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Operator
Hello and welcome to the Nordstrom first quarter 2006 earnings release conference call.
At the request of Nordstrom's, today's conference call is being recorded.
All lines will be in a listen only mode until the question and answer session. [OPERATOR INSTRUCTIONS] I would like to introduce Mr. R J Jones, Manager of Investor Relations for Nordstrom.
You may begin.
- Manager, IR
Good afternoon.
Everyone.
And thank you for joining us on the call today.
On the line with me this afternoon are Blake Nordstrom, President of Nordstrom Inc., Pete Nordstrom, President of Merchandising, and Mike Koppel, Executive Vice President and Chief Financial Officer.
This afternoon, Mike will lead off with a review of our first quarter results.
Blake will make a few concluding remarks, and then we'll open it up for questions.
Please note that any forward-looking statements we make in our remarks this afternoon, should be considered in conjunction with the cautionary statements contained in our SEC filings.
Now I'll turn the call over to Mike.
- EVP, CFO
Thanks, R J and good afternoon, everyone.
We are pleased to report another quarter of improving operating performance.
For the first quarter, earnings per share increased 26%, to $0.48 versus $0.38 per share last year and ahead of expectations.
Our pre-tax margin rose to 11.9%, 140 basis points higher than last year.
Top-line results consistently exceeded our low single digit same-store sales plan, which drove incremental leverage on both the gross profit and the operating expense lines of the P&L.
Net income for the quarter was 131.2 million, compared to to 104.5 million last year, also a 26% increase.
Sales momentum built throughout the quarter, with all of our geographic regions and most major merchandise categories posting same-store sales increases.
Total sales grew 8% to 1.8 billion, and same-store sales increased 5.4%.
Our strongest regional performances were in the Southern states and Northwest, and our best performing merchandise divisions were Accessories, Cosmetics, and Mens Apparel.
The 40 basis point increase in gross profit for the quarter was ahead of the Company's expectations.
Merchandise margin versus last year was flat, which was in-line with our plans.
We experienced over plan markdowns in Women's Apparel, that were offset by strong sales in margin across other major categories.
Above planned sales leverage on buying and occupancy expense created a rate expansion.
This expansion was partially offset by an additional $3 million, due to stock option expense, which had a 15 basis point impact on our gross profit rate.
As for SG&A, we gained 48 basis points of rate improvement versus the prior year.
Variable expenses were in-line with sales growth.
Rate improvement was driven by better than planned fixed costs, as well as leverage on above planned sales.
SG&A also includes $4 million in stock option expense, which had a 25 basis point impact on the SG&A rate.
Credit card revenue, which is included in the other income line of the P&L, increased 7.5 million for the quarter, as a result of growth in our co-branded Visa card program.
In addition, the increase in other income benefited from gift card breakage and foreign exchange gains totaling 3.6 million combined.
Net interest expense of 10.8 million, was 1.9 million better than last year primarily due to higher interest income.
We repurchased 5.3 million shares of stock during the quarter, for a total of $213 million, exhausting the remaining balance on our most recent authorization.
The result in reduction in weighted average shares outstanding was not significant enough to impact earnings per share this quarter.
Inventory levels were in-line with sales, resulting in an improvement in our turnover of 6% for the quarter.
On a comparable basis total ending inventory per square foot was flat with last year.
Total debt at quarter end was 932 million, and total capital was 3 billion, resulting in a debt to total cap ratio of 31.5%, compared to 35.2% at this time last year.
As we've discussed previously, our current dividend policy aims to maintain a pay out ratio of 18 to 20%, and a yield that is approximately 1%.
Our quarterly dividend of $0.105 currently meets these target ranges.
As we consider our strategic options for deploying capital, we're fortunate to be in a position of flexibility.
During the quarter, Standard & Poors raised our long term debt ratings from A- to A, based on their positive appraisal of the strength of our balance sheet and operating model.
In light of this upgrade we continue to review our capital structure.
