諾德斯特龍百貨 (JWN) 2010 Q1 法說會逐字稿

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  • Operator

  • Hello and welcome to the Nordstrom 2010 first quarter conference call.

  • At the request of Nordstrom, today's conference call is being recorded.

  • All lines will be on a listen-only mode until the question and answer session.

  • (Operator Instructions)

  • I will now introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom.

  • You may begin, sir.

  • - Treasurer, VP of IR

  • Good afternoon, everyone.

  • Thank you for joining us.

  • Today's earnings call will last approximately 45 minutes and will include about 30 minutes for your questions.

  • As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause the Company's actual results to differ materially from the expectations and assumptions discussed due to a variety of factors that affect the Company, including the risks specified in the Company's most recently filed Forms 10-Q and 10-K.

  • Participating in today's call are Blake Nordstrom, President of Nordstrom Inc., and Mike Koppel, Executive Vice President and Chief Financial Officer who will discuss the Company's first quarter 2010 performance and outlook for 2010.

  • Joining us for the Q&A are Pete Nordstrom, President of Merchandising, and Erik Nordstrom, President of Stores.

  • And now I will turn the call over to Blake.

  • - President

  • Thanks, Rob.

  • Good afternoon, everyone.

  • Thank you for taking the time to join our call today.

  • I'd like to, on behalf of our team, share a few thoughts about our business before turning the call over to Mike.

  • We had a comp sales increase of 12% in the quarter, and earnings improvement of 43.8% A continuation of the momentum we've been seeing for several months now.

  • We also feel it's important to recognize some of the calendar differences this year due to the shift in timing for Easter.

  • In that regard, from March/April combined, comp sales picked up 12.6% compared to last year's comp sales performance of a decrease of 12.4%.

  • We're encouraged by our sales growth and the productivity from our stores.

  • As we move forward, we are confident in our ability to execute along a number of fronts including merchandising, inventory management, multi-channel, new stores, and most importantly, customer service.

  • Our ability as merchants to manage inventory continues to improve.

  • This remains a key driver of our total performance, including our top line sales momentum.

  • Inventory is turning faster than in recent years, an indicator of our ability to execute and of the strong partnerships with our vendors.

  • In terms of the aging of inventory, it's as fresh and current as it's ever been.

  • We're flowing lots of new receipts into our stores and delivering compelling fashion to customers.

  • Our customers remain very receptive to this newness and the quality, color and top brands in our stores.

  • We're also seeing fewer markdowns as a percentage of sales.

  • Our focus on regular priced business is core to our merchandising strategy and of late, it's back up to historically high range as a percentage of total sales.

  • Additionally, our overall model continues to evolve.

  • And though we're not back to the peak sales per square foot productivity we achieved in 2007, the profitability we're generating from these numbers is better.

  • Our Company's benefiting from this improved merchandise performance and we're committed to continuing to execute along these lines.

  • Each time we've had a chance to talk with you about our business, we have highlighted our multi-channel efforts.

  • It is a key component of everything we do because this is how our customer wants to interact with us.

  • And our recent sales results bear that out.

  • We're learning a lot from our shared inventory capabilities and developing additional tools to enhance the total shopping experience.

  • We know our customers don't see a difference between Nordstrom.com, our catalogs, or our stores.

  • We will keep working to become more seamless across all channels and give our customers more options to shop with us.

  • The multi-channel is really about improving customer service, which is fundamental to our approach to the business.

  • In terms of store growth, we've been very pleased with the results from our Nordstrom full-line store and Rack openings this year.

  • In April we had a great response to our newest full-line store at Fashion Island in Newport Beach, California.

  • And in the two weeks following the end of the first quarter, we relocated our Cerritos, California store, which was also well received by our customers.

  • Additionally, we just returned from New York where we opened our Union Square Rack on Tuesday.

  • This is our first Manhattan location and a great fit for the Rack.

  • As we conclude the quarter and look ahead, we are optimistic about our business and feel confident about our ability to grow and take advantage of the opportunities in front of us.

  • We believe we are in a unique position to better serve our customers and gain more market share going forward for the following reasons.

  • We continue to focus on being better merchants and are leveraging our inventory capabilities to drive sales increases and improve service.

  • We are evolving our multi-channel capabilities to enable us to serve the customer on their terms.

  • We have a track record of execution, maintaining our disciplines, and delivering positive results.

  • Our strong financial position enables us to further invest in our business with new stores and remodels, technology, merchandising systems, and other opportunities.

  • We continue to believe that our ability to improve service is the single greatest opportunity we have to differentiate ourselves from the competition.

