Rob Campbell – Treasurer and Vice President of Investor Relations Blake W. Nordstrom – President and Director Michael G. Koppel – Executive Vice President and Chief Financial Officer Peter E. Nordstrom – Executive Vice President and President of Merchandising Erik B. Nordstrom – Executive Vice President, President of Stores

Edward Yruma - KeyBanc Charles Grom - J.P. Morgan Michelle Clark - Morgan Stanley Lorraine Hutchinson - BAS-ML Neely Tamminga - Piper Jaffray Tina Huang - Citigroup Jennifer Black - Jennifer Black & Associates Liz Dunn - Thomas Weisel Partners Bob Drbul - Barclays Capital Christine Chen - Needham & Company, LLC Lance Vitanza - Knighthead Adrianne Shapira - Goldman Sachs David Glick - Buckingham Research Group Richard Jaffe - Stifel Nicolaus & Company, Inc. Erika Maschmeyer - Robert W. Baird & Company Ken Stumpfhauser - Sterne Agee

Hello and welcome to the Nordstrom third quarter 2009 conference call. (Operator Instructions) I will now introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom. You may begin, sir.

Good afternoon, everyone, and 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 third quarter performance and business outlook. Joining us for the Q&A are Pete Nordstrom, President of Merchandising, and Erik Nordstrom, President of Stores. And now I'll turn the call over to Blake.

