Mike Koppel - CFO Blake Nordstrom - President Pete Nordstrom - President, Merchandising RJ Jones - IR

Michelle Clark - Morgan Stanley Charles Grom – JP Morgan Jennifer Black - Jennifer Black & Associates Stacy Turnof - Merrill Lynch Christine Augustine - Bear Stearns Deborah Weinswig - Citigroup Dana Cohen - Banc Of America Dorothy Lakner - CIBC World Markets Liz Dunn - Thomas Weisel Michelle Tan - UBS Richard Jaffe - Stifel Nicolaus Adrianne Shapira - Goldman Sachs

Welcome to the Nordstrom fourth quarter 2006 earnings release conference call. (Operator Instructions) I will now introduce Mr. RJ Jones, Manager of Investor Relations for Nordstrom. Thank you, sir. You may begin. RJ Jones: 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 fourth quarter and total year 2006 results. Blake will make a few additional remarks and then we'll open it up for questions. Please note that any forward-looking statements we make in our comments 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.

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IR firm sponsors transcript of micro-cap company: Consulting company sponsors company's transcript in sector of interest: Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details. Mike Koppel: Thanks, RJ and good afternoon, everyone. We are pleased to report another year of strong operating performance and continued value growth. We ended 2006 with a 12.9% pre-tax margin, 140 basis points higher than last year and near the high end of the goal we set out to achieve by 2008. Return on investment capital expanded to 20.9% compared to 16.8% for the last year. In addition, sales per square foot improved to $388 versus $369 last year on a comparable 52-week basis. Our operating model continues to perform consistently with increases in same-store sales and improvements in gross margin flowing through to the bottom line. Overall, these results indicate that we are creating value through the execution of our strategy and maintaining discipline that will enable us to continue achieving higher levels of performance. For the full year, we reported net earnings of $678 million or $2.55 per share, a 29% increase from the prior year. The full year results were driven by a 7.5% same-store sales increase, 75 basis points of gross profit expansion, and 37 basis points of SG&A improvement. As a reminder, for comparison to 2005, this year included stock option expense and a 53rd week of sales for the 4/5/4 retail calendar. Stock option expense impacted our gross profit by 14 basis points and the SG&A rate by 20 basis points versus the prior year. In the 53rd week, sales were $118 million, which increased earnings per diluted share by $0.02. For the fourth quarter, net earnings increased 22% to $232 million or $0.89 per share. Strong top line momentum along with gross profit and SG&A rate improvement drove 100 basis points of pre-tax margin expansion compared to last year. Sales trends were positive throughout the quarter with all of our major merchandise categories and geographic regions achieving same-store sales increases. Same-store sales in the quarter increased 8.3%, ahead of our low single digit-plan. Our online store sales growth exceeded 30%. Total sales including the 53rd week grew 14.6% to $2.6 billion. Our strongest performances by geography were in the East Coast and Midwest regions, and our best performing merchandise divisions were our collective designer offerings which includes apparel, accessories and shoe categories, along with our men's apparel division. The quarterly improvement in both gross profit and SG&A versus last year was the result of a strong sales volume and improved merchandise margin. Gross profit increased 81 basis points or $147 million compared to last year. Women's apparel delivered the largest improvement in terms of overall buying growth and gross margin rate. Same-store sales for women's apparel increased at mid single-digit rates while the gross margin rate expanded due to improved regular price selling. As for SG&A, we gained 20 basis points of rate improvement versus the prior year including stock option expense. Overall, our variable expenses aligned with higher sales volume and the majority of our fixed expenses met our plan. Our SG&A rate for the fourth quarter was slightly higher than planned, driven primarily by increased performance-based compensation costs. In the quarter, our sales, gross margin and inventory performance for 2006 achieved the highest level incentive targets for the total year. The improved annual results triggered correlating performance-based compensation which rose above plan levels for the fourth quarter. In addition, our stock price appreciated 21% in the quarter which increased variable expenses linked to the stock price above our plan. The combination of these compensation costs above our plan impacted our earnings per diluted share by approximately $0.02 to $0.03 for the quarter. The other income and finance charge line of the P&L increased $3.7 million, slightly better than planned for the quarter due to growth in receivables. Net interest expense of $7.8 million was in line with expectations and lower than the prior year due to repayment of long-term debt in October of 2006. During the quarter, we repurchased 0.5 million shares of stock for a total of $26 million which did not reduce shares outstanding enough to materially impact quarterly earnings per share. The remaining balance on our current authorization is approximately $591 million. Average inventory per square foot for the year was approximately 2% higher than last year, resulting primarily from our strategy to expand our offering of designer merchandise across our apparel, accessories and shoe categories. We believe these investments are paying off through increased volume and a continued improvement in inventory turnover rate of 5% for the year. Total debt at quarter end was $631 million and total capital was $2.8 billion, resulting in a debt to total cap ratio of 23% on a booked basis, down from 31% this time last year. In