In October this year, our $300 million private label securitization will mature.
In spring of 2007, our second securitization of 200 million, which is currently off balance sheet will mature as well.
We are evaluating alternatives to combine these two separate financings.
As part of that review, we are looking at the possibility of increasing leverage on the co-branded Visa and private label credit card receivables portfolio.
There are several possible uses for the cash generated by these alternatives, and we will be reviewing each of them diligently to determine the most appropriate course of action.
We will be providing updates as we progress.
Now I'd like to discuss our plans for disclosing the Company's progress on Return On Invested Capital, or ROIC.
Over the past three years, we have used ROIC as an internal measure to assess our performance.
In 2005, it became an incentive element for our executive leadership team.
ROIC is an important long term metric supporting our efforts to create shareholder value, and we believe it is important to share our progress.
Beginning with our first quarter 2006 10-Q, we will be providing this metric along with the appropriate reconciliation consistent with Reg.
G guidelines.
Our updated earnings outlook for the full year is $2.24 to $2.32 per share, up from $2.15 to $2.23 per share.
Including the $0.06 impact of stock option expense in this year's figures, this represents a 13 to 17% year-over-year increase.
Our low single digit same-store sales expectation is unchanged for the remainder of the year.
Back in February, when we gave our initial outlook for the year, we included all of our stock option expense in SG&A.
Our merchant team are recipients of stock option grants, and as such, the related expense is recorded as part of buying costs.
In our recently filed 10-K, for 2005, we updated our projection for classification of stock option expense with components recorded in both buying and occupancy and SG&A.
As a result, improvement in gross margin is now estimated to be 10 to 20 basis points for the year, down from our original expectation of 25 to 35 basis points.
Our initial SG&A annual expense outlook was for 30 to 40 basis points of improvement on a comparable basis, and flat year-over-year after including options.
We now expect SG&A expense rate improvement of 50 to 60 basis points versus last year, including option expense, due to both sales leverage on fixed expenses, and the shift of 40% of our expected option expense into gross profit.
Other income is anticipated to increase 30 to 35 million, and interest expense is assumed to improve 7 to 9 million.
For the second quarter, we are planning low single digit same-store sales, and expect earnings in the range of $0.59 to $0.64 per share.
Now I'll turn the call over to Blake for some additional remarks.
- President
Thanks, Mike.
And good afternoon, everyone.
Before opening it up for questions, I'd like to make a few comments on this past quarter, and give an update on a few things we're focusing on this year.
We are pleased to report the results of the first quarter, which show steady progress toward our goal, of both increasing same-store sales, and improving operating efficiency.
By controlling expenses, and leveraging above plan sales, our SG&A expense rate fell to 27.7%, which is the third consecutive year of expense rate decline in the first quarter.
While we continue to believe there is room to improve, it's moving in the right direction.
Our top priority continues to be to gain market share by earning more of our customer spend in the categories of merchandise we offer, and to increase our presence where our customers shop.
At the center of our strategy, is our unwavering commitment to continuously enhance the experience that each customer has in our stores.
Success for us will always begin and end with how well we connect with our customers, by offering compelling merchandise combined with personalized service.
Our sales people continue to use personal book to improve upon and develop more one-on-one customer relationships.
Our merchants continue to leverage perpetual inventory tools to make better informed buying decisions.
As we gain more insight over time, we are able to focus our resources in a way that is most meaningful to our target customers.
Along these lines, Women's Apparel represents an opportunity for us to gain market share.
After combining subjective feedback from the sales floor with objective demographic information about our customers, we identified a strategy to better meet our customer's style, price, fit, and occasion needs.
Pete Nordstrom has previously outlined adjustments we made to our women's leadership structure, in order to facilitate more streamlined decision-making.
Currently, our women's team is finalizing merchandise plans for the fall season based on this strategy.
We are excited about the upside potential that lies ahead in our women's business, and look forward to keeping you informed, as things start to develop in the back half of the year.