  • It's grounded in both our product offering and our people and remains our number one focus.

  • With that, I'd like to now turn the call over to Mike.

  • - EVP & CFO

  • Thanks, Blake.

  • And good afternoon, everyone.

  • Our first quarter performance continued the positive momentum that grew over the latter part of 2009, with results that exceeded both our internal sales and earnings plans.

  • Same-store sales increased in each month of the quarter, giving us seven straight months of positive comp sales performance.

  • Although customers continue to be cautious in their spending, this momentum is an indication of our progress in providing personalized service, a strong assortment of merchandise and growing profitable market share.

  • First quarter earnings per diluted share were $0.52 compared with $0.37 last year.

  • Earnings before interest and taxes, or EBIT, were $219 million an increase of $73 million, a 49.9% increase compared with last year's EBIT of $146 million.

  • Total retail sales in the first quarter increased to $2 billion, up 16.7% and same-store sales increased 12% compared with the same period in 2009.

  • Multi-channel same-store sales in the first quarter increased 13.7%.

  • Top-performing merchandise categories for multi-channel including -- included jewelry, dresses and women's shoes.

  • The Midwest, Northeast, and South regions were the top performing geographic areas for full-line stores relative to the first quarter of 2009.

  • Although improving, California same-store sales were below the full-line store average for the quarter.

  • Finally, Nordstrom Rack had same-store sales increase of 1.9%.

  • The combination of higher sales and lower mark down rates resulted in our gross profit as a percentage of net sales increasing 245 basis points to 37.6%.

  • Merchandise margin accounted for the majority of this improvement coupled with increased leverage of buying and occupancy costs.

  • The improvement in merchandise margin is a direct result of our ongoing progress in inventory productivity.

  • By having a fresh, edited merchandise assortment, we are able to have more regular priced sales and faster inventory turns.

  • We ended the quarter with sales per square foot up 13% and inventory per square foot up 1.9%.

  • Retail selling, general, and administrative expenses, as a percentage of net sales, increased 64 basis points to 26.8%.

  • Over 40 basis points of this increase are due to the timing of incentive-related expenses.

  • These incentive-related expenses are a reflection of the -- of our Company's improved sales and earnings performance relative to our plan, and better visibility into operating trends compared to this time last year.

  • The remainder of the variance primarily reflects increases related to new stores and technology.

  • We have talked about achieving a normalized EBIT flow-through of 25% to 35%.

  • We expect to be in our historical range for the year, but on the lower end of the range in the second and third quarters due to the flow of expenses.

  • Now I would like to turn to our credit business.

  • Although our metrics are still above historical levels, we began to see improvements to the business this quarter.

  • First quarter credit card revenue increased $11 million over the same period last year.

  • Our delinquency rate in the first quarter was 4.2%, a sequential improvement versus 5.3% in the fourth quarter of 2009.

  • This progress is attributable to improvement in overall consumer credit trends as well as actions that we have taken over the last few years to mitigate risk in our portfolio.

  • We have seen early stage delinquency rates decrease and start to return to levels comparable with the first half of 2009.

  • Payment rates also improved.

  • Write-off dollars in the first quarter increased $19 million compared to the same period last year to a rate of 11.9% of average receivables, which was better than plan.

  • A disproportionate share of our write-offs are from customers in California which have experienced greater economic weakness relative to other geographic areas.

  • However, the improving trend in early stage delinquencies offers increased confidence for a stabilizing and gradually improving outlook.

  • That said, we feel it is too early at this stage of the cycle to make any changes to our reserves.

  • During the quarter, we had a $350 million asset-backed note reach its maturity.

  • We mentioned in the fourth quarter conference call our intention of retiring this note using available cash, which we did.

  • That said, during the quarter, we made the decision to issue 500 million in ten-year senior unsecured notes at a coupon rate of 4.75%.

  • We felt this was an opportune time to issue debt at an attractive rate.

  • And while maintaining our existing capital structure framework, we were able to attain a tenor that fit well within our existing schedule of debt maturities.

  • We are pleased with the outcome and believe this further strengthens our financial position.

  • Total debt at the end of the first quarter was $2.8 billion.

  • We also finished the quarter with an adjusted debt to EBITDA ratio of 2.5 times which is in line with the fourth quarter of 2009 and well within the range to maintain our investment grade rating.

  • We expect to be at 2 to 2.2 adjusted debt to EBITDAR, the low end of our stated range by year end.

  • With the continued improvements in our performance and business model, we expect to generate excess cash.

  • The quarter ended with a cash balance of $1 billion including the proceeds of our recent debt transaction and generated free cash flow of $68 million.