the third quarter of 2006, we repaid $300 million of long-term debt by selling a portion of our interest in our co-branded Visa receivable trust. This arrangement has put us below our target debt to cap range of 25% to 40%. In the first quarter of 2007, we'll be increasing our debt and asset levels as a result of a new co-branded Visa securitization transaction. Both the co-branded Visa receivables and the debt back by those receivables will be recorded on our balance sheet. In anticipation of this new securitization structure, we are adjusting our target debt to cap ratio range on a book basis to 30% to 45% going forward. Over the course of the year, we sold $350 million of our interest in the co-branded Visa receivables primarily to retire $300 million of debt and we repurchased $622 million worth of stock. We ended the year with $403 million in cash and short-term investments. Our strong cash flow and low debt levels place us in a position of flexibility to support our value growth plan. Last week, we announced that our board of directors approved a 29% increase in our quarterly dividend from $0.105 to $0.135 per share. Our current dividend policy aims to maintain a payout ratio in the range of 18% to 20% and a yield of approximately 1%. Looking to our outlook for next year, we have included a table and notes in our fourth quarter earnings release that outlines the comparable view of fiscal years 2006 and 2007. We would like to take a moment to discuss a few key events that impact comparability over the coming year. The first item is the timing shift of sales in the 4/5/4 calendar for fiscal 2007 due to the 53rd week in fiscal 2006. The months of fiscal 2007 begin and end one week later than in fiscal 2006. The timing shift is anticipated to impact the rhythm of monthly same-store sales results throughout 2007. In addition, some events and holiday periods were aligned differently than last year. With each monthly sales reporting period, we will provide reminders about the timing impacts on a forward-looking basis. The next items impacting comparability is our co-branded Visa securitization transaction. As we mentioned earlier, and describe in our fourth quarter earnings release, our co-branded Visa receivables and the debt backed by those receivables will be recorded on the company's balance sheet in the first quarter of 2007. As a result of the transaction and the associated new accounting treatment for the co-branded receivables, expenses totaling approximately $23 million net will be recorded in other income and expense and impact earnings per share by $0.05. On the Investor Relations section of our website, we have included an exhibit which discusses in detail the Visa securitization process and related impacts to our financial statements. The other activity in 2007 impacting comparability to 2006 is our new store pre-opening costs. In 2007, primarily in the third and fourth quarters, we anticipate incurring general and administrative expenses supporting the opening of three new full line stores in fiscal 2007 and nine new full line stores in fiscal 2008. These expenses are forecasted to impact the SG&A rate by 15 basis points and earnings per diluted share by $0.03. Turning now to our outlook for 2007, we are currently forecasting earnings per share in the range of $2.78 to $2.84 for the full year, a 12% to 15% increase over last year after normalizing the estimated $0.05 impact for the new accounting treatment of the co-branded Visa receivables, and the $0.03 impact for new store pre-opening costs. We are assuming low single-digit same-store growth in our full line and rack stores throughout the year with a higher growth rate for our online store. Our resulting same-store sales plan is for a 3% to 4% growth. We expect sales leverage of buying and occupancy costs, along with improved merchandise margins to drive 30 to 40 basis points of annual gross profit rate expansion. Regarding expenses next year, we anticipate an SG&A expense rate increase of 5 to 15 basis points due to the new accounting treatment of normal bad debt expense for the Visa receivables and new store pre-opening costs. On a comparable basis, we anticipate a 35 to 45 basis point decrease in the expense rate due to sales leverage on fixed expenses. Net interest expense is anticipated to be flat and finance charge income is assumed to increase $25 million to $35 million. Our capital plan for the coming year is approximately $530 million, net of developer reimbursement, 75% of which will be spent on new stores and remodels. The remainder is for technology, maintenance and general purposes. Depreciation will likely be around $240 million for the full year. We currently expect inventory levels to remain fairly consistent with last year on a per square foot basis. For the first quarter specifically, we are planning for mid single-digit same-store sales growth. The one-week timing shift in 2007 caused by the 53rd week of 2006 is anticipated to positively impact comp sales for the quarter. In addition, the shift of the Easter holiday is expected to increase March same-store sales and decrease April same-store sales relative to the planned quarterly rate. Net earnings for the quarter are expected to be in the range of $0.51 to $0.54 per diluted share which includes a $0.02 impact from the first quarter portion of incremental expenses associated with the securitization transactions. In the quarter, we anticipate an increase in SG&A expenses versus historical trends. These expenses directly support strategic plans for growth in our designer and online businesses. To conclude, I want to take this opportunity to update our intermediate term goals for SG&A and pre-tax margin. Over the next three years, we are targeting an SG&A expense rate between 26.5% and 26% and a pre-tax margin rate from 13.5% to 14% at the end of 2009. These targets are based on low single-digit comp sales and include the impacts of new stores and the Visa securitization transaction. Now I'll turn the call over to Blake for some additional remarks.