Thank you, Rob. I'm down in our San Francisco Center store today and the rest of the team's in Seattle, so after I share with you my brief remarks I'll be turning it over to Mike and then he'll be our point person for the questions you have, and we look forward to answering them. You know, just a month ago we were talking about our September results and after that some of you shared some nice congratulations. It didn't feel so good on the one hand having a roughly 2.5% decrease and getting a pat on the back because our business model works when we have gains. No question we were pleased with the improvement. It's therefore gratifying for me to be on behalf of our team today talking about our October results and what's happened with our third quarter. While we recognize that last year at this time there was a precipitous drop with the economy - it dropped just over 15% - a win is a win, and so 6.5% up has really helped and it's done wonders for the morale of our folks in all of our stores. Many of our people are now in the money for some of their incentive compensation, and it's just a lot different and better environment for us to be managing supporting with a little bit more positive reaction from the customer. We've been saying for some time how important it is that the customer is responding to fresh, new compelling product, and we think that really accelerated in this last year or year and a half. We are encouraged by this gain, but I think it's really important that we emphasize to all of you that we do not see a material change with our customer. The customer is continuing to have confidence issues, and there's no question that the economy and other key factors have had a dramatic impact. But what the customer is saying is if there is a compelling reason to shop and it's predominantly around fashion and great product, then they're responding. And so we're encouraged by that, and we continue to try to enhance the discipline of the things in our control to enable us to stay close to the customer and react accordingly. I think it will was maybe two months ago where I read where Michael Exstein pointed out astutely that really every major retailer was talking about their ability to control expenses and labor and capital and inventory, and he questioned or pointed out when are these or which retailers are going to break ahead by taking advantage of some opportunities and showing some top line gain. And there's no question that our business works when we're having increases. And I give Mike Koppel and Rob and our financial team tremendous credit for working with all of our leaders throughout the company to understand the key financial drivers. We really believe being a good buyer, being a good merchant, is being a good businessperson, and I think we've come a long way with our discipline. And so we recognize that many businesses are talking about this, but we hope you're seeing it now consistently in our numbers. So, again, expenses for last month and for the quarter we feel were strong, our inventory position and our execution in the store. We tried to this last year maintain or enhance what the customer has, and literally everything else we do we question as a means to how we can improve or do it differently. Really in essence what I would like to share with you today that I submit there's a paradigm shift, and I want to give you some examples of that, and what I mean by that is kind of our old preconceived notions of how to run the business. For Pete, Erik and myself, we were raised in the shoe business, and for many, many years it was always understood that an appropriate churn to do the volume you needed to do and take care of the customer was roughly a 2 time churn in shoes. Well, now led by [Jack Minnick], we are considerably higher than that. And we don't look at it as, well, we can't do more; all of our merchants now look at some of their key metrics and drivers like churn with a curiosity, with an interest on how they can improve because that's where the customer's responding. When we're able to flow in fresh goods every day, it definitely makes this thing work. And so our ability to listen and respond and react, and we're just that much better or smarter the closer we are to it. So last month one of the questions that came up was are you concerned or do you run the risk in inventory management of maybe being too low? We actually think the opposite. And, again, we think this is a paradigm shift. We went from if you want to have a 10% increase you planned inventories for a 10% increase, to the last couple of years we felt that a delta in between there gave us the flexibility. So if you wanted to be flat, you might plan down 3. Well, today we think that can be even larger, and we don't know how high is high. So whether it's the systems and the tools and the new rhythm, working with our vendor partners, there's just so many exciting things taking place that enable us to be more efficient and, again, most importantly, give better service to sell more to our customers. So I really want to take this opportunity to applaud Pete and our general merchandise managers for really making some significant headway. So across the board, whether it's expense and our execution in the stores, there's been tremendous gains, but percentage-wise from a discipline, we think our merchants have made some of the most headway. It doesn't mean that by saying this we're crossing it off our list nor does it mean in any shape or form that we've got it figured out - and it's not fragile because there'll be other ways - but we do believe that it's getting more engrained into how we do business, and that gives us a lot of encouragement going forward. So as we look at the balance of this year and at this time of the year we're in the process of how we plan the following year, we really don't see a material change. And, again, we think we're very well served planning our expenses, our labor, our capital, our inventories in a prudent and conservative manner to again give us that flexibility and to give us that upside. Multi-channel, some of you noted when we announced our October sales, when we released full-line and Rack, that the Direct Division had a good month. Part of that was in September we had an additional release where the inventory system in Cedar Rapids, our Direct Division, is now the same and linked to our stores. So we have one view, and so it increased greatly the availability, the depth and breadth of inventory and, again, enhances the service level we can give our customers. So over time we've been able to evolve on this multi-channel front. We've talked a lot about it. Again, it's grounded in the customer. It's how the customer wants Nordstrom to operate - 7 days a week, 24 hours a day. That's our strategy. That's how we're applying our resources. And so being able to for the customer buy online and pick up in store. Having our salespeople being able to, if we're missing an item, do what we call the DTC - Direct to customer - finding it in another store. For the customer to go online and look at our inventory in Cedar Rapids and now to be able to leverage the entire inventory throughout the company, it just represents tremendous opportunities. There's significant learnings that are coming from this about our allocation of inventory and, again, our supply chain, but we view it as a real positive and view it as another confirmation on behalf of the customer in the feedback that they're giving us that this multi-channel strategy is super important to our future growth. We really think at this time it's not a function of what are we going to do next. There's a lot of opportunities in front of us. We still think we have an opportunity to do what good buyers do and that's to edit. And so how do we stay focused? How do we take our limited resources and apply them to the areas that the customer values the most? And so in addition to our platform and our strategy, we're trying to at this moment in time where things are improving slightly to see what areas we could go on the offense and see where we could maybe accelerate some things. So, again, things like the multi-channel, we're encouraged. Our Rack Division, as you know, has had a number of years of success, starting with Laurie Black and the strategy her team put forth to really try to address and improve the experience that a customer has in the Rack through ensuring that our stores are easy to shop, that they're sized, they're filled in, that we have the best brands, the best products, the best values, and that we have quick checkouts. That's good customer service for the customer. About three years ago [Scott Medine], who now leads our Rack Division, got with his team and felt like there was some upside, and so we have been taking advantage of that the last two or three years. And you have seen that with some of our growth in the Rack, and we're encouraged by that. So in some respects it complements the full-line stores and a means to efficiently clear merchandise from them that really is an independent strategy focused on our customer, and we see a lot of opportunities there. I've already mentioned the multi-channel, and I think it's also important to point out our