Through our website and catalogues, we make every effort to strengthen our relationship with our customers by giving them increased access to us.
Multi-channel shoppers continue to be our most loyal customers.
The 2 to 3 year process to integrate our online and full-line store inventory systems, is ongoing to create a more seamless shopping experience.
Designer merchandise has been an essential part of our offering as a fashion specialty retailer for a long time now.
We define our Designer business as carrying the most aspirational and coveted brands at the very top of the luxury scale.
While elements of Designer are present in all of our full line stores, we are working to enhance our Apparel, Footwear, and Accessories offering in roughly a quarter of our stores.
The importance of Designer merchandise to our customers and our stores cannot be understated, in terms of creating inspiration and excitement for newness across all categories.
Competitively and financially, we remain well positioned for new store growth.
Many expansion opportunities continue to arise in the retail landscape for us, and we will evaluate each of them individually for their strategic fit and return potential.
We regularly review our dividend and share repurchase programs with a committment to maximizing shareholder value.
With the completion of our most recent $500 million authorization, we look forward to discussing future repurchase considerations with our Board.
As we open the call up for questions, on behalf of the team at Nordstrom, we would like to take this opportunity to extend our heartfelt appreciation to our retiring Board members.
We would like to thank Al Osborn for his 18 years of valuable service as a member of the Board.
We would also like to thank John and Bruce Nordstrom, both 40-year plus members of the Board, and part of the third generation of Nordstrom family, for their dedicated service to customers, employees, and shareholders.
The advice and guidance from the Board of Directors is valued by all of us.
The executive team and the Board will continue to reach out to our retiring Board members as a Resource as the Company moves forward.
With that, we would like to answer any questions that you may have.
Operator
Thank you.
Our first question comes from Deborah Weinswig.
- Analyst
Thank you, and congratulations on a great quarter.
- President
Thank you.
- Analyst
Should we look at your comp guidance for the second quarter as conservative, based on your most recent quarterly comps, or is there something that we should figure into, you know, the second quarter that would be specifically impacting it?
- EVP, CFO
Deborah, this is Mike.
You know, our guidance on comp has been very consistent with the way we've shared it in the past.
We've shared what our internal plans are, and how we manage the business, and that's the way that we're going to continue to do it, and then as we release the monthly sales, I would encourage you to monitor our performance against that, and that should be an indicator of how the quarter, the direction that the quarter should head to.
- Analyst
I just wanted to make sure I wasn't missing anything there.
- EVP, CFO
No.
- Analyst
Can you also please provide us with an update on markdown optimization which I believe you went live with at the end of October?
What's been different positively and negatively?
- EVP, CFO
Well, you know, frankly at this point, I think that we're still going through a fairly deep learning process.
You know, our business has a number of different categories to it, and each category is unique.
We have found in some areas that it's helped us make better decisions, and in other areas, we're still learning how to maximize the use of the tool, so I would say at this point it's still a work in progress.
Thanks, Deborah.
Next question?
Operator
Thank you.
Our next question comes from Bob Buchanan.
- Analyst
Hello?
- EVP, CFO
Hi, Bob.
- Analyst
Hi, guys.
I just want to extend my appreciation to Bruce for just the tremendous job that he's done for your Company over the years, and just couldn't be a finer operator, and so my appreciation to him.
- President
Thank you.
We'll relay that to him.
- Analyst
Well thank you, thank you very much.
He's a good guy and he's brought up three good sons.
Let me just mention or just ask, with regard to Jeff Kalinsky and the whole evolution upscale, more toward Designer price points, if you could just update us with how that important initiative is going?
- President, Merchandising
Sure.
This is Pete.
We've always been in the Designer business.
I think it would be incorrect to perceive that with the addition of Jeffrey on board that something really changed, but what we've been able to do with Jeffrey there is create a lot more focus around the agenda, and make sure that we're lining up better across categories.