On behalf of our team I echo Mike's remarks, and how pleased we are to be able to share with you both our fourth quarter and year end results. 2006 was another record performance. The significant statistics to share with all of you is this is the fifth year in a row of positive same-store sales. We have shared with you on many occasions that our model and approach to the business is dependent upon our ability to provide the absolute best merchandise and service to our customers to drive our top line. We feel our ability at point-of-sale to try and connect with the customer and hopefully meet or exceed their expectations is built in everything we do. In addition to everyone's focus on driving meaningful sales gains, we're committed to managing the other aspects of the business. Our financial team, along with other key support areas in the business, have created a framework and environment for our leaders to spend resources wisely to create the best outcomes. This has enabled us to achieve an SG&A expense rate lower than any other performance in the last 12 years. It's also noteworthy that our pre-tax margin reached a new all-time high at 12.9%. It took this company 83 years to reach its first $1 billion in annual sales. We're now pleased, after 105 years of business, to have surpassed $1 billion in pre-tax earnings. Fundamental to our culture is treating both the customer and fellow employee with courtesy and respect and an unwavering focus as merchants for continuous improvement. Being in the fashion business, it's imperative to embrace and encourage change. We believe our culture supports this important element, as is evident in the results we're sharing with you. It's always been to us that retail is a competitive business and that will never change. The customer has countless choices in which to purchase merchandise, whether it be in a store, online, or through a catalog. Amongst those many channels, the formats continue to evolve and change, which create exciting choices for the customer. As we look ahead for 2007, we're encouraged by the improving foundation of our business and the many opportunities that are in front of us. Our core business, the full line stores, is the heart and soul of our business and continues to represent tremendous upside. We think you'll find it interesting to note that some of our largest gains came from some of our larger and more established stores. Stores like Belleview, Washington; Scottsdale, Arizona and Michigan Avenue in Chicago each had tremendous sales improvement in 2006. Though we are well positioned to take advantage of new store opportunities in the marketplace, it is our existing store base of roughly 100 stores that gives us the greatest confidence to reach and exceed our goals. In addition to the investments made with systems, our folks are finding new ways to capitalize on this information to better serve our core customers. As we learn more about our customer, we know as loyal and supportive as some of these customers are, they still spend a great deal with other retailers, thus giving us a wonderful opportunity to hopefully garner their patronage in other divisions throughout the company. We must continue to strive to carry the very best merchandise that the market has to offer for our customers fashion and lifestyle needs. Through improving our execution in the upcoming years, we feel confident we can achieve our objectives. We're also acutely aware of how fragile this relationship with the customer is and that we must earn it day in and day out one customer at a time. Last year, we share with you our concerted efforts to improve the women's apparel business. Loretta Soft and her merchandising team have gone from assessing the opportunities, formulating a new strategy and are now fairly far along in the implementation phase. The results in women's so far are encouraging because they demonstrate we're heading in the right direction and the customer supports these initiatives. The designer business has always been an important part of our overall mix and plans. It too has contributed greatly in the last couple of years and we feel our overall strategy to carry the best product possible for our customers will continue to evolve, enabling the designer business to continue to be a more meaningful part of our sales. Finally, we would be remiss if we didn't continue to emphasize how important it is for us to be a successful multi-channel retailer. We're uniquely positioned with the customer and the businesses within Nordstrom to serve the customer in the manner they want. Our goal moving forward is to provide a more seamless shopping experience throughout all of our channels. We've committed the necessary resources and are moving down the path to install new inventory systems and are expanding both our fulfillment and call center in Cedar Rapids, Iowa. Most importantly, it takes the commitment and effort from literally every person at Nordstrom to execute this successfully. We feel it's vitally important because of how important it is to our customer. This too is an area that should provide many dividends over time. We appreciate our shareholders’ support and we feel we have the team in place to execute the goals laid out. With the improvement and success we've been enjoying of late, it's certainly helped create an environment that is allowing us to reach new heights. We're committed to communicate with all of you as clearly and concisely as possible as we continue this journey. Now, I'd like to open it up for any questions you may have.