Credit Division. You probably saw in the notes, and Mike will talk about it in more detail, that we felt it was prudent with unemployment popping up a little bit to look at our future reserves, and I believe we took another $6 million. But separate of that, the Credit Division is important to our strategy. It enables us to stay close to our most supportive and loyal customers. Their spend is significantly more when they use our card, and we believe our service levels are better. And so by having a Credit Division we think we can improve our relationship, the loyalty, the spend and the retention of our best customers. So we're encouraged by that, too. So as we look forward, we're not economists. We don't know what's going to happen in the balance of this year and next year. But we are really encouraged about the position the company is in, whether it's financially, whether it's the content or aging or quantity of our inventories, whether it's the expense discipline or how we're applying the shareholder's dollars. In some respects, though it's a difficult economy, we may be as positioned as well as this company has ever been. And so, again, it doesn't assure our success going forward, but it gives us the best opportunity we think to win and succeed, and we're looking forward to continuing to demonstrate that through our actions and show it to you in our results. With that, I'd like to turn it over to Mike. Michael G. Koppel: Thanks, Blake, and good afternoon, everyone. As Blake commented, we are encouraged by the results in the third quarter. We experienced an improving sales trend in each month of the quarter, and generated increases in year-over-year transactions in the months of September and October. That said, we recognize that much of this improvement reflects comparisons to the deteriorating sales trends of a year ago. While we continue to make progress on improving our service and product offering, it's our view that customers remain cautious in their purchasing, and as a result we continue to be prudent in how we plan our business. Third quarter earnings per diluted share were $0.38 and earnings before interest and taxes or EBIT totaled $172 million. This is an increase of 15.2% in earnings per share and an increase of 34.9% in EBIT compared to the same period in 2008. Total retail sales increased to $1.87 billion, up 3.5%, and same-store sales declined 1.2%. A number of categories generated positive same-store sales results during the quarter. Highlights for multi-channel, which includes full-line stores and Nordstrom Direct combined, were fashion jewelry, women's better apparel, and shoes. Full-line same-store sales decreased 4.2% in the quarter, an improvement over the 12.3% decline experienced in the second quarter. The Mid-Atlantic and South regions were the top-performing geographic areas for full-line stores on a year-over-year basis, with the Mid-Atlantic and Northeast achieving the largest sequential improvements over the second quarter. Sales in our online Nordstrom Direct business increased 16.4% in the quarter. During the third quarter we updated our inventory platform to allow online orders to be fulfilled from our stores. This continues our ongoing effort to improve our customers' experience by providing them with greater access to more of our inventory whenever and however they want to shop. We believe this enhancement in serving our customers had a positive impact on our Direct sales for the quarter. Finally, Nordstrom Rack continued its sales growth with a same-store sales increase of 3%, the third consecutive quarter of positive same-store sales. Gross profit as a percentage of sales increased approximately 90 basis points for the quarter. The improvement in merchandise margins were partially offset by the impact of an increase if performance-related expenses included in buying and occupancy costs. During the quarter we experienced an increase in demand that was greater than planned. We ended the quarter with inventory per square foot down 10.7% and sales per square foot down 1.2%. Having a fresh flow of receipts into the stores to provide customers with newness and fashion is critical to our business. We continue to focus on flexibility in managing inventory. We've demonstrated that we can achieve an improvement in sales while maintaining inventory discipline, and we're confident that we'll have a solid flow of merchandise throughout the holiday season. Retail SG&A increased $10 million compared to last year. Adjusting for new store expenses, retail SG&A decreased $2 million. During the quarter our fixed expenses decreased year-over-year, but our performance-related costs increased due to the improved sales and earnings results. Our ongoing emphasis on expense management, along with the improved top line, led to retail SG&A as a percent of sales decreasing 37 basis points over last year. I'd like to take a moment and talk about longer-term earnings expectations. For some time now we have focused on leveraging our business model to achieve greater earnings efficiency. A metric we use in our business is EBIT flow-through, which measures our ability to produce earnings on incremental sales. During the period of 2002 to 2007, due to the combination of sales growth and EBIT flow-through of 25% to 35%, we achieved peak operating margins and return on invested capital or ROIC. As our business gets back to a more normalized pattern of sales growth we expect to achieve the 25% to 35% EBIT flow-through and as a result increase our overall profitability and return on invested capital. Third quarter credit card revenue increased $21 million over the same period last year. Our delinquency rate in the third quarter was 4.9%, which is higher than our second quarter rate of 3.7% and also above our internal plans. The majority of this increase in delinquencies was caused by a change in the timing of payment due dates. We made this change during the third quarter in order to comply with new regulatory requirements. We believe that this increase is temporary and our delinquencies will adjust within the next few quarters. Write-off dollars increased $22 million year-over-year to a rate of 9.3% of average receivables, which is in line with our plans and lower than our second quarter rate. In the past we have stated that there is a correlation between unemployment rates and our write-off rates. Since the first quarter we have been using an unemployment projection of 10% to 10.5% in calculating our bad debt reserves. While we still believe this is a reasonable range, the speed at which we reached this range has accelerated. As a result, we have increased our bad debt reserve for the quarter by $6 million. Now I would like to comment on our debt and cash position. In the beginning of the third quarter we finalized the renewal of our three-year $650 million senior unsecured credit facility. We plan to complete the renewal of our one-year $300 million variable funding note in the fourth quarter. We believe these actions, coupled with steps already taken this year, provide us with ample liquidity for the foreseeable future. We finished the quarter with an adjusted debt-to-EBITDA ratio of 2.8 times. While higher than our 2 to 2.5 long-term target, it was in line with our expectations, lower than the 3 times from the second quarter, and well within the range to maintain our investment-grade rating. We believe that we can return to our target adjusted debt-to-EBITDA range of 2 to 2.5 within the next 12 months. We ended the quarter $484 million of cash. This is an increase of $416 million compared to the same period last year. As evidenced by our cash balance, we continue to see improvement in the cash generated from our business. Through improved earnings, working capital initiatives and lower capital expenditures, we ended the third quarter with year-to-date free cash flow of $287 million and expect free cash flow to exceed $300 million for 2009. Net capital expenditures should total approximately $280 million for 2009 and between $325 to $375 million for 2010. We expect to open three full-line stores and approximately 15 Racks next year. We plan to return to remodeling five to six stores in 2010 after scaling back to two remodels this year. We did not reduce maintenance capital expenditures and will continue to keep our stores well maintained. We also plan to maintain our technology spend year-over-year at approximately $40 to $45 million. Over the next five years, assuming two to four full-line store openings and 10 to 15 Rack openings annually, we anticipate capital investments of approximately $2.1 billion, which is a decrease from the $2.5 billion plan we shared at this time last year. Overall, the third quarter performance exceeded our internal plans and reflected continued improvement in our sales trends. Given these results and the comparisons against the tougher business conditions experienced in last year's fourth quarter, we are updating our annual earnings per share guidance from a range of $1.50 to $1.65 to a range of $1.83 to $1.88. As a reminder, our annual earnings guidance includes the $0.06 tax benefit we received in the first quarter of this year. With that, I'd like to turn the call back to Rob.