  • With this current cash position and a projection of increased accumulation over the next several years, we are reviewing our capital structure framework.

  • As we previously stated, we seek to maintain an appropriate capital structure that reflects our commitment to an investment grade rating, allows for continued investment in the business, including our ongoing commitment to merchandise systems, store growth, remodels and improving technology and provides us with the flexibility to drive innovation and growth.

  • We plan on reviewing these alternatives with our Board over the next several months and will share our plans when complete.

  • Next, I will discuss our outlook for fiscal year 2010.

  • Overall, our first quarter performance exceeded our expectations.

  • As a result, we are increasing our annual earnings per share guidance from the original range of $2.35 to $2.55 to a revised range of $2.50 to $2.65.

  • The increase in our guidance primarily reflects better than planned sales and gross profit results for the first quarter and planned performance for the remainder of the year.

  • Also, as a reminder, May sales are going to be unfavorably impacted due to the shift in Memorial Day and our women's half yearly sale.

  • Our sale typically begins the Wednesday before Memorial Day weekend which has now shifted one week later.

  • We think that this will cause a 350 basis-point to 400 basis-point shift out of May sales and into June sales.

  • In closing, as our business continues to improve, we want to remain focused on our customers and the experience we provide them across channels.

  • Additionally, we want to retain and build on the practices and disciplines that guided us through the challenging environment we've experienced over the last several years.

  • We're off to a good start in 2010 and believe we are well positioned to gain profitable market share and execute successfully throughout the remainder of the year.

  • With that, I'll now turn the call back to Rob.

  • - Treasurer, VP of IR

  • Thank you, Mike.

  • Before taking the first question, we want to request that each person limit himself or herself to one question and, if necessary, one follow-up in order to give as many persons as possible a chance to answer a question.

  • If you have additional questions, we'll ask that you return to the queue.

  • And with that we'll take the first question.

  • Operator

  • Thank you.

  • Our first question today is from Lorraine Hutchinson from Banc of America.

  • - Analyst

  • Thank you.

  • Good afternoon.

  • - President

  • Hi, Lorraine.

  • - Analyst

  • Just wanted to get a little bit more detail on the crease in SG&A.

  • You said about 40 basis points was timing of incentive comps.

  • Would you expect to keep -- the SG&A rate to continue to grow at that kind of pace through the year if your comp continues to outperform?

  • And were there any additional costs from the New York Rack store?

  • - EVP & CFO

  • Sure.

  • Lorraine, this is Mike.

  • Couple of things.

  • For the first quarter, almost 75% of the dollar increase was attributable to our comp sales performance, new stores, and those incentives that we discussed.

  • The balance of it was primarily additional investments we're making in technology and a few other areas.

  • You know in terms of the year, we expect to have leverage in SG&A by the end of the year, but because of the accelerated performance early on this year versus last year, we're recognizing those incentives earlier in the cycle.

  • So by the end of the year, you should see leverage in the SG&A.

  • - Analyst

  • Okay.

  • Thank you.

  • - EVP & CFO

  • You're welcome.

  • Operator

  • Thank you.

  • Our next question is from Jennifer Black from Jennifer Black and Associates.

  • - Analyst

  • Congratulations on another great quarter.

  • - President

  • Thank you, Jennifer.

  • - Analyst

  • You're welcome.

  • I wanted to know -- your shoe department looks awesome, and I wanted to know if you've expanded the number of vendors you're offering, and what kind of further opportunities you have in shoes?

  • And then as you remodel and add to the salon show department as a stand alone department, what -- does that increase your productivity per square foot?

  • And what other changes are you making as far as productivity?

  • Thanks.

  • - President Merchandising

  • Jennifer this is Pete.

  • You know, the shoe business has really held up really well.

  • We've done a good job pretty much all the way along managing our inventories, but I think where they deserve a lot of credit is even during challenging times, they found a way to focus on the stuff that was really working well.

  • If you look at last year and in particular we had a lot of success with boots.

  • We've just been able to keep the momentum going there.

  • So I'm glad you like what's going in the shoe departments.

  • I don't think we've necessarily added any more vendors, but I think that the team's just got a lot of discipline and focus on being really connected to what's working and investing in that appropriately.

  • So we've been able to grow the business very profitably.

  • We're having, you know, better margins than we've ever had there.

  • And our sales productivity is very good.

  • Operator

  • Thank you.

  • Our next question is from Edward [Abramoff] from KeyBanc.

  • - Analyst

  • Hi.

  • Thanks very much.

  • And congratulations on a great quarter.

