Peter Nordstrom - Executive Vice President, Director and President of Merchandising Michael Koppel - Chief Financial Officer and Executive Vice President James Nordstrom - Executive Vice President and President of Nordstrom Direct Robert Campbell - Vice President of Investor Relations and Treasurer Blake Nordstrom - Principal Executive Officer, President and Director Erik Nordstrom - Executive Vice President, Director and President of Stores

Dana Telsey - Telsey Advisory Group Michelle Clark - Morgan Stanley Richard Jaffe - Stifel, Nicolaus & Co., Inc. Robert Drbul - Barclays Capital Adrianne Shapira - Goldman Sachs Group Inc. Kenneth Stumphauzer - Sterne Agee & Leach Inc. Wayne Hood - BMO Capital Markets U.S. Deborah Weinswig - Citigroup Inc Erika Maschmeyer - Robert W. Baird & Co. Incorporated Jennifer Black - Jennifer Black & Associates Neely Tamminga - Piper Jaffray Companies David Glick - Buckingham Research Group, Inc. Edward Yruma - KeyBanc Capital Markets Inc. Lorraine Hutchinson - BofA Merrill Lynch

Hello, and welcome to the Nordstrom 2010 Fourth Quarter and Year End 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 one hour and will include about 40 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. They will discuss the company's fourth quarter and fiscal year 2010 performance, the outlook for 2011 and today's announcement on HauteLook. Joining us for the Q&A are Pete Nordstrom, President of Merchandising; Erik Nordstrom, President of Stores; and Jamie Nordstrom, President of Nordstrom Direct. And now I will turn the call over to Blake.

Thank you, Rob, and good afternoon, everyone. On behalf of our team, we're excited to be able to share with all of you our results. Our fourth quarter and 2010 year end numbers exceeded our plans. The team did a good job of staying focused on the customer and our areas of discipline, including inventory management, expenses and what takes place at point of sale. These efforts contributed to results that are now at or above our historical highs in some key areas. We ended the year with same-store sales up 8.1%. We think it's important to look at this on a two-year basis, and our combined 2009 and 2010 numbers reflect a 3.9% same-store increase. In 2010, we achieved record sales of $9.3 billion. Our regular price selling is back to historical high levels as well. We've made a concerted effort on inventory turn, and for 2010, we also reached a historical high of 5.6. Merchandising is a real strength and a big reason for our success. Our buying team demonstrated thoughtful planning, sharp editing and disciplined execution throughout the year. We are also seeing improvements in productivity, with sales per square foot of $397, approaching pre-recession levels though still below our peak of $435 from 2007. As good a year as 2010 was, we know we can do more. In the past, we've been a customer-focused organization. Going forward, we want to instead be a customer-driven organization. Our strategy remains grounded in the customer through service, merchandise, multi-channel and working to have the best people on our team. It requires us to continually reevaluate our connection to the customer, our strengths, our opportunities and how we can individually and collectively be faster and more nimble while enhancing the capabilities throughout the company. This view creates an ongoing review of our business and a desire to be proactive on behalf of the customer. It means putting the customer in the driver's seat and setting aside our own notions of how the customer wants to be served. For some time now, we've been doing a pretty extensive review of the private-sale sector, and we're pleased to announce today that we have entered into an agreement to acquire HauteLook. What's exciting about the addition of HauteLook to our company is how together we can better serve our customers. We know the way our customers shop for fashion is changing rapidly. HauteLook provides a platform of speed, capability and innovation to support our customer-driven strategy. HauteLook was founded in 2007 by Adam Bernhard. In this short time, their business has evolved to one that we admire and respect. We've been impressed by their significant growth and how customers have responded to their model. Together, we will continue to grow and innovate with a focus on delivering a great shopping experience. We are looking forward to partnering with them. Nordstrom Direct continues to be our fastest-growing part of the business and adds to the Nordstrom experience that our customers expect. The online business is an important cornerstone of our growth strategy, and HauteLook will contribute to our overall results in this space. They are a talented team that complements our business and will help us to develop new capabilities. Looking ahead, technology, online and social networking are all areas where we're working on providing the kind of functionality that our customer needs in order for us to be their store of choice. Just as when we committed to improving the multi-channel experience, we believe these areas represent our next big opportunities to address service and deliver meaningful results. Within two years, more customers will access the Internet via mobile device than with a computer. Customers are responding favorably to those retailers that move at their speed and make it convenient for them to shop on their terms. We mentioned on the last call, starting in November, we added WiFi functionality to all our full-line stores. We're now in the process of developing additional mobile capabilities on our sales floor, including testing mobile checkout and equipping our sales people with better tools at point of sale. We should be able to implement this on a broader scale later this year, and we will continue exploring ways to make our sales floor more responsive to the mobile customer. Our performance in 2010 enables us to start 2011 in one of our strongest positions yet. Though we don't see any fundamental changes with our customer or the economy, we are excited about the opportunities going forward. We continue to evolve our customer strategy and recognize that technology is a key enabler for us to better service our customers. It's not a technology-driven strategy but a customer-driven strategy that is enriched by the new tools and capabilities now available to us. We're going to continue to be more curious and look for more ways to improve and grow. Our customer is our best filter when it comes to these decisions in how we apply our capital, our time and leadership. I'd now like to turn it over to Mike, who will give you some more details about the numbers. And then we look forward to opening it up to any questions you have.