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 an opportunity to ask a question. If you have additional questions we'll ask that you return to the queue. With that, we'll take the first question.

(Operator Instructions) Your first question comes from Edward Yruma - KeyBanc. Edward Yruma - KeyBanc: In trying to piece together two comments that you made, first on changing the amount of inventory turns in select departments and two, the online integration with the in-store inventory, over time how should we think about your inventory levels and your ability to take out inventory from the stores? Peter N. Nordstrom: That's a good question. We've always kind of measured it in their own individual styles with relation to Direct or full-line stores, so we've got to combine that. And I think Mike and Rob in future dates will probably be able to give you some more indication exactly how those numbers play out when you combine them. I think Blake was right that there are some new context being set for us in terms of how to plan most effectively and efficiently given we have the ability to leverage and access all the inventory that we can now across all the channels, so it's managed in context. Michael G. Koppel: I would just add just a couple other thoughts onto that and that is, with the implementation of the latest release of our multi-channel inventory platform, we're still learning. And there's a lot we've learned this quarter and there's going to be more we're going to learn going forward, so we believe, as Blake implied, that the way we're going to think about churn is going to change. But at this point in terms of putting any value to that, I think it's still too early.

Your next question comes from Charles Grom - J.P. Morgan. Charles Grom - J.P. Morgan: Just some questions on your SG&A line, Mike. In the third quarter you gave us a couple of the buckets - the total up $10 million, the pre-opening costs, I guess, up $12 million. Can you give us the breakdown between the dollar amount of fixed expenses that are down versus the performance base that were up so we can kind of just look at the whole pie? Michael G. Koppel: Yes, Charles, first, just to clarify one thing, the $12 million that was up was the cost of the stores being open, not the pre-opening costs. So those are permanent costs. But in terms of breaking out, you know, we normally don't break out the layers of what was performance in other items, but what I will say I think just to give it a little bit more context is that our programs to reduce our fixed and overhead costs continue to perform very well. They've actually been performing better than the original plans all year. Charles Grom - J.P. Morgan: My second question has to do with, just again, on the overall SG&A, you were formerly thinking about $100 to $150 million decrease. You're now thinking $50 to $40 million decrease. Michael G. Koppel: Right. Charles Grom - J.P. Morgan: Can you give us a little sense of how much of that is because of the better sales and they're therefore variable expenses? Michael G. Koppel: Well, a portion of that is due to higher sales volume and thus it's related to selling costs, and the other portion is due to the incentive costs related to the improved overall sales and earnings of the company.

Your next question comes from Michelle Clark - Morgan Stanley. Michelle Clark - Morgan Stanley: Mike, if you could just clarify, just to follow up on Chuck's question, just a portion of the increase in SG&A that's coming from higher sales versus an increase in the incentive comp, a rough breakout? Michael G. Koppel: We really haven't broken that out, Michelle. Michelle Clark - Morgan Stanley: Okay. And then in terms of a pickup in the business, if you can just detail for us where you're seeing the greatest pickup versus year-to-date trends. Is it coming in your good, better, best price points? Peter N. Nordstrom: Actually, I was just kind of looking at some of that breakout by our largest vendors, and interestingly, of the top 10 increases from our largest vendors, seven of those vendors would be rich/pride-type vendors, which I guess, if you had that kind of three-tiered example you talked about, would be kind of a middle tier for us; clearly, not our least-expensive stuff. So I think that's really encouraging. We're trying hard to maintain a balance. All our merchandise strategies are really centered on the customer, and we're going to evolve along with them. Price is clearly more important than it has been in the past, but it doesn't mean that, as Blake alluded to, that newness and the fashion and all that, almost regardless of price, that that's working as well. So there's a real sensitive balance that we continue to manage every day.