  • - EVP & CFO

  • Thanks, Ed.

  • - Analyst

  • I guess my question is around gross margin.

  • I know that you've cited that your improvement inventory turns allowed you to improve your merchandise margin.

  • How sustainable is that and should we expect that rate of improvement to, to decelerate as we hit the back half of the year?

  • Thank you.

  • - EVP & CFO

  • Yes, Ed, thanks for the question.

  • This is Mike.

  • In the first quarter, the majority of that roughly 240 basis points in gross profit came from margin, and we expect to see some level of continued improvement in that range in the second quarter.

  • In the back half of the year, that will start to moderate, particularly in the fourth quarter where we had some big gains.

  • You know, I think ultimately based on our current plan that's how we view it.

  • But certainly that is also a function of sales performance.

  • If sales performance outperformed plan, then we do get leverage on margin.

  • - Analyst

  • Got you.

  • And one follow-up on the inventory question.

  • Does -- How does tight inventory impact your half year lease sale?

  • Does this cause shift given that inventories are really tight right now?

  • Thank you.

  • - President Merchandising

  • This is Pete.

  • That's a good question.

  • Historically, and I'd say historically in the last five or six years, a lot of success we've been able to have in the halt yearly event has been because we've been able to bring in new merchandise and not so much because we've got all this clearance that's been driving the business.

  • Last year, last 18 months that was different because we had more clearance kind of given what was going on.

  • Since our inventories are leaner, we'll get back to the way we've been operating in the last, you know, five or six years, and I guess based on what we've seen over the last several months, we run a much more normal rhythm about regular price sales and what really seems to be stimulating the business across the board is newness and flow.

  • So half yearly's part of it, part of the clearance rhythm.

  • That will be important, but we also think that the new merchandise coming in right behind it is what's really going to make it happen for us.

  • Operator

  • Thank you.

  • Our next question is from Neely Tamminga from Piper Jaffray.

  • - Analyst

  • Great.

  • Thanks, guys.

  • Good afternoon.

  • Just a question here on merchandise initiatives.

  • If you had to outline kind of your top three initiatives on the men's side of the business, I'd be curious what direction you're headed and if there's an opportunity for really increase in the regular price selling in that division specifically?

  • Thanks.

  • - President Merchandising

  • In men's, gosh, you know, things have really evolved there, and I think for us, when we have success is when we're really grounded in what's happening with the customer.

  • So most of our efforts are just to be really in tune with what the customers want to buy.

  • I know that sounds kind of obvious, but probably where that plays out most evidently is in the wear to work category.

  • We've always done a pretty good business with clothing suits and, you know, shirts and ties.

  • While that's still a good business for us, the fact is that not as many men wear that to work as used to.

  • So it's important that we're clear about what men are wearing to work and that we can be a store of choice for them.

  • I think that would probably be the primary thing that we could point to is how that evolves.

  • And then, you know, I'd say probably being in tune with more of kind of the modern side of the business.

  • Kind of the updated modern part of it, and being able to do it.

  • Not necessarily at the very highest level price points but to do it at what we would call better price points.

  • Where we've been able to add product there that feels more modern that's worked well for us.

  • Operator

  • And our next question is from Deborah Weinswig from Citigroup.

  • - Analyst

  • Good evening.

  • So, to kick things off, in terms of inventory management, you did an incredible job in the quarter and we continue to see inventory turns improve.

  • Can you talk about your strategy?

  • And also what are you doing to chase inventory?

  • - President Merchandising

  • This is Pete.

  • It's a good position to be in when you have open to buy.

  • And we've had it because we've been able to exceed plans.

  • I think we continue to see opportunities where we can have a more efficient use of inventory.

  • So for us, our total amount of inventory that we have seems to be about right, but I guess the trick in retail is making sure all of the details of having the exact right item in the right place at the right time store by store.

  • And that -- we're trying to get better at that all of the time.

  • We've got good information, good systems and a lot of our investments in technology are going to help us on some of the up front parts of that, with the allocation and assortment planning.

  • As we get better at that, that'll allow us to even be probably more efficient with our inventory.

  • - EVP & CFO

  • Deborah, that is Mike.

  • I would just add one thing to that.

  • And that's -- since last fall when we implemented our store fulfill capabilities.

  • It's helped us belter fulfill demand across the chain.

  • And we are learning from it.

  • We're learning more about where to have the right inventory at the right time and also how to deal with better fulfillment of demand.

  • So that's been a big help as well.

  • - Analyst

  • Okay, and then how are you guys thinking about the designer business at this point in the cycle?