You know, we would have maybe Designer in a shoe department, but not in an Apparel department or so on across multiple different stores, and what we've tried to do is identify a more succinct number of stores that across all categories we have a very credible Designer offering, and Jeffrey has helped us in a lot of ways.
It's really been terrific working with him.
He's great in the market.
He's got good relationships.
There has been some help there.
He also has a fantastic eye just purely as a buyer.
He's got great instincts as a merchant, and he's really good at the selling part of the business.
We've actually had him in our stores working with our sales people, literally doing selling-type seminars if you will, and that's been extremely valuable as well.
I think all of our people in the different merchandising areas that get to work with him, and mostly that's in the Designer parts of the businesses are really embracing his input.
He's a great partner for us, and I think it enables us to continue to move forward.
- Analyst
Sounds good, and then also, wanted to ask on the customer service regard.
So important along with trend identification and item merchandising.
I know the personal book has helped you there.
Just an update as to what some of the initiatives are, to take you guys even from your level to the next level, in terms of taking care of that customer.
- President
Do you want me to take that one, Mike?
- EVP, CFO
Blake, please!
- President
Okay.
You know, we've had really good success with personal book, and again I think it's allowed us to be a little bit more scientific in our approach to customer data, and just do it in a more consistent fool-proof way, and so many of our sales people that are aggressive about this, have really embraced the technology and what it can do for them, so you can see just individual performances in many cases, it's really improved quite a bit.
So I think our main focus there, aside from just being comfortable with using the new tools, which I think we've made a lot of progress on, is now literally being able to track the improvements in productivity, and not just amongst the people that have embraced it, or already the high achievers, but literally across-the-board in our Company.
So I think that we've dialed up the expectations, and how we're holding people accountable for just pure productivity, and we're encouraged by where that's taken us so far.
- Analyst
Okay, thanks.
Thanks again.
- President
Thanks, Bob.
Operator
Thank you.
Our next question comes from Michael Exstein.
- Analyst
Good afternoon, gentlemen.
Just following up on what Bob said, you know, I think it's incredibly classy, what you did in terms of spotlighting the departing directors, so I think that's terrific.
- President
Thank you.
- Analyst
And in terms of the business, I understand strategically why you'd want to go after the Designer business, but I guess when we watch some companies that are very heavily Designer skewed, it's sometimes pretty tough to create a profitable model.
And I'm wondering how you're sort of doing the seesaw between you know, the image and the profitability that's inherent in that push.
- President
It's all about balance.
You know, and we're not radically changing the percentage of our total business that's done in these businesses.
We're just improving it and making it better and improving the profitability, and the synergy there.
And we are experiencing some growth that's outpacing some of the rest of our categories, but I don't think that it would be fair to say that we've changed the collective balance of our offering.
We really haven't.
I think that we've just been able to be more focused on whatever the agenda is.
So I understand what you're saying.
We're definitely mindful of that.
We know that we need to deliver results, and nothing that we're working on in merchandising is at all at odds in compromising our quest for outcomes and results.
- Analyst
I'm not doubting that for a minute.
Just interested in how you're going to balance that, and how broad you want to make the initiative long term.
- President
Well I think the customer will determine that.
As we offer more goods to the customer, they will react and, you know so far, and I'm sure we're not the only retailer, you've seen a lot of acceptance and desire by the customer, and I'm talking about a large amount of customers that are interested this kind of product, so we've had a lot of success there, and that's why we've applied energy to it.
As time goes on, we will continue to adjust as the customer demand adjusts, but it will always have a really solid place in our overall operating, and all I can speak to again is the balance and making sure that we're nimble enough to react that way.
- Analyst
And I assume that the vendors are more than embracing you?
- President
Well, yes.
I think that for the most part but there's, you know, always some caution there too.
