,000.00$ 378,500.00$ 400,000.00$ 412,500.00$ 400,000.00$ 365,000.00$ 350,000.00$ 275,000.00$ 196,000.00$ 2,562,000.00$ Inventory 2,392,913.57$ 2,311,993.79$ 2,255,603.70$ 2,200,588.97$ 2,146,916.07$ 2,094,552.27$ 2,043,465.63$ 1,993,625.00$ 1,945,000.00$ 1,733,000.00$ Other Current Assets 350,000.00$ 350,000.00$ 350,000.00$ 350,000.00$ 350,000.00$ 330,000.00$ 315,000.00$ 290,000.00$ 278,000.00$ 102,000.00$ Total Current Assets 4,357,913.57$ 4,140,493.79$ 4,005,603.70$ 4,163,088.97$ 3,696,916.07$ 3,489,552.27$ 3,308,465.63$ 3,083,625.00$ 3,014,000.00$ 5,224,000.00$ Long Term AssetsLong Term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Fixed Assets 4,823,701.62$ 4,660,581.27$ 4,502,977.08$ 4,350,702.49$ 4,203,577.28$ 4,061,427.33$ 3,924,084.38$ 3,828,375.00$ 3,735,000.00$ 3,340,000.00$ Goodwill 535,000.00$ 525,000.00$ 515,000.00$ 500,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ Intangible Assets -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Other Assets 550,000.00$ 525,000.00$ 475,000.00$ 465,000.00$ 514,000.00$ 246,000.00$ Deferred Asset ChargesTotal Assets 9,716,615.19$ 9,326,075.07$ 9,023,580.78$ 9,013,791.46$ 8,885,493.36$ 8,510,979.59$ 8,142,550.00$ 7,812,000.00$ 7,698,000.00$ 9,245,000.00$

Current LiabilitiesAccount Payable 1,838,538.35$ 1,793,695.95$ 1,749,947.27$ 1,707,265.63$ 1,665,625.000$ 1,625,000.00$ 1,600,000.00$ 1,800,000.00$ 1,740,000.00$ 1,744,000.00$ Short-Term Debt/ Current Portion of Long Term Debt 17,500.00$ 17,500.00$ 17,500.00$ 17,500.00$ 17,500.00$ 17,000.00$ 14,000.00$ 12,000.00$ 10,000.00$ 8,000.00$ Other Current Liabilities 1,088,212.61$ 1,116,115.50$ 1,144,733.84$ 1,174,085.99$ 1,204,190.76$ 1,235,067.45$ 1,210,850.44$ 1,181,317.50$ 1,161,000.00$ 1,048,000.00$ Total Current Liabilities 2,944,250.95$ 2,927,311.44$ 2,912,181.11$ 2,898,851.62$ 2,887,315.76$ 2,877,067.45$ 2,824,850.44$ 2,993,317.50$ 2,911,000.00$ 2,800,000.00$

Long Term Debt 3,497,500.25$ 3,596,401.28$ 3,698,099.00$ 4,108,998.89$ 2,682,775.21$ 2,758,637.75$ 2,836,645.50$ 2,781,025.00$ 2,795,000.00$ 3,123,000.00$ Other Liabilities 631,984.49$ 624,182.21$ 616,476.26$ 608,865.44$ 601,348.58$ 593,924.53$ 586,592.13$ 595,525.00$ 581,000.00$ 372,000.00$ Deferred Liability Charges 580,128.82$ 572,966.74$ 565,893.08$ 558,906.74$ 552,006.66$ 545,191.76$ 538,461.00$ 549,450.00$ 540,000.00$ 510,000.00$ Misc. Stocks -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Minority Interest -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Liabilities 7,653,864.51$ 7,720,861.68$ 7,792,649.45$ 8,175,622.69$ 6,723,446.21$ 6,774,821.48$ 6,786,549.06$ 6,919,317.50$ 6,827,000.00$ 6,805,000.00$