Thank you. (Operator Instructions) Your first question comes from Michelle Clark – Morgan Stanley. Michelle Clark - Morgan Stanley: Does '07 EPS guidance assume any share repurchases? Secondly, CapEx guidance for '07 of $530 million, I think last time you provided guidance, it was actually slightly higher at $550 million. What's causing the decline there? Thank you. Mike Koppel: 2007 assumes approximately $300 million in share repurchase which will most likely start in the second quarter. As far as a $550 million number, I don't recall that. I mean, we've been sharing a $2.8 billion plan over a five-year period, but this $530 million represents our current best thinking on it.

Your next question comes from Charles Grom – JP Morgan. Charles Grom - JP Morgan: On SG&A, despite back-to-back quarters of very strong comps, you're not seeing a big decline in operating expenses. I was wondering if you could explain why for us? Thanks. Mike Koppel: First, we went through a discussion in the script that talked about the fourth quarter. The fourth quarter was primarily comp related, and both the fourth and third quarter were impacted by our accelerating stock price which drives a component of our comp cost. In addition, the fourth quarter was impacted by the acceleration of overall targets in both comp sales and gross margin. Those were the primary components. As I indicated all other fixed costs were pretty much on plan. Charles Grom - JP Morgan: Could you quantify the salary cost in the fourth quarter for us? Mike Koppel: Well we indicated that the impact of those costs was $0.02 to $0.03 in the quarter.

Your next question comes from Jennifer Black – Jennifer Black & Associates. Jennifer Black - Jennifer Black & Associates: Good afternoon and congratulations on a great quarter.

Thank you, Jennifer. Jennifer Black - Jennifer Black & Associates: I just received your new designer catalog and I was a little bit concerned on how fashion forward the merchandise appears. I wondered if you could speak to what percent of your business is designer, how you feel about the fashion influences today, what's the average age of who shops in designer and just give a little bit of color there? Thank you.

I think we've yet to see a time where giving the customers what they want in terms of what's new and most fashionable has deterred us; we really benefited actually from providing newness in fashion across all price points. I guess I can see your point a little bit, but all those books and catalogs are intended to represent the most aspirational view of what the season has to offer. It also is a book that's sent out in a more targeted way. It doesn't go to every single person in our database, so it is more specifically for the designer customer. In terms of what percentage of the business designer is for us, we're not going to disclose that specifically other than to say it's been growing at a pretty healthy clip. Jennifer Black - Jennifer Black & Associates: Can you speak to the fashion influences, as far as where fashion is today with MOD coming back and this new inspiration, how do you feel about that? Do you feel that you've interpreted it correctly throughout the entire store?

Sure hope so. You obviously depend a lot on the buyers being in the market and the experience that they have. Our merchants, we've got us a great team that has a lot of experience and also the relationships we have with the key vendors that really set the trends. We feel like we're really right on the same page with that in getting everything in real-time and feel like we're right on top of what the trends are. Jennifer Black - Jennifer Black & Associates: And you feel like you have enough classic merchandise for the baby boomer customer as well?

I believe we do. We've actually experienced significant growth, particularly in the last six months or so, in women's apparel as it relates to really all customer groups but particularly some of that wear-to-work group where in the past few years we hadn't done as well but that's an improving part of our offer. Jennifer Black - Jennifer Black & Associates: I appreciate your clarification. Thank you and good luck.

Thanks, Jennifer.