I think well all of those luxury vendors realize that a lot of the demand for their product is because there's scarcity of supply, and you can't buy it everywhere, and I think to their credit, they want to make sure if they are going to open any retailer with this, they want to make sure it's an environment that shows their product well, that's being sold and presented by sales people that are professional and know what they're doing, and that we can as a Company make a long term committment.
There's a fair amount of loyalty that goes into being in that business, because there are up and down seasons, so we're earning the confidence and trust as we go along, and we're encouraged by the progress we've made.
- Analyst
Great.
Thanks so much.
- President
Thanks, Michael.
Operator
Thank you.
Our next question comes from Michelle Tan.
- Analyst
Hi, guys.
Just a couple of questions.
First on the full year guidance, taking it up by $0.09 is that really just a first quarter beat, and then the share repurchase coming early?
- EVP, CFO
It's primarily the results from the first quarter, and maintaining our operating plans for the remainder of the year.
- Analyst
Okay, great.
And then, just looking at some of the consolidation that's going on in the market, have you seen any benefits yet in the Northeast, from some of the uncertainty with some of your competitors there?
- EVP, CFO
In terms of store performance?
- Analyst
Yes.
- EVP, CFO
At this point, I wouldn't say that there is a difference that's causing a noticeable impact to our business in the Northeast at this point.
- Analyst
Okay, great.
Thank you.
And then just one final question.
On the changes that you've talked about in the Women's assortment, is there anything specific that you can point us to at this stage, for what we should start looking for in the stores as we get closer to the fall season?
Thank you very much.
- EVP, CFO
Pete?
- President, Merchandising
Yes, this is Pete.
I don't think so, because I think to explain it in that way might imply that there's more dramatic changes happening, than really are necessary.
It's a pretty subtle evolution.
I think what we've been able to do is quantify much better the size of the prize with the market share and the different constituents that we're going after with the customer groups that we're serving, and so you know, it takes awhile for these things to change and we just at the beginning of the year have implemented the team and the structure to be able to execute against the strategy that we're working on, so as you know, there's going to be several months down the road, until those buys are able to be changed in any measurable way, so I think as we get closer to it, and we actually have some results to talk about, that might be the appropriate time to speak to it.
All I can say is on the whole, all this is done in the spirit of how we can improve our business and our market share with our core customer.
- Analyst
Great.
Thanks, guys.
- EVP, CFO
Thanks Michelle.
Operator
Thank you.
Our next question comes from Barbara Wyckoff.
- Analyst
Hi, everyone.
Great quarter.
- President
Thanks, Barbara.
- Analyst
Can you talk about the Junior and the Contemporary business, Brass Plum and TBD?
Tough comparisons coming up, denim, Juicy, those kinds of classifications.
How are you planning to manage through the shifts in fashion and, you know, do you see anything on the horizon that could be, you know, of the same magnitude of these kinds of businesses?
- President, Merchandising
Well, those businesses have been still relatively stronger compared to the other businesses in the contemporary segment.
In particular, there has been pretty strong for us, and I think you're right.
There are some things that we're going to be going against, but that's the beauty of women's fashion.
It evolves and it changes and as other things become outdated, new things become important and the whole trick for us, is to make sure that our inventory positions are in a place where we can react and respond to that, that we have buyers that are out there in the market, and they are experts at it, and they are able to identify trends, so I mean these are the things we talk about all the time, and while we don't nail it perfectly, it definitely is a cultural aspect of our Company, and what we're trying to do, and being able to be nimble with that, so I really don't have a lot specifically other than to say, while the denim business by the way is not on the wane, it's still very, very strong, but as other things change, we have never seen any decrease in the newness that's coming up, that's going to allow us to continue to up the volume.
- Analyst
Okay.
And then have you seen any kind of migration from a boot cut kind of a silhouette to a skinnier jean so far?
- President, Merchandising
That's a great question!
We've been talking about that as we're out in the stores, and yes, it's starting.
A lot of it has to do with the way an individual sales person or crew adopts it, and says here is what's coming up, and here is what's new.
