NOTE 15: SEGMENT REPORTING

Segments

We have two reportable segments, which include Retail and Credit.

Our Retail segment includes our Full-price operating segment, which is comprised of our Nordstrom U.S. full-line stores and Nordstrom.com. Both of these divisions earn revenue by offering customers a wide range of apparel, shoes, cosmetics and accessories for women, men, young adults and children. Through our multi-channel initiatives, we have integrated the operations, merchandising and technology of our Nordstrom full-line and online stores, consistent with our customers’ expectations of a seamless shopping experience regardless of channel. Internal reporting to our principal executive officer, who is also our chief operating decision maker, is consistent with these multi-channel initiatives. Our Nordstrom Rack, Nordstromrack.com/HauteLook, Nordstrom Canada, Trunk Club and Jeffrey operating segments have similar economic and qualitative characteristics, including nature of products, method of distribution and type of customer, or the segment results are not significant to the operating results of Full-price. Therefore, the results of these operating segments have been aggregated with our Full-price operating segment into the Retail reportable segment.

Through our Credit segment, our customers can access a variety of payment products and services, including a selection of Nordstrom-branded Visa® credit cards in the U.S. and Canada, as well as a Nordstrom-branded private label credit card and a debit card for Nordstrom purchases. When customers use a Nordstrom-branded credit or debit card, they also participate in our loyalty program that provides benefits based on their level of spending. Although the primary purposes of our Credit segment are to foster greater customer loyalty and drive more sales, we also receive credit card revenue through our program agreement with TD (see Note 2: Credit Card Receivable Transaction).

Amounts in the Corporate/Other column include unallocated corporate expenses and assets (including unallocated assets in corporate headquarters, consisting primarily of cash, land, buildings and equipment and deferred tax assets), sales return reserves, inter-segment eliminations and other adjustments to segment results necessary for the presentation of consolidated financial results in accordance with generally accepted accounting principles.

Retail Business represents a subtotal of the Retail segment and Corporate/Other, and is consistent with our presentation in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations. Retail Business is not a reportable segment.

We continually monitor and review our segment reporting structure in accordance with authoritative guidance to determine whether any changes have occurred that would impact our reportable segments. As a result of the evolution of our operations, our reportable segments have become progressively more integrated such that we will change our reportable segments to one reportable segment to align with how management will view the results of our operations in the first quarter of 2018.

Accounting Policy

In general, we use the same measurements to compute earnings before income taxes for reportable segments as we do for the consolidated Company. However, redemptions of our Nordstrom Notes are included in net sales for our Retail segment. The sales amount in our Corporate/Other column includes an entry to eliminate these transactions from our consolidated net sales. The related Nordstrom Notes expenses are included in our Retail segment at face value. Our Corporate/Other column includes an adjustment to reduce the Nordstrom Notes expense from face value to their estimated cost. In addition, our sales return reserve and other corporate adjustments are recorded in the Corporate/Other column. Other than as described above, the accounting policies of the operating segments are the same as those described in Note 1: Nature of Operations and Summary of Significant Accounting Policies.

The following table sets forth information for our reportable segments:



	Retail		Corporate/Other			Retail Business			Credit			Total
Fiscal year 2017
Net sales		$15,408		($271	)		$15,137			$—			$15,137
Credit card revenues, net	—		—			—			341			341
Earnings (loss) before interest and income taxes	1,206		(454		)	752			174			926
Interest expense, net	—		(136		)	(136		)	—			(136		)
Earnings (loss) before income taxes	1,206		(590		)	616			174			790
Capital expenditures	516		214			730			1			731
Depreciation and amortization	445		213			658			8			666
Assets	5,237		2,638			7,875			240			8,115

Fiscal year 2016
Net sales		$14,768		($270	)		$14,498			$—			$14,498
Credit card revenues, net	—		—			—			259			259
Earnings (loss) before interest and income taxes	1,006		(298		)	708			97			805
Interest expense, net	—		(121		)	(121		)	—			(121		)
Earnings (loss) before income taxes	1,006		(419		)	587			97			684
Capital expenditures	593		249			842			4			846
Depreciation and amortization	456		182			638			7			645
Assets	5,291		2,088			7,379			479			7,858

Fiscal year 2015
Net sales		$14,376		($281	)		$14,095			$—			$14,095
Credit card revenues, net	—		—			—			342			342
Earnings (loss) before interest and income taxes	1,220		(302		)	918			183			1,101
Interest expense, net	—		(112		)	(112		)	(13		)	(125		)
Earnings (loss) before income taxes	1,220		(414		)	806			170			976
Capital expenditures	837		241			1,078			4			1,082
Depreciation and amortization	428		143			571			5			576
Assets	5,460		1,720			7,180			518			7,698

The following table summarizes net sales within our reportable segments:



Fiscal year	2017			2016			2015
Nordstrom full-line stores - U.S.¹		$6,951			$7,186			$7,633
Nordstrom.com	2,887			2,519			2,300
Full-price	9,838			9,705			9,933

Nordstrom Rack	4,059			3,809			3,533
Nordstromrack.com/HauteLook	897			700			532
Off-price	4,956			4,509			4,065

Other retail²	614			554			378
Retail segment	15,408			14,768			14,376
Corporate/Other	(271		)	(270		)	(281		)
Total net sales		$15,137			$14,498			$14,095

¹ Nordstrom full-line stores - U.S. includes Nordstrom Local.

²Other retail includes Nordstrom Canada full-line stores, Trunk Club and Jeffrey boutiques.

The following table summarizes the percent of net sales by merchandise category:



Fiscal year	2017		2016		2015
Women’s Apparel	32	%	32	%	31	%
Shoes	23	%	23	%	23	%
Men’s Apparel	16	%	17	%	17	%
Women’s Accessories	11	%	11	%	12	%
Beauty	11	%	11	%	11	%
Kids’ Apparel	4	%	3	%	3	%
Other	3	%	3	%	3	%
Total net sales	100	%	100	%	100	%