Stockholders EquityCommon Stock 2,000,000.00$ 2,000,000.00$ 2,075,000.00$ 2,100,000.00$ 2,150,000.00$ 2,200,000.00$ 2,300,000.00$ 2,400,000.00$ 2,539,000.00$ 2,338,000.00$ Capital Surplus -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Retained Earnings (100,000.00)$ (400,000.00)$ (850,000.00)$ (1,330,000.00)$ (65,000.00)$ (500,000.00)$ (850,000.00)$ (1,540,000.00)$ (1,610,000.00)$ 166,000.00$ Treasury Stock -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Other Equity -$ 77,047.15$ 36,158.11$ 99,275.00$ 88,582.00$ (58,000.00)$ (64,000.00)$ Total Equity 1,900,000.00$ 1,600,000.00$ 1,225,000.00$ 770,000.00$ 2,162,047.15$ 1,736,158.11$ 1,549,275.00$ 948,582.00$ 871,000.00$ 2,440,000.00$ Total Liabilities and Equity 9,553,864.51$ 9,320,861.68$ 9,017,649.45$ 8,945,622.69$ 8,885,493.36$ 8,510,979.59$ 8,335,824.06$ 7,867,899.50$ 7,698,000.00$ 9,245,000.00$



FY 2015 (Nordstrom,

2016)

FY 2014 (Nordstrom,

2016)Net Income 3,688,413.17$ 3,613,300.81$ 3,087,598.12$ 2,609,907.34$ 2,156,361.40$ 1,327,108.81$ 600,768.75$ 566,081.75$ 600,000.00$ 720,000.00$ Cash Flow - Operating ActivitiesDepreciation 1,088,320.52$ 946,365.67$ 901,300.64$ 819,364.22$ 712,490.63$ 569,992.50$ 542,850.00$ 517,000.00$ 497,000.00$ 432,000.00$ Net Income Adjustments 742,869.64$ 645,973.60$ 615,212.95$ 585,917.09$ 509,493.13$ 443,037.50$ 385,250.00$ 335,000.00$ 238,000.00$ 114,000.00$ Changes in Operating ActivitiesAccounts Recievable 13,500.00$ 21,500.00$ 12,500.00$ (12,500.00)$ (35,000.00)$ (15,000.00)$ (75,000.00)$ (79,000.00)$ (56,000.00)$ (161,000.00)$ Changes in Inventories (80,919.78)$ (56,390.09)$ (55,014.72)$ (53,672.90)$ (52,363.81)$ (51,086.64)$ (49,840.62)$ (48,625.00)$ (203,000.00)$ (176,000.00)$ Other Operating Activities 140,000.00$ 120,000.00$ 55,000.00$ 1,327,000.00$ 106,000.00$ Liabilities 66,997.16$ 71,787.77$ 382,973.25$ (1,452,176.48)$ 51,375.27$ 11,727.58$ 132,768.44$ (92,317.50)$ 48,000.00$ 185,000.00$ Net Cash Flow Operating 5,519,180.71$ 5,242,537.75$ 4,944,570.23$ 2,496,839.27$ 3,342,356.61$ 2,425,779.75$ 1,656,796.56$ 1,253,139.25$ 2,451,000.00$ 1,220,000.00$ Cash Flows - Investing ActivitiesCapital Expenditures (950,000.00)$ (1,250,000.00)$ (1,150,000.00)$ (2,000,000.00)$ (900,000.00)$ (975,000.00)$ (985,000.00)$ (1,028,000.00)$ (1,082,000.00)$ (861,000.00)$ Investments 500,000.00$ 650,000.00$ 500,000.00$ 450,000.00$ 300,000.00$ 250,000.00$ 350,000.00$ 458,000.00$ 924,000.00$ (8,000.00)$ Other Investing Activities -$ -$ -$ 14,000.00$ (20,000.00)$ Net Cash Flows Investing (450,000.00)$ (600,000.00)$ (650,000.00)$ (1,550,000.00)$ (600,000.00)$ (725,000.00)$ (635,000.00)$ (570,000.00)$ (144,000.00)$ (889,000.00)$ Cash Flows - Financing ActivitiesSale and Purchase of Stock (20,000.00)$ (17,303.00)$ (16,945.50)$ (17,135.25)$ (17,349.50)$ (17,940.00)$ (19,007.34)$ (17,257.94)$ (1,098,000.00)$ (469,000.00)$ Net Borrowings 500,000.00$ 625,000.00$ 750,000.00$ 2,500,000.00$ 500,000.00$ 1,761,618.57$ 981,088.73$ 559,817.63$ (308,000.00)$ 23,000.00$ Other Financing Activities 37,500.00$ 20,000.00$ 14,500.00$ 20,000.00$ 27,500.00$ 35,000.00$ 12,000.00$ 25,000.00$ 37,000.00$ (23,000.00)$ Net Cash Flows Investing 517,500.00$ 627,697.00$ 747,554.50$ 2,502,864.75$ 510,150.50$ 1,778,678.57$ 974,081.39$ 567,559.69$ (2,539,000.00)$ (698,000.00)$ Effect of Exchange RateNet Cash Flow 5,586,680.71$ 5,270,234.75$ 5,042,124.73$ 3,449,704.02$ 3,252,507.11$ 3,479,458.32$ 1,995,877.95$ 1,250,698.94$ (232,000.00)$ (367,000.00)$