Obviously if you are a fashion oriented customer and you're aware of it, you've seen what's happening in magazines or television or just paying attention to fashion, but as it starts trickling down to the rest of customers, yes, it's starting to happen, but you know, it's going to be, it will not be an overnight switch.
I think there will be an evolution into those silhouettes changing, and we're scrambling to make sure that we're right there when that happens.
- Analyst
Great.
Thanks.
Good luck.
- President
Thank you, Barbara.
Operator
Thank you.
Our next question comes from Stacy Turnof.
- Analyst
Good afternoon.
Following up on Michelle's question regarding merchandising changes, without you guys going into too much detail, would you be able to share whether it's going to be new products that are coming in in the fall, or is it more so that you're ordering product differently store by store in that Women's area?
- President, Merchandising
Probably be more a version of ordering products somewhat differently literally across the brands that we do a lot of business with, in targeting the times of things that we can do best, and we're really buying across different needs states for the customer, related to fit and price and occasion and style, so along, you know, on the occasion part, that's a big part of it, and it really can literally be broken out to casual clothes versus work clothes, and as this has evolved over the years, and work clothes don't literally just mean suits, but a lot of other things.
So again, right now, I think it would be premature to talk about it, but I think that we're pretty clear on the balance that we need going forward in the foreseeable future, and that does involve some adjustments to where we've been in the past couple years.
- Analyst
But the work apparel will be the focus?
- President, Merchandising
I'm sorry?
- Analyst
The wear to work apparel?
- President, Merchandising
Well wear to work apparel is part of it, but when I talk about buying for occasion that's part of it, and so is the casual part of it too.
We've had some success with the premium denim and maybe some more of the casual parts of the business, as have others, but in a lot of ways it also reflects there's a lot of opportunity there.
There's growth and there's probably more than we've been able to maximize, so I think that they're both valid areas for us to be able to improve.
- Analyst
One more question which is, could you comment on how some of your Designer shoe area is doing, since that's been one of the first areas that you started to roll out higher end products?
- President, Merchandising
Been pretty darn strong.
Customers like shoes!
And we like selling them, so it's a been really great for us to be able to layer on some new businesses in certain stores, and we have had some improved distribution there, and the customers are definitely embracing a lot of that real luxury footwear that we've started carrying, so it's been a solid, solid part of our business.
- Analyst
Great thanks.
Keep up the good work.
- President, Merchandising
Thank you.
- President
Thanks, Stacy.
Operator
Our next question comes from Dana Cohen.
- Analyst
Following up on the fashion trend, just the whole, just curious about your thoughts, the whole trend to more tighter bottoms, looser tops.
You know, how do you see that evolving in the fall, and as well, you know, do you think it's a trend that can be accepted by the consumer, not sure it's a, you know, universally good looking trend?
- President, Merchandising
That's another good question, much to the point of the previous questions about the straight legged jeans.
And I think it remains to be seen.
You know, we've sold a fair amount of that, but it's been to a very fashion-oriented customer.
It hasn't necessarily been to the masses, so all of those things have to be adopted in a way and adapted in a way where it creates volume, so it's hard to say right now.
You know, we've lived through these cycles before.
If you're old enough like we are, we've seen some of these things come and go, so we know that there's business to be done there, but you're right.
That really speaks to the fit part of the business, and some of that stuff isn't going to fit everyone perfectly, so we just have to make sure that we maintain the balance in all ways.
- Analyst
So it sounds to me that for now, it's more on the edge than moving to the mainstream?
- President, Merchandising
I guess it depends on how you define edge, but that's probably fair to say, that it has more, more traction with the real fashionist, than probably the more mainstream customer at this point.
- Analyst
And then, Mike, can you just elaborate about your comment about the leverage, and the potential opportunity with the Visa portfolio?
Just give us a better sense of your thoughts there, and what you might do with the cash?
- EVP, CFO
Sure, Dana.