Your next question comes from Lorraine Hutchinson - BAS-ML. Lorraine Hutchinson - BAS-ML: I just wanted to follow up on the Credit SG&A guidance. You took that up about $20 to $25 million, and I was just wondering what your initial expectations had been for the delinquencies and some of the write-offs, and then what we should look to in terms of the unemployment rate or the metrics you're tracking to build expectations for the next few quarters. Michael G. Koppel: Sure, Lorraine. Clearly, I pointed out that delinquencies were higher than we expected. We believe and know that a good portion of that is temporary, but we did see an increase after we had seen some leveling off for about a quarter or so. Interestingly enough, our write-offs were slightly below last quarter and roughly where we thought they would be so no surprise there. But I think the thing that kind of gave us some caution is the acceleration of unemployment. And with unemployment seemingly being higher than anticipated, just last week we did adjust our models and, as a result, required higher reserves. In terms of going forward, I think that relative unemployment rate is still something we're looking at. But it feels like we're getting there sooner and perhaps we might be there a little longer, and we factored that into our models. But I don't think anything has really changed materially in terms of the numbers. It's more been in terms of the speed with which we've gotten there and the length with which we'll stay there.

Your next question comes from Neely Tamminga - Piper Jaffray. Neely Tamminga - Piper Jaffray: Just right here on the Rack, two things I want to ask about. One is, managing the flow of goods for Rack, obviously inventories are tight and I think it's a noble cause to really manage for fast returns and flow, but just wondering how the balance between full-line and Rack works with your inventory and are you going to be comp constrained to be able to deliver some good comps over at Rack? Maybe talk a little bit through that with this new strategy on churn. And then secondly related to Rack, could you just talk about the reach of the concept overall and has any of that really changed for you guys as you look into the years ahead? Erik B. Nordstrom: The Rack, there are two main components of our inventory - the full-line store transfer goods and special purchase. And if we do a good job of buying special purchase, that can be quite flexible, so as we have more goods to clear from full-line stores, our full-line store percentage can go up and if we have less that percentage can go down. The key is really in the quality of the special purchase buys, and the Rack has been doing a terrific job of that, of getting the brands that our customers want in our stores. It's another real strength of the Rack business model that there's a flexibility there to not only support the full-line stores in keeping our full-line stores clean and able to bring in new merchandise but also in driving their business. So as that percentage goes up and down, we don't see that materially affecting our Rack sales results. And you had a second question. What was that? Neely Tamminga - Piper Jaffray: About the reach of the concept in terms of what markets and MSAs you can go into with Rack. Erik B. Nordstrom: Well, our Rack model works best when it's close to a successful full-line store. We are testing some stand-alone markets with the Rack, not in a big way. The vast majority of our Rack growth will be selling in and following where we have full-line store growth.

Your next question comes from Tina Huang - Citigroup. Tina Huang - Citigroup: I'm just wondering on the CapEx guidance for this year it looks like it's gone from $325 million down to $280 million now for the year, and I was wondering if you could clarify what drove the decrease in expectations there? Michael G. Koppel: It's primarily just the overall cost of several projects that have come in lower than what we expected.

Your next question comes from Jennifer Black - Jennifer Black & Associates. Jennifer Black - Jennifer Black & Associates: I wondered if you could talk in more detail about the women's business. You've done a great job. Are there any departments that you feel have significant opportunities? That's my first question, and then I have a follow up. Peter N. Nordstrom: We have opportunity in all the women's departments because if you look, again, over a longer historical context, we have some ground to make up. We lost some there over the years, as you know, as we've talked about what's gone on with our women's business. But we're on a good pace now with solid momentum. The women's divisions have collectively been outperforming the full-line store total for a little while now. That's really encouraging to see, particularly given it's such a large segment of our business. I'd say in particular the better price point segments have performed pretty well. The Point of View department would be one where we're having pretty solid increases in. We're also having some pretty good increases in some specific areas around Bridge, namely, I'd say, the individuals departments work well, a lot of that related to the strength that we're having with Classiques, which is, you know, Jennifer, one of our own brands. So there's some things to focus on that are working, but I would think collectively we're not particularly satisfied with our women's results yet. We've got a ways to go, and we still think we have quite a bit of headroom to keep improving. Jennifer Black - Jennifer Black & Associates: Which department is doing the poorest of the women's? Peter N. Nordstrom: Well, women's designer apparel would probably be the toughest spot, and that's probably doesn't come as a big surprise; we've talked about that for a little while, that the designer segment was particularly challenged during all this economic stuff that's going on. More specifically, I would say maybe our plus size business. We have some opportunity there. We've had a little bit of softening in some of our contemporary business as it relates to the [inaudible] department more specifically, and I'd say that is really just the shift of what's happening with bottoms. Premium denim still matters, but I think that there's more pressure on a balance of prices there. And so while we may be selling the same amount of units, it might be at lesser price points than we did in previous years. And then also, you know, we're selling a lot of skinny pants and leggings. Frankly, leggings are a lot less expensive than premium denim. So there's some price point evolution there that I think has made things a little bit challenging.

