nordstrom report slides
TRANSCRIPT
NORDSTROM INC.
- Nordstrom’s Inventory Turnover from 2008 to 2010
- Inventory Cost Flow and Inventory Valuation Policy
- A Comparison with Nordstrom’sCompetitors
-Total Sales and Net Income
-Current Assets
-Current Liabilities
Nordstrom’s Inventory TurnoverInventory Turnover = COGS / Average
Inventory
In 2010 it was 5.93 from [5,328M / (898M+900M / 2)]
In 2009 it was 5.84 from [5,417M / (900M+956M / 2)]
In 2008 it was 5.66 from [5,526M / (956M+997M / 2)]
2010 62 days
2009 62.5 days
2008 65 days
A Look at the Competition
2010 62 days
2009 62.5 days
2008 65 days
Nordstrom Inc. Saks Fifth Avenue Inc.
2010 151 days @ 2.42
2009 140 days @ 2.6
2008 171 days @ 2.14
At a glance Nordstrom consistently keeps inventory for fewer days than
its closest competitor (Saks Fifth Avenue).
0
50
100
150
200
2008 2009 2010
Nordstrom Saks
To account for its billion dollar annual sales Nordstrom uses a perpetual inventory system to record
merchandise sold
Inventory Cost Flow and Inventory Valuation Policy
Nordstrom values inventory at lower of cost or market value (LCM)
Nordstrom uses the weighted average cost method
The Weighted Average Cost Method: Cost of Goods Available for Sale /
Total Units Available for Sale = Weighted Average Cost
Total Sales and Net Income
Year 2010 2009
Total Sales 8,627M 7,573M
Net Income 441M 401M
Nordstrom Inc.
Improved inventory turnover rate generated more sales resulting in a higher net income for 2010 than in 2009
The net income is a result of [total revenue - operating expenses and cost of goods sold]
Year 2010 2009
Profit Margin 5% 4.7%
Profit Margin = Net Income / Total Revenue
Total Sales and Net Income Cont’d
Year 2010 2009
Total Sales 8,627M 7,573M
Net Income 441M 401M
Nordstrom Inc.
0
2,250
4,500
6,750
9,000
2009 2010
Total ExpenseNet Income
Current Assets Year 2010 2009 2008Cash 795M 72M 358M
Net Receivables 2,273M 2,152M 1,956MInventory 898M 900M 956M
Other Current Assets 88M 93M 78MTotal Current Assets 4,052M 3,217M 3,361M
Total Current Assets
3%
28%
67%
2%
2009 2008
2%
29%
58%
11%
CashNet ReceivablesInventoryOther Current Assets
2010
2%22%
56%
20%
Current Assets
Current Liabilities
Year 2010 2009 2008
Accounts Payable 1,062M 777M 882M
Debt 456M 299M 261M
Other Current Liabilities 596M 525M 492M
Total Current Liabilities 2,014M 1,601M 1,635M
0
525
1,050
1,575
2,100
2010 2009 2008
Total Current Liabilities
Current Liabilities2010 2009 2008
60%8%
32%
Accounts PayableDebtOther Current Liabilities
33%
19%
49%
30%
16%
54%
Cash Flow Statement Explained
So What is a Cash Flow Statement?
A financial statement explaining the flow of cash in and out of a business
When a firm makes an investment or purchases supplies and equipment the cash amount decreases
Increases in cash come from 1) net earnings 2) decreases in accounts receivable 3) increases in accounts payable and
4) increases in other liabilities
Cash Flow Statement
Year 2010 2009 2008
Net Cash from Operating Activities 1,251M 848M 161M
Net Cash from Investing Activities -541M -792M -270M
Net Cash from Financial Activities 13M -342M 64M
Net Change in Cash 723M -286M -45M
Cash at Beginning of Period 72M 358M 403M
Cash at End of Period 795M 72M 358M