Well I think that we've been in the past clear about our priorities over capital, and that is obviously we want to reinvest back in the business first and take care of our operating needs, and then we look at then we look at the alternatives to return it back to the shareholders, and you know, we've done that pretty successfully over the last year or so and as we look at these two financings maturing and we look at the quality of our balance sheet, there obviously is an opportunity here to potentially lever up those receivables a little bit, and, you know, we're going to look at what the possible uses of that cash will be over the next year.
Obviously that won't happen until next spring, but we felt that it was important to let everybody know that we're going to go through this transition over the next several quarters, and understanding how we want to use that capital.
And as we know more and we're more clear about it, based on the needs as they come in the future, we'll update you on that.
- Analyst
But is this sort of replacement debt, or is it incremental debt, if you're paying down some traunches?
- EVP, CFO
Well the 500 million would be replacement, and then to the extent that we lever above that, that would be additional.
- Analyst
Great.
Thanks so much.
- EVP, CFO
Thanks, Dana.
Operator
Thank you.
Our next question comes from Christine Augustine.
- Analyst
Hi.
- EVP, CFO
Hi, Christine.
- Analyst
Thank you.
The first question I wanted to ask you was you mentioned in your prepared remarks, that you had better control, or better than planned fixed cost in the SG&A.
Is that the IT spending?
- EVP, CFO
An element was, a small part of it was IT.
We also continue to have some efficiencies in our distribution area, and we also had some efficiencies in our direct business.
You know the combination of several of those factors helped us improve our fixed costs.
- Analyst
Okay.
So you're actually talking about reducing the fixed cost, not the point that you got leverage because the comp was better?
- EVP, CFO
It was a combination of both.
- Analyst
But there was cost reduction?
- EVP, CFO
There was some cost savings relative to budget.
That's correct.
- Analyst
Okay.
Are you able at this point to discuss anniversary sale with us?
Because last year was sort of the first time you made some changes, and I'm just wondering what the follow-on, or what we can look for with the follow-on this year.
- EVP, CFO
Pete, do you want to talk about that?
- President, Merchandising
I'll take that one.
The evolution of whatever we're doing in the sale event like anniversary, is more gradual than it is revolutionary.
I mean we always make tweaks to it, particularly since it's such a huge part of our year.
I think that the major thing there, is making sure that we get as nimble as possible, by as close to season as possible, to ensure that we have the most desirable product but really there's not a lot new to talk about there.
I guess maybe the answer to your question is, we'll have to wait and see until actually after the sale has unfolded, and what's happening there, but we expect to do well.
- Analyst
Okay.
And then my final question, Mike, is does this mean that the potential sale of credit card receivables is off the table?
- EVP, CFO
Well, I think we've been pretty clear that it is not part of our plans, you know, to sell that asset, that it's a very important part of our business, and it's important to us and our customers, and no, there are no plans to sell it.
- Analyst
Okay thank you very much.
- EVP, CFO
Thanks, Christine.
Operator
Thank you.
Our next question comes from Jennifer Black.
- Analyst
Good afternoon, and let me add my congratulations.
- President
Thank you.
- Analyst
I had a couple questions.
First question, I wondered if you could update us on Plus sizes, as well as Petites?
- President
Jennifer, the Plus size business is relatively stronger than the Petite business right now.
Petite business continues to be relatively challenging.
The Plus size business is pretty strong.
- Analyst
Okay.
Aren't you making some changes in Petites that we should -- ?
- President
No, not yet.
We're kind of in the process of evaluating all of that and finding, you know, really what is the best way to go.
As I mentioned earlier, there's nothing to announce.
There's no kind of revolution in our Women's business, and if something substantive would have happened with Petites, obviously that would have been a major thing we would have talked to you about, but there really is nothing to talk about at this point.
I think we want to continue to monitor the business, and ultimately we've got to invest in things that are really working for us, and always looking to evolve.
- Analyst
Okay.