Your next question comes from Liz Dunn - Thomas Weisel Partners. Liz Dunn - Thomas Weisel Partners: I guess my question relates to gross margin. Can you provide the breakout of merchandise margin versus the deleverage on comp? Then also just some color on average unit retail and IMU? Michael G. Koppel: Sure, Liz. As you know, we don't usually break out the specifics that are in gross profit, but I will say that the improvement in gross profit was all driven by merchandise margins and it was partially offset by some of the increased incentive costs that are in buying and occupancy. And so that definitely was the driver of the gross profit. In terms of the AURs, Pete, you want to cover that? Peter N. Nordstrom: Yes, I would say that in terms of the price on what we're offering on the floor this last quarter, if you exclude the cosmetics area out of that - that's stayed pretty flat - we're down about 10% in average price that we're offering to the customer. I would say that that wasn't a top down decision made literally a year ago. It's just another example of our model responding to the evolution of where customers are wanting to buy stuff, and that's kind of where we've settled in of late. Liz Dunn - Thomas Weisel Partners: But have your IMUs gone down as much? What's happened with IMU, I guess, in that equation? Peter N. Nordstrom: Well, no. Interestingly, I think when this first started we tried to really sharpen our pencil in terms of offering great value, but what's happened over time is that's just not clearly in our court; it had to do with what the vendors are offering as well. I think the vendors have found ways to take costs out of product. I think we've found ways to tighten our markups. And all this is balancing itself out. But in general, if you just look at the IMU part of it, it's not changed much.

Your next question comes from Bob Drbul - Barclays Capital. Bob Drbul - Barclays Capital: Mike, I guess the one quick question that I have for you is on the bad debt expense. I think you gave us the additional $6 million. I think last quarter you said $215 million to $225 million, clearly up from there. Is there a number that you're thinking about for the full year now in these expectations? Michael G. Koppel: Well, I think with that additional $6 million, it starts to put it up in the $225 million to $230 million range for the bad debt expense for the year. But clearly, you know, we'll continue to monitor what's going to happen in the fourth quarter and any changes in the pace of business will dictate that. Bob Drbul - Barclays Capital: And then just a quick question on the inventory. With the tighter inventories, how are you thinking about spring buying going into next year at this point in time in terms of maybe comp inventory or total inventory plans? Peter N. Nordstrom: What we're trying to do is not look at it so much in terms of a comparison to last year because last year was so challenging and such an anomaly, particularly as it relates to our inventory efficiency and our margin and markdown rate, so we kind of used some historical context over the last four or five years to try to plan in an area that we know works well for us and can drive results. So we feel like we've reconciled the inventory level to the demand. We're in good shape with that. We actually have had to raise our plans a little bit of late because, as you know from the sales we reported here, we've exceeded those plans. That's a good news story for us, and it's given us the opportunity to really focus on where we want to add the inventory. We've been able to do that through replenishment items and some really key items and trends. And so we're feeling good about the quality of our inventory right now.

Your next question comes from Christine Chen - Needham & Company, LLC. Christine Chen - Needham & Company, LLC: I just wondered, Pete, back off of a comment when you answered Jennifer's question about premium denim and I guess the contemporary space in general, is it really price point or is she looking for fashion and if the fashion is there is price point an issue both on the bottoms and tops side? Peter N. Nordstrom: Well, to follow up that, I mean, premium denim's still a great classification, and we're selling lots of it. I mean, there's some transition in silhouette, but if the skinny pant thing is working really well, a lot of that has to do with someone saying hey, if I want something new it might be in the form of a ponte pant or knit legging or something like that, which just almost every time has an average price quite a bit less than a pair of premium denims. So it's not that they don't like denim; it's just keeping up with whatever's going on with that trend and how to bring newness to their wardrobe. So it's great that it's new and that's creating a lot of sales for us, but I think just in terms of item for item, average price against average price, it's probably going to be a bit less in that bottoms category. Christine Chen - Needham & Company, LLC: And what about on the tops side in contemporary? Peter N. Nordstrom: Well, tops actually is the place where we might have an opportunity to improve some. There's a lot of good business with sweaters still, and coats have been strong as a third piece to what a woman's wearing in her wardrobe, the boyfriend blazer kind of an idea. So that's given us great opportunity to add multiple sales beyond just a top.