Your next question comes from Stacy Turnof – Merrill Lynch. Stacy Turnof - Merrill Lynch: Congratulations on a good quarter. A couple questions on some of these one-time costs. From the securitization transaction, you did indicate $0.02 in the first quarter. How are we going to look at the $0.03 over the next couple quarters? The same question related to the pre-opening. Should that be spread out throughout the quarters? Mike Koppel: In terms of securitization, we'll see about $0.02 in the first quarter and the other $0.03 will be spread out over quarters 2, 3, and early in 4. As far as pre-opening, it's primarily in quarters 3 and 4 with the majority of it in Q3. Stacy Turnof - Merrill Lynch: Great. That's very helpful. Could you give us an update on some of the benefits you're seeing from your markdown optimization systems? Mike Koppel: As we've been indicating, we continue to learn and make progress with markdown optimization. We're just starting to see some benefits in the women's apparel area as we're using it to better plan our markdowns, but at this point to quantify anything that's material to our results, it's probably a little early stage for that.

Your next question comes from Christine Augustine – Bear Stearns. Christine Augustine - Bear Stearns: I wondered if you would talk a little more about your online business and some of the investments that you're making in designer. Is that more salespeople? I wasn't quite sure what or why that would have an impact on your SG&A.

I'll take the online part and maybe Pete can speak a little bit about designer and what's happening in full line stores . In terms of online, we've talked about it and we've broken ground and activity has taken place now. We've had a facility for some time, matter of fact, almost since the inception of the direct division, which is the catalog in Cedar Rapids, Iowa and we are significantly expanding both the fulfillment center and the call centers, so there's a sizeable capital investment there. As well as the original platform was [eComaTrade], and as you know, the Company is on ReTech, so we are implementing ReTech in the direct division and that's also a capital expenditure that's taking place. So there are quite a few investments happening. Even marketing, we've been able to measure that fairly well and so with direct and our online business improving, we're allocating more resources there that warrant that with the business and that's having a timing effect at least on the first quarter. Pete, do you want to talk about designer and what's happening there?

I think when you talk about the investments, it really most specifically speaks to our investment in inventory and we've layered on a fair amount of inventory. The good news is our sales are pretty significantly outpacing our inventory growth but that's a big part of the investment. The other part would be trying to remodel where we have a chance to add certain shops or designer-branded image and concepts. Some of that is in addition to our regular rhythm around our remodels, and so there's been some extra expense there. Lastly with catalog, we're trying to do a better job of marketing more specifically and directly to the designer customer, which is kind of what Jennifer spoke to just a couple minutes ago. Christine Augustine - Bear Stearns: I really was wondering about the size of the online business now, and then if you have any kind of goals, maybe over the medium term as to what percentage that might contribute to the overall company and if that's a business where you would anticipate maybe operating margins that could actually be above what you do at the stores. Mike Koppel: We have stated that our goal is that the online business reach or exceed $1 billion in the next four to six years. We believe over time that as we scale up that business and finish with the investments we're making at the operating margins that come from that business could potentially be higher than the four wall stores, but that's a few years out.

Your next question comes from Deborah Weinswig – Citigroup. Deborah Weinswig - Citigroup: With regards to the turnaround in the women's business, which obviously we've show up pretty strongly in comps since August, can you discuss what inning we're in and how we should think about the women's business going forward?

Well, we've made progress, probably at least as quickly as I think we would have hoped for from the outset, because a lot of the work that happened with the strategy and demographic work that we did, and then making sure we had the systems and the structure in the place to do the job. So we felt like we got traction pretty quickly. It's hard to say exactly how far along we are. It's probably less than, a little less than half the way through, but keep in mind, these are strategies that we're going to continue to update over time. It doesn't stop with what we've done here. It's just really a new process in place to allow us to continue to evolve and refresh, but I think off the initial plan, we're probably close to halfway, I'd guess. Deborah Weinswig - Citigroup: Secondly, with regards to your credit card, can you talk about the penetration there and also how the performance was in the most recent quarter? Mike Koppel: As far as the credit card, our overall credit tender business actually showed a slight increase in market share in the back half of the year which is the first time we've seen that in a long time. We think that has a lot to do with our improved loyalty program. In terms of performance of bad debt, we continue to see a pretty steady performance. Obviously we're coming up against the impact last year where we have the change over in the third quarter and the rates in the fourth quarter last year were unusually good, and so now we're in more of an even run rate. But in terms of the overall performance, our aging continues to be solid and there's no indication that there's any deterioration in the portfolio. Deborah Weinswig - Citigroup: Great thanks so much and best of luck in '07. Mike Koppel: Thanks, Debra.