Appendix E 8 yr. perspective with no funding

Nordstrom, Inc.

Income Statement Values in (000,000)


FY 2015 (Nordstrom,

2016)

FY 2014 (Nordstrom,

2016)Sales and Interest Income 19,012.50$ 18,639.70$ 18,009.38$ 17,400.36$ 16,715.33$ 16,053.46$ 15,343.16$ 14,653.56$ 14,437.00$ 13506Cost of Goods Sold 10,357.26$ 10,204.19$ 10,004.11$ 9,760.11$ 9,615.87$ 9,473.76$ 9,333.76$ 9,241.34$ 9,168.00$ 8406Selling, General and Admin Exp. (SG&A) 4,751.21$ 4,612.82$ 4,522.38$ 4,433.70$ 4,242.78$ 4,060.07$ 4,121.90$ 4,184.67$ 4,168.00$ 3777Total Operating Expenses 15,108.46$ 14,817.02$ 14,526.49$ 14,193.81$ 13,858.65$ 13,533.84$ 13,455.66$ 13,426.02$ 13,336.00$ 12183EBIT 3,904.03$ 3,822.69$ 3,482.89$ 3,206.55$ 2,856.68$ 2,519.62$ 1,887.50$ 1,227.54$ 1,101.00$ 1323Depreciation and Amortization -$ -$ 0Earning before interest and taxes 3,904.03$ 3,822.69$ 3,482.89$ 3,206.55$ 2,856.68$ 2,519.62$ 1,074.00$ 1,012.00$ 1,101.00$ 1323Interest Expense 409.92$ 401.38$ 365.70$ 336.69$ 299.95$ 264.56$ 112.77$ 106.26$ 125.00$ 138Earning Before Taxes 3,494.11$ 3,421.31$ 3,117.19$ 2,869.87$ 2,556.73$ 2,255.06$ 961.23$ 905.74$ 976.00$ 1185Taxes 1,222.94$ 1,197.46$ 1,091.02$ 1,004.45$ 894.86$ 789.27$ 360.46$ 339.65$ 376.00$ 465Net Income 2,271.17$ 2,223.85$ 2,026.17$ 1,865.41$ 1,661.87$ 1,465.79$ 600.77$ 566.09$ 600.00$ 720

Earning Per Share 4.85 3.14 2.78 3.15 4.3Dividends PerShare 1.35 1.15 1.05 1.48 1.1875Special Cash Dividend per Share 0 0 4.85 0Book Value Per Share 18.75 15.95 14.75 16.35 19.07Stock Price 62.5 53.24 52.14 51.15 49.57 48.75 51.15 45.85 83.16 80.54Shares Outstanding 315 320 325 325 335 350 368 371.6 376.4 383.6

Balance Sheet (values in 000's) FY Ending FY2023 FY2022 FY2021 FY2020 FY2019 FY 2018 FY 2017 FY 2016

FY 2015 (Nordstrom,

2016)