And then my second question is your new Designer section on the internet, which is fabulous, have you had a great response to that?
- President
It's been interesting so far.
It's been good.
We've been right about on plan.
You know, we're learning a lot.
We're still not fully enabled there, in terms of the customer being able to literally click and buy, and what have you.
There is some manual process there with the phone, so I think until we get to a place where that is all up and going, it's going to be difficult for us to evaluate the effectiveness, but it's been well received by customers, and they like it and we've been making our plans, and so far so good.
- Analyst
Okay.
And then lastly, I know you've discussed the opportunity in Women's Apparel.
I wondered if we would start to see some changes at anniversary sale, with what you're trying to do in Women's Apparel.
- President
That's a little optimistic.
I think it's possible you'll start to see some of it, yes, you know, we're obviously trying to make an impact as soon as possible, and fall is a great place to start, and the anniversary is always at the very beginning part of fall, so hopefully we'll have some good things to talk about there.
- Analyst
And I would think the feedback feedback you get would really be helpful going forward?
- President
You bet.
- Analyst
All right, thanks so much, and good luck.
- President
Thank you.
Operator
Thank you.
Our next question comes from Richard Jaffe.
- Analyst
Thanks very much.
Two questions.
One is a follow-up on the shifts, or the changes ahead for Women's Apparel.
Obviously the product is going to change.
Will you try and change the physical plans?
The stores, the signage, the actual layouts of the departments, either in signage or in flow?
- President
Difficult to predict.
I think the fair thing to say is that it always will change.
I mean if you were to go back in time and look at our business over the last 20 years there's been a lot of changes, yes.
Things, we are prepared to change, if need be that way.
So there will be subtle things over time, but it would be naive and probably wrong, for us to say there's no way we're ever going to change.
That would be a dumb thing to do.
- Analyst
Okay.
And I guess how is it going looking for real estate, either in Manhattan or nationwide?
Can you comment on the process?
- EVP, CFO
Sure, hi, Richard, this is Mike.
With all of the activity out there, we've continued to look at, you know, opportunities on an individual basis, and I think that it's fair to say and we've said it before, that there's more activity out there today than there has been, and we're doing our due diligence, and as things firm up and become clear we'll continue to share with you how we're doing on that.
- Analyst
Thanks very much.
- EVP, CFO
Thanks Richard.
- Manager, IR
We have time for about one more question.
Operator
Yes, our next question comes from Neely Tamminga.
- Analyst
That's pretty good pronunciation of the name.
- EVP, CFO
Hi, Neely.
- Analyst
Congratulations on a great quarter.
Just following up, I guess dovetailing pretty nicely into Richard's question, can you just revisit a little bit on the capacity for real estate?
How many stores do you think you can bring on?
I mean it looks like you have seven or eight openings for 2008, maybe four that are out there right now for 2007.
Can we get some deals done yet for 2007, or is it getting getting to be too close to that cut date for next year?
- EVP, CFO
Yes, Neely this is Mike.
In terms of 2007, that's a little bit close to our timeframe , you know, by the time that we can structure a deal, get everybody signed off on it and then actually, you know, go through the process of building it, and staffing it and opening, '07 is pretty tight, so more of the new store opportunities that you'll probably see going forward will be '08 and beyond, and probably beyond '08, because '08 is a pretty full schedule right now.
- Analyst
That's what is seemed to be.
Just wanted to double check on the capacity.
Thank you.
- EVP, CFO
Thanks for your question.
Operator
Thank you.
Sir at this time, I'd like to turn the call back over to you.
- Manager, IR
Thank you for participating in our conference call this afternoon.
If you have additional questions or need further information, please contact me at 206-303-3007.
The replay number for this call is 866-463-4967.
The number again is 866-463-4967.
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An archived version of the Webcast will be available on the Investor Relations section of our website for 30 days.
Thank you for your interest in Nordstrom.
Operator
Thank you.
This concludes today's teleconference.
All participants please disconnect at this time.