  • - President Merchandising

  • The designer business has been pretty darn good for us.

  • If you look at it specifically -- and when I say designer, I would say all categories and shoes and accessories and apparel.

  • But you know this last quarter -- let me get this here -- we were able to pick up 24% in those designer categories on 30% less inventory from the year before.

  • So the business is there to be had if you do it well.

  • Our customers expect that from us and want to see that, and we feel good about how that business is improved, and particularly in shoes, we talked about that earlier.

  • That really never dropped off much for us.

  • We've been able to sustain good, healthy growth all along.

  • But the apparel part has definitely gotten much better here in the last few months.

  • Operator

  • Thank you.

  • Our next question is from Richard Jaffe from Stifel Nicolaus.

  • - Analyst

  • Thanks very much, guys.

  • Nice to hear about the credit card business moving in the right direction.

  • I'm wondering if your standards have changed at all for your customer evaluation, or your credit customer evaluation, or is it really the customer doing a better job managing their own finances?

  • What's your take on that?

  • - EVP & CFO

  • Richard, this is Mike.

  • Well, it's probably a little bit of both.

  • You know, the first part of your question, you know, beginning well over a year ago, we started to, you know, raise our standard levels of FICO requirements to open new accounts and we've been at a pretty high standard for a while.

  • But, even before that, you know, our relative standards on approvals were probably, you know, measurably above average to the industry.

  • But the second part is, you know it does feel like we're cycling through that initial period where a lot of consumers got behind for one reason or the other.

  • Unemployment seems to be stabilizing, although it's still putting pressure on the portfolio.

  • And then, you know, we've also done a good job of editing through a variety of different factors in the accounts and ensuring that the customers we do have are customers that are spending with us and that are, you know, paying their bills.

  • So we think it's a combination of all that, that we're starting to see the improvement.

  • - Analyst

  • Thanks a lot.

  • - EVP & CFO

  • You're welcome.

  • Thank you.

  • Operator

  • Thank you.

  • (Operator Instructions) Our next question is from Barbara Wyckoff from Jesup & Lamont.

  • - Analyst

  • Hi everyone, good quarter.

  • - EVP & CFO

  • Thank you Barbara.

  • - Analyst

  • Hi.

  • You've had such strong new store openings lately.

  • Are there plans to close any of the underperforming stores?

  • Or is is the thought to relocate them and remodel these stores as leases come due?

  • And I guess how many questions would be on your wish list to close stores?

  • - President

  • Hi, Barbara.

  • This is Erik.

  • - Analyst

  • Hey, Erik.

  • - President

  • We don't have any plans to close stores at this time.

  • And the cycle that you mentioned relocated stores, which we just had at Cerritos, the cycle on that really isn't driven by our leases.

  • We sign very long-term leases.

  • It's really driven by our remodel schedule.

  • We have a fairly aggressive remodel schedule to keep our stores up to date.

  • And when it makes sense, we certainly like to open up in a brand new building as opposed to putting remodel dollars into an existing building.

  • Cerritos is an example, the most recent example of several we've had, where it not only allows us to get in a brand new building with our latest concepts, but it allows the mall to make improvements as well.

  • And we're really pleased that in a tough environment, Maastricht stuck with it and execute that project.

  • And it came out beautifully and the response we've had so far is really overwhelming to us considering we've been there since 1981.

  • It was a great response.

  • So we're going to keep remodeling stores where we can and the developer will work with us.

  • We like doing relocations, and as far as store closings, we're fortunate that our portfolio is really healthy.

  • Right now, we don't have any plans on closing stores.

  • Operator

  • Thank you.

  • Our next question is from Liz Dunn from Thomas Weisel.

  • - Analyst

  • Hi, good afternoon.

  • Let me add my congratulations.

  • - EVP & CFO

  • Thanks.

  • - Analyst

  • I just wanted to follow up an earlier question.

  • So, did I understand you correctly that you'll deleverage expense in Q2 and Q3?

  • And then I also had a question on your ROIC goals?

  • I think you finished 2009 somewhere around 12%.

  • When do you anticipate getting back to sort of your long-term goal range for ROIC?

  • - EVP & CFO

  • Sure.

  • Liz, this is Mike.

  • In terms of your question on expense leverage/deleverage, we'll probably see slight deleverage in the second quarter.

  • Starting the third quarter, we'll start the leverage expense again.

  • And then for the total year, we will leverage SG&A.

  • In terms of our goals, we've stated that our language term ROIC goal would be mid-teens.

  • Based on our view this year, I think we're making good progress against that.

  • We should achieve that within some reasonable period of time over the next several years.