FY 2014 (Nordstrom,

2016) Current AssetsCash and Cash Equivalents 1,250,000.00$ 1,100,000.00$ 1,000,000.00$ 1,200,000.00$ 800,000.00$ 700,000.00$ 600,000.00$ 525,000.00$ 595,000.00$ 827,000.00$ Short Term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Net Receivables 365,000.00$ 378,500.00$ 400,000.00$ 412,500.00$ 400,000.00$ 365,000.00$ 350,000.00$ 275,000.00$ 196,000.00$ 2,562,000.00$ Inventory 2,392,913.57$ 2,311,993.79$ 2,255,603.70$ 2,200,588.97$ 2,146,916.07$ 2,094,552.27$ 2,043,465.63$ 1,993,625.00$ 1,945,000.00$ 1,733,000.00$ Other Current Assets 350,000.00$ 350,000.00$ 350,000.00$ 350,000.00$ 350,000.00$ 330,000.00$ 315,000.00$ 290,000.00$ 278,000.00$ 102,000.00$ Total Current Assets 4,357,913.57$ 4,140,493.79$ 4,005,603.70$ 4,163,088.97$ 3,696,916.07$ 3,489,552.27$ 3,308,465.63$ 3,083,625.00$ 3,014,000.00$ 5,224,000.00$ Long Term AssetsLong Term Investments -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Fixed Assets 4,823,701.62$ 4,660,581.27$ 4,502,977.08$ 4,350,702.49$ 4,203,577.28$ 4,061,427.33$ 3,924,084.38$ 3,828,375.00$ 3,735,000.00$ 3,340,000.00$ Goodwill 535,000.00$ 525,000.00$ 515,000.00$ 500,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ 435,000.00$ Intangible Assets -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Other Assets 550,000.00$ 525,000.00$ 475,000.00$ 465,000.00$ 514,000.00$ 246,000.00$ Deferred Asset ChargesTotal Assets 9,716,615.19$ 9,326,075.07$ 9,023,580.78$ 9,013,791.46$ 8,885,493.36$ 8,510,979.59$ 8,142,550.00$ 7,812,000.00$ 7,698,000.00$ 9,245,000.00$

Current LiabilitiesAccount Payable 1,838,538.35$ 1,793,695.95$ 1,749,947.27$ 1,707,265.63$ 1,665,625.00$ 1,625,000.00$ 1,600,000.00$ 1,800,000.00$ 1,740,000.00$ 1,744,000.00$ Short-Term Debt/ Current Portion of Long Term Debt 17,500.00$ 17,500.00$ 17,500.00$ 17,500.00$ 17,500.00$ 17,000.00$ 14,000.00$ 12,000.00$ 10,000.00$ 8,000.00$ Other Current Liabilities 1,088,212.61$ 1,116,115.50$ 1,144,733.84$ 1,174,085.99$ 1,204,190.76$ 1,235,067.45$ 1,210,850.44$ 1,181,317.50$ 1,161,000.00$ 1,048,000.00$ Total Current Liabilities 2,944,250.95$ 2,927,311.44$ 2,912,181.11$ 2,898,851.62$ 2,887,315.76$ 2,877,067.45$ 2,824,850.44$ 2,993,317.50$ 2,911,000.00$ 2,800,000.00$

Long Term Debt 3,497,500.25$ 3,596,401.28$ 3,698,099.00$ 4,108,998.89$ 2,682,775.21$ 2,758,637.75$ 2,836,645.50$ 2,781,025.00$ 2,795,000.00$ 3,123,000.00$ Other Liabilities 631,984.49$ 624,182.21$ 616,476.26$ 608,865.44$ 601,348.58$ 593,924.53$ 586,592.13$ 595,525.00$ 581,000.00$ 372,000.00$ Deferred Liability Charges 580,128.82$ 572,966.74$ 565,893.08$ 558,906.74$ 552,006.66$ 545,191.76$ 538,461.00$ 549,450.00$ 540,000.00$ 510,000.00$ Misc. Stocks -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Minority Interest -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Total Liabilities 7,653,864.51$ 7,720,861.68$ 7,792,649.45$ 8,175,622.69$ 6,723,446.21$ 6,774,821.48$ 6,786,549.06$ 6,919,317.50$ 6,827,000.00$ 6,805,000.00$