Your next question comes from Lance Vitanza - Knighthead. Lance Vitanza - Knighthead: Can you talk a little bit about your ability to gain share at the expense of some of the higher-end guys like Neiman and Saks, and then I have a follow up as well. Peter N. Nordstrom: We're just trying to do what we do, and we're trying to take care of our customers as well as we can. I guess maybe that could come at the expense of some of our competition. We don't really look at it so much that way. I think the fact that we've had our inventories in line and we haven't had to play catch up with that, it puts us in a position where we're just well positioned going forward. We've created some open to buy for ourselves, and I think the newness and quality of our overall inventory position is pretty darn good right now. So I can't speak to what it is like at our competition, but when you look at the fact that our inventories are fresher and newer and cleaner and that we have a bit more breadth, maybe, to our inventory offered than Neiman would, we think customers respond well to that.

Your next question comes from Adrianne Shapira - Goldman Sachs. Adrianne Shapira - Goldman Sachs: Mike, I have two questions. First perhaps give us an update on California. You had called out some of the other regions. Anything about improvement in California? Michael G. Koppel: Well, California did show improvement, but the relative improvement was similar to what we saw in all the other regions, so it's not like California has shown any kind of accelerated improvement versus the other regions. We are seeing a little bit more improvement in Northern California than we are in Southern, but I think that's about the extent of what we're seeing there. Adrianne Shapira - Goldman Sachs: And then, Pete, maybe on these sale events - we know you're in your half-yearly now - maybe give us a sense, anything you can share with us in terms of how you're thinking about these events given the lean inventories, how you're planning them, how they're tracking, the customer appetite. It sounds as if down 10% in terms of AUR is the right number, so maybe anything that could shed light in terms of the promotional cadence and how things are tracking. Peter N. Nordstrom: We're planning for the same promotional cadence. I think what's changed if you look at it really more over a 5 to 10-year period is that where we used to use just a couple of clearance events to clear out seasonal merchandise, we markdown in real time now based on how things are selling, with markdown optimization. So there is always some product that we're clearing out to some degree on the floor. And, again, this just creates an opportunity for us to trade that type of inventory for something that's new. This has been going on for awhile, and I think the outcome of that, if you were to just look at our bottom line results and gross margins, is that that's been a pretty good thing for us. So we're continuing on that track and try to be handling those inventory situations on a daily basis.

Your next question comes from David Glick - Buckingham Research Group. David Glick - Buckingham Research Group: Pete, a question on the footwear business. I was wondering if you could speak to the relative outperformance of it versus the total store trend? Clearly, given the high penetration of the business and the fashion trend going on in boots that it's probably a big overall comp driver for the company, and I was wondering if you could give us some color on that. And then how does this trend translate to spring? Obviously, boots do not translate to spring, but do you expect the same type of momentum in footwear in spring? Are you seeing any trends there that translate maybe from a fashion perspective that's good in sandals, and how do you think about the business for spring relative to the overall plan? Peter N. Nordstrom: You're right. When the shoe business is strong and there's a lot of good trends for us to capitalize on out there, it's good for us because it's an important and large segment of our business. I think our people have done a pretty good job of executing. There's no question the boot thing has been important for us through fall and will continue to be through winter. In terms of how that plays out for spring - and, again, it's boots at all prices; we're selling in all our women's departments, from the most expensive to the least expensive we have to offer, we're selling all those boot categories or boot brands and styles well - the boot thing should continue on through spring. It won't be as many as you have in fall, but it's still a relevant trend for us. Just in talking to our store buyers and merchant leaders, they're feeling pretty good about what the market has to offer and our ability to be able to deliver that for our customers, so I think you should expect to see the shoe categories perform relatively well for us as we go forward. David Glick - Buckingham Research Group: And just a quick follow up for Mike on the credit card revenue line. Once we anniversary the rate increase from last year, how do we think about modeling that going forward? You guys have commented that you still expect to see some modest continued growth on the credit card revenue line. I'm just wondering if you have any updated thoughts on how we should think about that line on the income statement. Michael G. Koppel: David, we haven't quite anniversaried some changes we've made in our rating and won't until some time next year. We'll give some more visibility into our expectation as to where we see credit card revenue for next year, but I think suffice it to say it's a function of balanced growth and it's a function of payment activity. And we've seen a little; some of our revenue growth has been due to some growth in the actual balances combined with an increase in rate. But when we talk about next year's numbers in February we'll give you some more insight into that for next year.