Your next question comes from Dana Cohen – Banc of America. Dana Cohen - Banc Of America: On the merchandising, is there a regional bias in terms of the acceptance of designer or can you give us any sense of how it may differ by region?

We tend to perform best with designer where we have great salespeople and the store environment to be able to house the product, so it really doesn't have anything to do with the regional bias. There are some store by store opportunities but we found success literally everywhere geographically where we've been able to add the best market has to offer. Dana Cohen - Banc Of America: Has there been any price resistance at all -- category, region -- as you've moved price points up?

No. I mean, not compared to what our sales plans have been, no. Dana Cohen - Banc Of America: Mike, I think you said somewhere on the website is an explanation of the securitization? Mike Koppel: Yes. On the investor relations portion of our website you should find the write up on it. Dana Cohen - Banc Of America: I'm having trouble but I'll circle back later. Can you just give us the rational for the transaction? Mike Koppel: Sure. As a quick background, we had had a portion of our Visa receivables that, we had two separate securitizations. One was off balance sheet. One was on balance sheet. We felt with both securitizations maturing, one this past fall and one this spring, that it made more sense for us to combine it all into one and to get our accounting consistent so it was all on balance sheet. I think in summary, it was all about having a more efficient source of capital and simplifying our financial reporting.

Your next question comes from Dorothy Lakner – CIBC World Markets. Dorothy Lakner - CIBC World Markets: Congratulations on a great finish to the year. I wanted to ask about private label. I think you've talked in the past about wanting to strengthen that side of the business which has always been important to Nordstrom, so I wonder if you could give us an update on that? Secondly, the juniors business. We know we've seen improvement in women's and it looks like maybe the juniors business is beginning to improve as well, so I wondered if you could address that? Lastly, just tagging on to Deborah's question on the credit card, I wondered if you'd share with us, just comparing the customer who comes into your store and buys not using your credit card versus the customer who is on the loyalty program and has the credit card, what the differential would be? Thanks.

In terms of private label, we actually had a pretty successful year with private label. We don't go into it with some kind of plan about exactly how much private label we're going to do. We really try to find the level based on the customer demand and our ability to be able to deliver the design that they want. I feel like our private label programs have really invested a lot in design and speed to market and we're getting better at that all the time, so we've actually had an increase in our private label part of our business that actually represented about 13% of our total business this last year. In terms of what's happening with juniors, you're right. In the last few months, we've had positive momentum in the juniors part of the business and it isn't any kind of outlier now in terms of poor performance. It's right in there with the rest of the women's with a lot of improvement and momentum going for it. Mike Koppel: On the credit card, I would just answer that by saying that every time and every way that we touch our customer, whether it's through our stores, our online store or credit card, we see a significantly larger spend level than with the customer who just participates with us in one of those options. So we do see a higher spend level with the customer that does shop our credit card and it allows us to further target it and create loyalty programs that can hopefully increase that share wallet. Dorothy Lakner - CIBC World Markets: Can you quantify that in any way? I know you've spoken in the past to the fact that the multi-channel customer at Nordstrom spends four times what the single channel customer spends. I think you've talked about that, so, in terms of the credit card, can you give us any color? Mike Koppel: I don't have that exact number with me but we can learn that and perhaps share it in the future.

Your next question comes from Liz Dunn – Thomas Weisel. Liz Dunn - Thomas Weisel: First, an accounting question. On one of your sales releases you highlighted that there would be about a $25 million catch up associated with bad debt expense. Is that embedded in the 278 to 284? Because I had that below the line. Mike Koppel: That is the cumulative impact of this change in accounting treatment and that is included in that guidance for next year which is roughly $0.05. Liz Dunn - Thomas Weisel: Two more questions. Can you address what marketing we should expect to see as you enter brand new markets like Boston? My final question is, is there an ROIC goal through 2009 that corresponds to your margin goal?