Stockholders EquityCommon Stock 2,000,000.00$ 2,000,000.00$ 2,075,000.00$ 2,100,000.00$ 2,150,000.00$ 2,200,000.00$ 2,300,000.00$ 2,400,000.00$ 2,539,000.00$ 2,338,000.00$ Capital Surplus -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Retained Earnings (100,000.00)$ (400,000.00)$ (850,000.00)$ (1,330,000.00)$ (65,000.00)$ (500,000.00)$ (850,000.00)$ (1,540,000.00)$ (1,610,000.00)$ 166,000.00$ Treasury Stock -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Other Equity -$ 77,047.15$ 36,158.11$ 99,275.00$ 88,582.00$ (58,000.00)$ (64,000.00)$ Total Equity 1,900,000.00$ 1,600,000.00$ 1,225,000.00$ 770,000.00$ 2,162,047.15$ 1,736,158.11$ 1,549,275.00$ 948,582.00$ 871,000.00$ 2,440,000.00$ Total Liabilities and Equity 9,553,864.51$ 9,320,861.68$ 9,017,649.45$ 8,945,622.69$ 8,885,493.36$ 8,510,979.59$ 8,335,824.06$ 7,867,899.50$ 7,698,000.00$ 9,245,000.00$



FY 2015 (Nordstrom,

2016)

FY 2014 (Nordstrom,

2016) Net Income 2,271,172.32$ 2,223,848.99$ 2,026,171.24$ 1,865,412.78$ 1,661,873.90$ 1,327,108.81$ 600,768.75$ 566,081.75$ 600,000.00$ 720,000.00$ Cash Flow - Operating ActivitiesDepreciation 1,088,320.52$ 946,365.67$ 901,300.64$ 819,364.22$ 712,490.63$ 569,992.50$ 542,850.00$ 517,000.00$ 497,000.00$ 432,000.00$ Net Income Adjustments 742,869.64$ 645,973.60$ 615,212.95$ 585,917.09$ 509,493.13$ 443,037.50$ 385,250.00$ 335,000.00$ 238,000.00$ 114,000.00$ Changes in Operating ActivitiesAccounts Recievable 13,500.00$ 21,500.00$ 12,500.00$ (12,500.00)$ (35,000.00)$ (15,000.00)$ (75,000.00)$ (79,000.00)$ (56,000.00)$ (161,000.00)$ Changes in Inventories (80,919.78)$ (56,390.09)$ (55,014.72)$ (53,672.90)$ (52,363.81)$ (51,086.64)$ (49,840.62)$ (48,625.00)$ (203,000.00)$ (176,000.00)$ Other Operating Activities 140,000.00$ 120,000.00$ 55,000.00$ 1,327,000.00$ 106,000.00$ Liabilities 66,997.16$ 71,787.77$ 382,973.25$ (1,452,176.48)$ 51,375.27$ 11,727.58$ 132,768.44$ (92,317.50)$ 48,000.00$ 185,000.00$ Net Cash Flow Operating 4,101,939.86$ 3,853,085.94$ 3,883,143.36$ 1,752,344.71$ 2,847,869.11$ 2,425,779.75$ 1,656,796.56$ 1,253,139.25$ 2,451,000.00$ 1,220,000.00$ Cash Flows - Investing ActivitiesCapital Expenditures (950,000.00)$ (1,250,000.00)$ (1,150,000.00)$ (1,000,000.00)$ (900,000.00)$ (975,000.00)$ (985,000.00)$ (1,028,000.00)$ (1,082,000.00)$ (861,000.00)$ Investments 500,000.00$ 650,000.00$ 500,000.00$ 450,000.00$ 300,000.00$ 250,000.00$ 350,000.00$ 458,000.00$ 924,000.00$ (8,000.00)$ Other Investing Activities -$ -$ -$ 14,000.00$ (20,000.00)$ Net Cash Flows Investing (450,000.00)$ (600,000.00)$ (650,000.00)$ (550,000.00)$ (600,000.00)$ (725,000.00)$ (635,000.00)$ (570,000.00)$ (144,000.00)$ (889,000.00)$ Cash Flows - Financing ActivitiesSale and Purchase of Stock (20,000.00)$ (17,303.00)$ (16,945.50)$ (17,135.25)$ (17,349.50)$ (17,940.00)$ (19,007.34)$ (17,257.94)$ (1,098,000.00)$ (469,000.00)$ Net Borrowings 500,000.00$ 625,000.00$ 750,000.00$ 650,000.00$ 500,000.00$ 2,000,000.00$ 981,088.73$ 559,817.63$ (308,000.00)$ 23,000.00$ Other Financing Activities 37,500.00$ 20,000.00$ 14,500.00$ 20,000.00$ 27,500.00$ 35,000.00$ 12,000.00$ 25,000.00$ 37,000.00$ (23,000.00)$ Net Cash Flows Investing 517,500.00$ 627,697.00$ 747,554.50$ 652,864.75$ 510,150.50$ 2,017,060.00$ 974,081.39$ 567,559.69$ (2,539,000.00)$ (698,000.00)$ Effect of Exchange RateNet Cash Flow 4,169,439.86$ 3,880,782.94$ 3,980,697.86$ 1,855,209.46$ 2,758,019.61$ 3,717,839.75$ 1,995,877.95$ 1,250,698.94$ (232,000.00)$ (367,000.00)$