  • I think, you know, how quickly we do that is going to be a function of our ability to continue to drive top line growth.

  • - Analyst

  • Okay, great.

  • Thanks.

  • - EVP & CFO

  • You're welcome.

  • - Analyst

  • Good luck.

  • - EVP & CFO

  • Okay.

  • Operator

  • Thank you.

  • Our next question is from Bob Drbul of Barclays Capital.

  • - Analyst

  • Hi, good evening.

  • Just -- a question on the inventory.

  • With inventory levels being so tight and sales so strong in the full-on stores, are you able to maintain the 25% of sales in the Rack from the full-line product?

  • And is inventory availability hindering the Rack comp currently?

  • - President Merchandising

  • Mike, you want to take that?

  • - EVP & CFO

  • Bob, we have been -- I think we talked the other day, in that range roughly and I think the best thing for the Company overall with our merchandising strategy is to enhance the regular price selling what we referred to and the sell-throughs.

  • So that I think over time that, you know if you did the math in theory that we could get less.

  • But at this moment, we're roughly in that 25%, 75% range and we continue to monitor that.

  • But, we think it's a good thing overall, obviously, that the full-line stores, which is the heart and soul of our business, is making such great progress along those lines.

  • Operator

  • Thank you.

  • Our next question is from Adrianne Shapira from Goldman Sachs.

  • - Analyst

  • As you said, we saw some pretty impressive improvements in your early stage delinquencies.

  • And as you said, it's too early to perhaps change the reserving.

  • But help us think about what you would need to see to perhaps start to draw down those reserves?

  • - EVP & CFO

  • Sure.

  • Hi, Adrianne.

  • This is Mike.

  • - Analyst

  • Hi.

  • - EVP & CFO

  • Clearly, we'd like to see a little bit more sustainable progress on the delinquency front.

  • I mean, we clearly saw some pretty dramatic change in one quarter, 110 basis point improvement.

  • I think if we see that continuous improvement or stabilization over the next quarter or two, it will certainly suggest we need to redo that.

  • - Analyst

  • Okay, so will -- it'll be up for review in the back half?

  • - EVP & CFO

  • Well, we review our performance and our reserves every quarter.

  • So we'll see, we'll see how things play out.

  • Operator

  • Thank you.

  • Our next question is from Lance Vitanza from Knighthead.

  • - Analyst

  • Hi guys.

  • Two questions.

  • The first is, could you just discuss a little bit the longer term opportunity for new stores?

  • And then second, on the cap structure review, could you talk a little bit, I mean, is that to determine to what extent you think a dividend increase or share repurchase program might be appropriate at this time?

  • Is that what that's about?

  • - EVP & CFO

  • Sure.

  • This is Mike.

  • Erik will cover the new store and I'll cover the second part of that question.

  • - President

  • For full-line stores, there are a few opportunities since the economy slipped.

  • And I think it's pretty obvious that there's not much need for new mall construction in the country.

  • Developers think they are having tougher times filling, filling the space they do have.

  • So we have seen a lessening of these full -- new full lines for opportunities.

  • We have three a year for the next couple of years.

  • I would say the two to four range is probably what you should expect from us going forward.

  • On the flip side for Rack growth, there's -- economy's actually helped in that regard.

  • There's -- because our Racks aren't dependent on being part of a large project and they're much smaller, we've seen more good location opportunities come our way at better prices.

  • So that's been a positive.

  • - EVP & CFO

  • Lance, this is Mike.

  • The second part of your question, you may recall that we've, you know, we've been pretty clear in our current capital structure.

  • That's been focused on, you know, reinvesting back in the business with every opportunity we have to deliver higher returns.

  • You know, we've had a stated dividend payout ratio of roughly 20% to 25% and a yield of 1.5%, and in the past, we have done some share repurchase.

  • You know, we, we believe going forward as we continue to see the business generating additional capital that we want to make sure that we review that structure, that it's appropriate that we continue to reinvest back in the business, but that we have a long-term view that takes us through cycles and advises us on the right ways not only to invest in the business but also to return capital to shareholder.

  • So, said simply, yes, it would include a review of both dividends and share repurchase.

  • Operator

  • Thank you.

  • Our next question is from Erika Maschmeyer from Robert W Baird.

  • - Analyst

  • Thanks, great quarter.

  • - EVP & CFO

  • Thank you.

  • - Analyst

  • Now that you're seeing improvement in top line trends, or as you've seen improvement in top line trends, and you cycle your 10% plus decreases in AUR, do you think that you have opportunity going forward to increase AUR?

  • Or is that otherwise do you think you'll start see AUR creep upwards?

