Finanacial Statement Analysis-Final-1

Finanacial Statement Analysis-Final-1 - Nordstrom,Inc.1 The...

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Nordstrom, Inc. 1 The A Team Economics 118 Professor Don Loster Pan Chung Yong Lin Danielle Myers Farrah Ng Emmanuel Saldivar Gerardo Sandoval
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Nordstrom, Inc. 2 Nordstrom, Inc. (JWN) Financial Analysis Part A Economic Characteristics Demand Price Sensitivity Nordstrom’s provides high end goods to fashion-conscious individuals; however, Americans today are far less interested in shopping than they were a decade ago. The competitive nature of the retail industry, in combination with current econom- ic conditions, results in a market with relatively price-sensitive consumers. In ad- dition, a gain in sales from one store, translates into a loss for another. Retailers, particularly department stores such as Nordstrom’s and Macy’s, have come to rely on frequent price promotions in order to gain market share; especially in a time where low prices are expected. Consumer spending has been severely hindered by the current recession and changing demographics. According to Nordstrom’s 10-K, business during 2008 was both challenging and volatile. Due to economic concerns and uncertainty, consumers reduced their discretionary spending, resulting in struggles for the re- tailers to align their businesses with significantly lower levels of demand. Due to price sensitivity caused by poor economic conditions, Nordstrom was required to significantly reduce expenses, inventory, and planned capital expenditures in or- der to provide more appealing prices to consumers. Net sales (2008 VS 2007) fell 6.3% due to declines in full-line stores, however, sales for Rack and Direct stores (discounted merchandise) saw increases in sales; this is a prime example of how current economic conditions have affected price sensitivity. In the MDNA section of Nordstrom’s 10-k report, it is acknowledged that in 2008 price sensitivity and value were significant factors to customers. Management feels that with a broad merchandise offering coupled with their merchants working hard with vendors to
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Nordstrom, Inc. 3 provide the right balance of quality, value and prices, Nordstrom’s will have the ability to adjust to price sensitivity without compromising quality nor their position in the market. Growth Profile Nordstrom’s financial statements definitely suggest the company is growing. For instance, Capital expenditures grew 89.5% when comparing 2006-2007 and in- creased an additional 12.4% when comparing 2007 to 2008. Nordstrom’s growth is continuing to increase due to its relatively small size when compared to Macy’s. Macy’s, the larger company in terms of stores, is showing decreases in capital expenditures. Macy’s capital expenditures fell 24.5% when comparing 2006 to 2007 and fell an additional 23.4% when comparing 2007 to 2008. Nord- strom’s 10-K report explains that the capital expenditures were used to add stores, enhance existing facilities, and improve information systems. The industry growth as a whole is relatively mature, for instance, Macy’s is show-
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This note was uploaded on 03/17/2010 for the course ECON 118 taught by Professor Loster during the Spring '07 term at UCSB.

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Finanacial Statement Analysis-Final-1 - Nordstrom,Inc.1 The...

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