Appendix F - 5 yr. with 20 decrease in sales - Income and Cash Flow Statements

Nordstrom, Inc.

Income Statement Values in (000,000) FY 2018 FY 2017 FY 2016 FY 2015 (Nordstrom, 2016)FY 2014 (Nordstrom, 2016)

Sales and Interest Income 11,800.81$ 12,621.19$ 13,498.60$ 14,437.00$ 13,506.00$ Cost of Goods Sold 7,860.41$ 8,274.12$ 8,709.60$ 9,168.00$ 8,406.00$ Selling, General and Admin Exp. (SG&A) 3,498.31$ 3,682.43$ 3,959.60$ 4,168.00$ 3,777.00$ Total Operating Expenses 11,358.72$ 11,956.55$ 12,669.20$ 13,336.00$ 12,183.00$ EBIT 442.09$ 664.64$ 829.40$ 1,101.00$ 1,323.00$ Depreciation and Amortization -$ -$ -$ Earning before interest and taxes 442.09$ 1,074.00$ 1,012.00$ 1,101.00$ 1,323.00$ Interest Expense 46.42$ 112.77$ 106.26$ 125.00$ 138.00$ Earning Before Taxes 395.67$ 961.23$ 905.74$ 976.00$ 1,185.00$ Taxes 138.48$ 360.46$ 339.65$ 376.00$ 465.00$ Net Income 257.19$ 600.77$ 566.09$ 600.00$ 720.00$

Annual Cash Flow Statement (000's)Period Ending 1/31/2019 1/31/2018 1/31/2017 1/31/2016 1/30/2015Net Income 257,185.05$ 600,768.75$ 566,087.50$ 600,000.00$ 720,000.00$ Cash Flow - Operating ActivitiesDepreciation 466,592.50$ 491,150.00$ 517,000.00$ 497,000.00$ 432,000.00$ Net Income Adjustments 443,037.50$ 385,250.00$ 335,000.00$ 238,000.00$ 114,000.00$ Changes in Operating ActivitiesAccounts Recievable (15,000.00)$ (75,000.00)$ (79,000.00)$ (56,000.00)$ (161,000.00)$ Changes in Inventories 87,768.13$ 92,387.50$ 97,250.00$ (203,000.00)$ (176,000.00)$ Other Operating Activities 140,000.00$ 120,000.00$ 55,000.00$ 1,327,000.00$ 106,000.00$ Liabilities 11,727.58$ 132,768.44$ (92,317.50)$ 48,000.00$ 185,000.00$ Net Cash Flow Operating 1,391,310.75$ 1,747,324.69$ 1,399,020.00$ 2,451,000.00$ 1,220,000.00$ Cash Flows - Investing ActivitiesCapital Expenditures (975,000.00)$ (985,000.00)$ (1,028,000.00)$ (1,082,000.00)$ (861,000.00)$ Investments 250,000.00$ 350,000.00$ 458,000.00$ 924,000.00$ (8,000.00)$ Other Investing Activities -$ -$ -$ 14,000.00$ (20,000.00)$ Net Cash Flows Investing (725,000.00)$ (635,000.00)$ (570,000.00)$ (144,000.00)$ (889,000.00)$ Cash Flows - Financing ActivitiesSale and Purchase of Stock (17,940.00)$ (19,007.34)$ (17,257.94)$ (1,098,000.00)$ (469,000.00)$ Net Borrowings 1,761,618.57$ 981,088.73$ 559,817.63$ (308,000.00)$ 23,000.00$ Other Financing Activities 35,000.00$ 12,000.00$ 25,000.00$ 37,000.00$ (23,000.00)$ Net Cash Flows Investing 1,778,678.57$ 974,081.39$ 567,559.69$ (2,539,000.00)$ (698,000.00)$ Effect of Exchange RateNet Cash Flow 2,444,989.33$ 2,086,406.07$ 1,396,579.69$ (232,000.00)$ (367,000.00)$


Appendix G - With a 20 percent increase in sales - Income and Cash Flow Statements.