  • - President Merchandising

  • Yes.

  • This is Pete.

  • That's a pretty dynamic situation for us, the average unit retail.

  • We're not still at the 10% decline.

  • We actually were down 5%, our average price receipt for first quarter.

  • But interesting, the -- it was about exactly the same in terms of average price sold.

  • And that's just because we're doing less clearance sales than we did before.

  • So it's a pretty good trend.

  • It's finding its own -- appropriate levels.

  • So we'll continue to react as our target customers express interest in what we're carrying.

  • It's just a dynamic process that will going up and down a little bit all the time.

  • - Analyst

  • Thanks so much.

  • Operator

  • Thank you.

  • Our next question is from Michelle Clark from Morgan Stanley.

  • - Analyst

  • Hey, guys.

  • It's actually Chris Cuomo filling in for Michelle Clark.

  • I just had a quick question for you on the Rack business.

  • I apologize if I missed this, but I noticed your April sales comps did come in negative and now clearly you'd rather operate in a world where full line was accelerating and Rack was decelerating.

  • But, I was just wondering if you could help us understand some of the dynamic that's going on in that business and is that any cause for alarm?

  • Does it perhaps change your strategy to go forward?

  • - President

  • Chris this is Blake.

  • No question.

  • We're obviously striving always for comp store gains, and the Rack has had a number of years of pretty sizable gains.

  • And that (inaudible) was the first in some time.

  • It's important, I think, to note the importance with the calendar shift in Easter to put the two months together.

  • When we do so, I think it was about a 1.8% increase.

  • So it was still on the plus side.

  • But, it is something that we're sensitive to and our team and specifically the Rack team is looking at, but there's nothing at this early stage that would be cause for concern.

  • So we're encouraged by the opportunities we have right now and focusing on those things in our control.

  • - Analyst

  • Okay.

  • And if I could just ask one quick follow-up.

  • I think earlier you had suggested, just use the term, that customers continue to be cautious.

  • I was just curious, are there any specific metrics that you look at that gives you that, you know, give that you perspective?

  • That -- What would you be looking for?

  • Whether it's internal metrics or are you just making a broad macro economic stance -- opinion, if you will?

  • What metrics do you look at that might cause you to become more optimistic about the outlook?

  • - President

  • This is Blake again.

  • It goes without saying that it's comp store sales.

  • Sales are the truth.

  • And so, we look at that and, you know, that gives us, you know, the ultimate gauge of how we're doing and in relation to our competition.

  • But there are just numerous metrics and also anecdotal that give us the viewpoint of what's happening with our customer and our ability as merchants to stay close to our customers is really the key to what we do.

  • We're not trying to, you know, forward project because that's not our strength.

  • But, we do take it on a daily, weekly monthly point of view, and we don't think, though there is some progress, we still -- the numbers, which would clearly show that we still have more to make up for in terms of square foot and productivity in total sales from what we gave out the last two years.

  • But the key is, we're making good progress.

  • - EVP & CFO

  • Chris, this is Mike, you know.

  • Just one thing I would just add to that and it goes back to the discussion on the credit business is, you know, we get a lot of information on the consumer behavior through the credit business.

  • While it's showing improvement, delinquency trends and write-off trends are still measurably above historical averages.

  • That continues to tell us that, that while there's some stabilization improvement that the consumer, you know, is still challenged.

  • And so we need to be mindful of that.

  • Operator

  • Thank you.

  • Our next question is from David Glick from Buckingham Research Group.

  • - Analyst

  • Good afternoon.

  • Great quarter.

  • - EVP & CFO

  • Thank you, David.

  • - Analyst

  • Mike, a question about how you're thinking about the credit card going forward.

  • I mean, obviously, there are a lot of pending changes to rates and late fees and that's still a bit in flux, but how do you think about the, you know, the long term on -- in terms of, can you sustain growth in the credit card business?

  • Can you get back anywhere near the historical profitability?

  • You think about the profit potential of that business any differently?

  • And does it change your long-term view on whether it's still the right thing to be owning your credit card?

  • - EVP & CFO

  • Sure, David.

  • First, you know there's two ways to look at the credit card business.

  • One is, you can look at it as the pure credit card business as I think what the majority of the financial industry would look at it.

  • And the other way is you would look at it as part of your overall offering to your customer.

  • That's kind of the way we look at it.

  • We certainly believe that the changes in regulatory direction and some of the pressures on fees are having an effect on our business.

  • We have factored that into our plans this year.

  • The only known potential change to our revenue stream coming is the late fee change which we'll know sometime mid-summer.