This is Pete. I'll take the marketing. Luckily, we've opened up a lot of stores over the last couple years so we have some good experience about what tends to work best. We tend to have the most success if we can do it in a very targeted and grassroots way, and that means trying to reach out to the community, get involved actually with local charities, which is something we do right from the outset. We will do probably more newspaper advertising than we would in an existing market and that's mostly again to create the hype around the store opening, but we definitely have a plan. Boston is a super important market for us being new there and we hope that it's a success. We've got a lot of good plans for that. Mike Koppel: On the ROIC question, our long term goal over the next five years is to have an ROIC in the range of 18% to 20%. We've actually exceeded that as you've seen this year, but with the step up of our capital plan and the new store growth, in addition to bringing all of those receivables on the balance sheet, that range seems to make more sense over the next five years.

Your next question comes from Michelle Tan – UBS. Michelle Tan - UBS: On the gross margin, can you give us some color of the break down between the increase in merchandise margin versus any leverage that you did see on buying and occupancy? Mike Koppel: The majority of the expansion came from merchandise margin. Part of the comp costs that we talked about were also included in the buying and occupancy which took some leverage away in the P&L. Michelle Tan - UBS: Even with that, I mean given the comp, I guess you would have expected to see a little bit more leverage on buying and occupancy. Was there anything else in there that we should look at as being unusual to the fourth quarter? Mike Koppel: I wouldn't say anything unusual other than the comp-related items. Michelle Tan - UBS: One other question on the credit business. It seems like you've been seeing great growth in the contribution from that business over the last year or so. Can you give us a sense of what the dynamic is there and then why you expect it to flatten out going forward? Mike Koppel: When you say flatten out going forward, what are you implying? Michelle Tan - UBS: As a percentage of sales, meaning that the credit contribution, the service charge on a comparable basis. So not looking at obviously the impact of bringing the Visa receivables on balance sheet but more just looking at the service charge income apples to apples. Mike Koppel: Well, we continue to see that element of the business growing and those receivables have been growing at a rate faster than our overall sales, so we do continue to see that growing at a rate somewhat faster. I'm not quite sure I understand where you're calling out as being flat. Michelle Tan - UBS: I guess looking at the full year 2007 guidance, the other income including finance charges is planned at flat. Mike Koppel: Yes, well part of that is because of the impact of the securitization accounting. All of the change, the roughly $24 million to $25 million as it relates to bringing that bad debt reserve up to speed is all going to be recorded in other income. So I think that's what you're seeing. If you go through the write up that we put out there it will describe that.

Your next question comes from Richard Jaffe – Stifel Nicolaus. Richard Jaffe - Stifel Nicolaus: My congratulations for a great quarter and great year. Just drilling in a little bit on the online business and the seamless multi-channel experience to the consumer, could you talk about your commitment to that? Your inventory level that you're keeping in reserve, particularly as you get into some of the designer product online, and how you see that unfolding or how you will be able to manage that between stores and online or direct warehouse business?

Part of our success last year within direct was their improved ability to forecast better and have a better fill rate, and so though you always have a challenge of missing some business, we saw quite an improvement and some of those statistics from what we can tell are towards the top when compared to the industry. So the inventory is one of the reasons why we have felt that the fulfillment center needs to expand because there is some limitation in space and there's a SKU count limitation as well. With the integration that we're working on is we'll have a more seamless ability with the merchants and our sales folks and the customer to navigate between the stores inventory and that inventory within direct at Cedar Rapids, so that opens up a lot of doors for us. In terms of designer, as you may know, we have a designer website that we're pleased with and we're learning a lot with, but a number of these vendors are limited or have some restrictions in terms of what type of inventory within their brands can be online. Over time, that's improving and we're just working very closely with these vendors, because we would like to be their retailer of choice in terms of trying to offer these goods to the customers. So, again, the key is over the next maybe 24 months, how will we continue to evolve? Because when we use the word seamless, by no means are we saying today it is a seamless experience but it's certainly something we're striving for. Richard Jaffe - Stifel Nicolaus: I look forward to it. Thanks very much.

Your final question comes from Adrianne Shapira – Goldman Sachs. Adrianne Shapira - Goldman Sachs: Mike, can you just talk about as far as the gross margin guidance, the 30 to 40 basis points, how much do you think will come from merchandise margin improvement versus leverage on buying and occupancy? Mike Koppel: At this point, it looks like it's roughly half and half. We do see an opportunity to still get some margin expansion, but in terms of our plans which are based on that 3% to 4% comp it's roughly 50% each way.

Thank you. I will now turn the call back over to your speakers for closing remarks. RJ Jones: 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 866-448-4802. There is no passcode required and the replay will be available for 48 hours. Alternatively, 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.

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