Income Statement Values in (000,000) FY 2018 FY 2017 FY 2016FY 2015

(Nordstrom, 2016)FY 2014

(Nordstrom, 2016)

Sales and Interest Income 17,316.65$ 16,298.02$ 15,339.31$ 14,437.00$ 13,506.00$ Cost of Goods Sold 10,259.34$ 10,107.72$ 9,626.40$ 9,168.00$ 8,406.00$ Selling, General and Admin Exp. (SG&A) 4,246.40$ 4,289.29$ 4,184.67$ 4,168.00$ 3,777.00$ Total Operating Expenses 14,505.73$ 14,397.01$ 13,811.07$ 13,336.00$ 12,183.00$ EBIT 2,810.91$ 1,901.01$ 1,528.24$ 1,101.00$ 1,323.00$ Depreciation and Amortization -$ -$ -$ Earning before interest and taxes 2,810.91$ 1,074.00$ 1,012.00$ 1,101.00$ 1,323.00$ Interest Expense 295.15$ 112.77$ 106.26$ 125.00$ 138.00$ Earning Before Taxes 2,515.77$ 961.23$ 905.74$ 976.00$ 1,185.00$ Taxes 880.52$ 360.46$ 339.65$ 376.00$ 465.00$ Net Income 1,635.25$ 600.77$ 566.09$ 600.00$ 720.00$

Appendix H - Time Value of Investment and Risk Analysis

Sales Per Square Feet (2015)Square feet needed for planned expansionPlanned Revenue 729,011,534.43$ 729,011,534.43$ 729,011,534.43$ Planned Online Sales 3,835,800,000.00$ 3,835,800,000.00$ 3,835,800,000.00$ Differential in four wall sales 1,666,000,000.00$ 1,666,000,000.00$ 1,666,000,000.00$ Total Added Revenue 2020. 6,230,811,534.43$ 6,230,811,534.43$ 6,230,811,534.43$

Combined Same Facility Sales with enhanced and expansion sales 24,434,623,190.68$ 18,628,407,165.68$ 22,087,894,659.43$ Projected Sales vs 2020 Sales Goals 4,434,623,190.68$ (1,371,592,834.32)$ 2,087,894,659.43$

Variance of High to Low Estimates 5,806,216,025.00$ Percentage of risk of failure -24%


Appendix I – Projected Future Needs to Generate Revenue

NordstromProjected Future Needs to generate revenue

FY Sales Nordstrom Stores and .com(2015) in value of (000,000) 9,933.00$ Total Square Feet (2015) in value of (000,000) 21.36Sales Per Square Feet 464.98$ FY Sales Nordstrom Rack (2015) in value of (000,000) 4,065.00$ Total Square Feet (2015) in value of (000,000) 7.25Sales Per Square Feet 560.84$ Total Company Sales 13,998.00$ Sales Per Square Feet 489.27$ Proposed Sales Goal 20,000.00$ Proposed Square Feet Needed 40.88Minus 2015 square feet used 28.61Square Feet Needed based on average sales 12.27

Average Square Footage Nordstrom 176545Average Square Footage Nordstrom Rack and others 35881

Planned Stores (2016-2018) :Nordstrom 6Square Feet Needed value of (000,000) 1.06Estimated Added Revenue (value of 000,000) 594.09$ Nordstrom Rack (estimated) 42Square Feet Needed value of (000,000) 1.51Estimated Added Revenue (value of 000,000) 845.20$

Online Sales Overall in 2015 (Value of 000,000) 2,832.00$ Expected Online Sales (Value of 000,000) 6,667.00$ Expected 4 wall sales (Value of 000,000) 13,333.00$ Minus Current Sales 11,167.00$ Differential 2,166.00$ Minus 2016-2018 openings 726.71$

Needed Square Footage to meet goals (value of 000,000) 1.49


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