Your next question comes from Richard Jaffe - Stifel Nicolaus & Company, Inc. Richard Jaffe - Stifel Nicolaus & Company, Inc.: A quick question on the Direct business. I guess there appears to be a lot of opportunity there. I just wanted to hear your thoughts on expanding the choices, the customer opportunities on the Internet or through ecommerce to be actually broader than the store offerings. And then have you thought about or what do you think about some of the outreach opportunities - social networking, blogging, Twitter, celebrity tie-ins, all the things that are happening through electronic medial. Peter N. Nordstrom: In terms of broadening our offer on Direct, it's a little early to say. I think Mike put it well earlier that we're learning a lot of things right now about our ability to be able to leverage the different channels to maximum benefit for our business toward the customers. It probably wouldn't be a good idea for us to get too far afield, and we're trying to be really aligned with our product, what's happening in the stores and what's happening online. But there might be an opportunity if there's a brand that we carry that we can carry more styles and SKUs online than we could literally in a store. So we're going to keep working on that and, to the extent we can do it efficiently and drive outcome, we'll keep trying to expand it. In terms of the social networking part of how to drive business for us, we're right there with everybody else, completely aware of the potential of that but without really knowing exactly how to exploit it to its maximum benefit. So we're trying a lot of things. I think we've got a healthy sense of curiosity about how it might be able to help us. Our customers are there. They want to be communicated with in those venues. So we're going to keep working on some things to see if we can connect better that way. Richard Jaffe - Stifel Nicolaus & Company, Inc.: Should we look for tweets from you guys or from some of your fashionistas? Is that kind of thought process going on? Peter N. Nordstrom: I don't know if Blake's going to start tweeting or anything, but we do have some people that are tweeting in our company. We have some store managers and some merchants, so there's a bit of this activity going on right now. We're just continuing to monitor it and try to be curious about trying new things to drive business.

Your next question comes from Erika Maschmeyer - Robert W. Baird & Company. Erika Maschmeyer - Robert W. Baird & Company: I have a couple of follow up questions. You mentioned that Classiques was doing well. Have you seen an increase in your penetration of private brands due to customers being more value focused? Peter N. Nordstrom: A little bit, but when you look at the plans were made and the lead times required for our private label, our inventory really isn't in a position to have it outperform to any major degree given that we've scaled it back pretty far and can't just ramp it up that quickly. We believe that there's an opportunity for us to do a better job with our private label. Historically, we've been anywhere between 11% to 20% of the full-line store business, and we're down towards the lower end of that now. But we would anticipate it'll improve some this next year and hopefully continue to grow a little bit because, to your point, it tends to offer good value to the customers and they're responding well to it. Erika Maschmeyer - Robert W. Baird & Company: And then could you talk about are there any particular reasons why you think you saw the greatest sequential improvement in the Mid-Atlantic and Northeast? Erik B. Nordstrom: Nothing in particular. Really, the West Coast is toughest for us - and, again, improved business in the West Coast, as Mike said, but relative to the rest of the regions, California plus the Northwest has lagged behind the average. All the other regions of the company have taken their turns at being at the top of the region. So Mid-Atlantic most recently and I think we, from an execution standpoint, have a lot of good things going there with our team there, but nothing from the market there that stands out.

Your next question comes from Ken Stumpfhauser - Sterne Agee. Ken Stumpfhauser - Sterne Agee: Mike, I was wondering just if you could perhaps let us know if in the fourth quarter, considering where your gross margin guidance is and where inventory per square foot is down 11%, if it's reasonable to infer that you're expecting merchandise margins to be up and consequently, if that's the case, if you're also expecting for the fixed cost component again to offset that to a certain degree? Michael G. Koppel: Sure, Ken. Well, yes, certainly in the fourth quarter our plans do imply an improvement in margin from last year's results, which I think everybody recalls were pretty difficult because of the deceleration in sales and the excess inventory that the industry had. In terms of the costs offsetting that, I don't know if we're talking about costs totally offsetting that. I think we are looking for some improvement in our earnings relative to what was implied in prior guidance. And, you know, if you were to look at the overall earnings flow-throughs that these numbers imply for the third and fourth quarter, I think they're pretty good. So we expect to continue to leverage the P&L. Ken Stumpfhauser - Sterne Agee: I think previously you'd kind of implied that merchandise margins were down 300 to 400 basis points last year. Are you expecting to recapture all of that or just a portion of it? Michael G. Koppel: No, we're not expecting to recapture all of it, just a portion of it.

Thank you, and I'll now turn the call back to the speakers for closing remarks.

Thank you. This concludes the Q&A and this concludes our call for today. Thank you for joining us. As a reminder, a replay of this call will be available for 90 days on the Investor Relations section of Nordstrom.com under Webcasts. Thank you for your interest in Nordstrom. Goodbye.

Thank you. And this does conclude today's conference. Thank you for participating. You may now disconnect.