  • You know, in terms of it as a strategic importance to us, you know, just this past first quarter, we had some of the best performance in our fashion rewards program with a couple events we had.

  • We had some great traction from our customers.

  • Our fashion reward customers still outpace spend of all of our other customers.

  • So it continues to be a program that resonates with our customers and something that not only creates value from a pure credit card P&L standpoint, but from an overall customer standpoint.

  • So we still feel very strongly about it and are committed to it.

  • And we'll continue to try to do better.

  • Operator

  • Thank you.

  • Our next question is from Steve Marrs from CitizensTrust.

  • - Analyst

  • Good afternoon, people.

  • Maybe I'm misreading your corporate tax based upon your corporate release, but does your corporate tax rate go up year-over-year?

  • - EVP & CFO

  • We had a minor -- we had a minor adjustment based on some tax returns, I think.

  • You know, we're constantly getting adjustments with our tax rate.

  • So it was just something that happened this quarter.

  • It's not something to be projected out long term.

  • - Analyst

  • Because if I read it correctly, last year, you had a tax rate of around, oh, 30% --

  • - EVP & CFO

  • Oh,last year we had -- I'm sorry, last year we did have a one time benefit from some tax settlements.

  • - Analyst

  • Okay, so --

  • - EVP & CFO

  • Okay?

  • - Analyst

  • -- actuality the tax rate didn't go up, it's maybe about the same?

  • - EVP & CFO

  • Yes.

  • I'm sorry, I didn't understand that.

  • Thank you.

  • Operator

  • Thank you.

  • Our next question is from Jennifer Black from Jennifer Black and Associates.

  • - Analyst

  • I wondered with the big move to khakis, especially with skinny cargoes, can you reinvigorate both Savvy and TBD which I know has been softer because of premium denim?

  • And I wonder what other big trends you're seeing?

  • - President Merchandising

  • I think what ultimately ends up driving businesses is if the bottoms part of the business has something you really can latch onto and grow.

  • That's for us, that's been the premium denim for the last several years has been great.

  • And as that -- I mean, it's still a big part of our business, but, you know, I think for us to be successful, and TBD and Savvy, or really in any of our departments, we're going to have to have a good strategy around bottoms.

  • And so that's -- what you mention there in terms of the khakis and the skinny cargos and stuff, and there's a few other pant silhouettes -- that are doing well it's just a matter of being able to identify it and jump on it to the extent that it can really make a big difference in the business.

  • So that's an ongoing effort on behalf of our buyers.

  • - Analyst

  • Are there any other big trends you're seeing?

  • - President Merchandising

  • Oh, gosh.

  • Well, you know, as always this time of year, I'm -- just turning the corner into nicer weather really makes a big difference and just gets people excited about buying new things.

  • It's a variation of the same theme and that has to do with, you know, color, and just new silhouettes and for us, shoes such a big part of our business to open up footwear, is, is continues to be good like it was last year.

  • So I don't know that there's anything that's revolutionary there, Jennifer.

  • I would just say I think we're down a better job in general of getting after that modern customer and kind of those better price points both in men's and women's.

  • Operator

  • Thank you.

  • And our final question is from Erika Maschmeyer from Robert W.

  • Baird.

  • - Analyst

  • Hi, just a follow up on your technology investments.

  • Could you give a little bit more detail on those?

  • And how they'll play a role in better inventory management?

  • - EVP & CFO

  • Yes, Erika.

  • This is Mike.

  • What we're referring to, is we have a project going on that's basically going to help enhance our ability to both allocate and sort our product by store.

  • It's a combination of both improving our organizational practices and plus implementing some systems that we pretty much have in place but haven't fully utilized.

  • This is going to be a multi-year effort, and we believe the benefit is going to help us, you know, continue our progress with turns and sell-throughs and overall productivity of inventory.

  • - Analyst

  • Is this a gradual improvement that you'll be realizing?

  • - EVP & CFO

  • Well, I think we've got to get through the implementation over the next eighteen to twenty-four months first.

  • Then after that, you know, we have a pretty good set of metrics to measure how we're going to do against that.

  • Operator

  • Thank you.

  • I'll now turn the call back to Rob for closing remarks.

  • - Treasurer, VP of IR

  • Thank you, everyone, for joining us today for our first quarter earnings call.

  • As a reminder, a webcast replay of this call will be available for 90 days on the Investor Relations section of www.nordstrom.com under Webcasts.

  • Thank you and good-bye.

  • Operator

  • Thank you.

  • And this does conclude today's conference.

  • Thank you for participating.

  • You may now disconnect.