Thanks, Blake. As Blake mentioned, 2010 was a year of meaningful achievement and growth. We generated all-time highs in sales and inventory turn and approached our recent peak in gross margin. We had a high single-digit same-store sales increase while continuing to build our multi-channel capabilities. We continue to gain market share and improve the productivity of our stores. Overall, 2010 reflected the strength of our customer-centric model and our ability to execute it successfully. We believe this foundation will help us to continue to grow with the changing retail environment. For the full year, our earnings per diluted share were $2.75, and earnings before interest and income taxes or EBIT totaled $1.1 billion. This is an increase of 37% in diluted earnings per share and an increase of 34% in EBIT compared with the same period in 2009. Fourth quarter earnings per diluted share were $1.04 compared with $0.77 last year. EBIT for the fourth quarter was $406 million, an increase of $96 million over last year. Same-store sales in the fourth quarter were up 6.7%. Our multi-channel same-store sales were up 7.2% with the South and Midwest as our top performing regions. Jewelry, Dresses and Shoes were our top performing merchandise categories. Nordstrom Rack same-store sales were up 3.9% in the fourth quarter. Fourth quarter gross profit as a percentage of net sales increased 34 basis points to 37.6%. The majority of the improvement was from leveraging our buying and occupancy cost, although we did see a slight increase in our merchandise margins. We ended the quarter close to our historical high in merchandise margin, reflecting inventory efficiencies that led to a record 5.6 inventory turn. 2010 saw regular price selling back to pre-recession levels, and as a percentage of our total business, up 300 basis points over the last 12 months. We ended the quarter with sales per square foot up 6% and inventory per square foot up 3.8%. Retail SG&A as a percentage of net sales decreased approximately 10 basis points compared to last year's fourth quarter. The majority of the improvement was driven by the timing of performance-related expenses relative to last year. This was partially offset by higher overhead expenses related to technology and marketing as we continue to focus on improving the customer experience. We will continue to innovate and invest in the business where we believe we can enhance the overall shopping experience and promote profitable growth. Our Credit business continues to improve. The delinquency rate was 3% at the end of the quarter, an improvement of 230 basis points over last year. Our write-off rate was 7.2% for the quarter, down 330 basis points from last year. Both delinquencies and write-offs have shown continued improvement throughout the year. This led us to reduce our reserve for bad debt expense by $15 million during the fourth quarter. Our reserve for bad debt is currently at $145 million, which is 6.9% of ending credit card receivables compared to 8.8% of credit card receivables last year. We finished 2010 in a great financial position. We generated free cash flow of $582 million. We have $1.5 billion of cash and total liquidity of nearly $2.5 billion. Our adjusted debt to EBITDAR of 2.2x is well within investment grade and consistent with our targeted range for this metric. Our return on invested capital continues to improve, ending the year at 13.6%. Additionally, Standard and Poor's and Moody's recently upgraded our credit rating from BBB+ and BAA2 to A- and BAA1, respectively. These upgrades reduce our cost of borrowing under the revolver and could lower the cost of future debt transactions. During the fourth quarter, we repurchased approximately 1.4 million shares at an average price of approximately $42 for a total of $58 million. The remaining balance on our authorization is $411 million. I'd like to spend a few minutes to add to Blake's comments on growth. Technology is changing how customers shop. It is a much larger enabler than in the past, encompassing communication, mobile shopping, salesperson tools and store formats. For the past five years, we have spent considerable time and resources on multi-channel and it had a significant impact in our performance. In a similar way, our focus going forward is on technology to improve the customer experience. This can translate into a lot of different areas, whether it's mobile or in-store shopping improvements. As with our approach to multi-channel, we believe the opportunity is significant. Today, we announced our agreement to acquire HauteLook. We entered into a 180 million stock transaction, a portion of which is subject to vesting requirements. In addition, there is a three-year earnout provision of up to $90 million subject to performance requirements for the company. The deal was structured so that we could retain the talent from the existing HauteLook team. HauteLook will be dilutive in 2011, with virtually all the dilution attributable to non-cash items. We will share more details in subsequent quarters after we close the transaction. From a capital allocation standpoint, we're planning for $400 million to $440 million in net capital expenditures in 2011, with depreciation and amortization of approximately $290 million for the full year. In 2011, we plan to open three full-line stores and 17 Rack stores. We plan to spend over $70 million on technology throughout the year. This represents over 15% of our 2011 capital expenditures. Our current five-year capital plan is approximately $2.2 billion. About 75% of it is for new stores and remodels. 15% is for technology, and 10% is for store maintenance. Over 60% of our technology spend is customer facing, focused on improving the customer experience, enhancing the merchandise offering and enabling stronger relationships with customers. We will continue to invest in our online presence, our selling tools and our ability to assort and allocate product. We believe that these investments will drive continued growth, with healthy returns on capital. In 2011, we expect our return on invested capital to continue to move toward our mid-teens goal. Now I will focus on our guidance for 2011. We expect to achieve 2011 earnings per share of between $2.95 and $3.10, with same-store sales between 2% to 4% and sales per square foot of over $400. This guidance does not include the impact from the HauteLook transaction. 2011 marks our third year of opening double-digit number of Rack stores. Rack stores are a high return in capital investment, with healthy sales productivity and earnings as a percentage of sales. As we continue to grow Racks at a faster pace than full-line stores, there will be an unfavorable impact to our gross profit rate, which will be offset by improvements in our SG&A rate. Overall, it remains a positive impact to the total business. We plan our 2011 gross profit rate to range from 10 basis points lower to 10 basis points higher than last year. The absence of meaningful improvement primarily is a function of the significant improvement experienced in 2010, along with the impact of the Racks growth that I just mentioned. We anticipate leveraging retail SG&A with expenses $120 million to $160 million higher than last year. The increase primarily reflects the growth in volume from existing and new stores along with strengthening our capabilities to enable continued improvement in the customer experience. Credit card revenue is expected to be flat to up $10 million, with credit card receivables remaining relatively flat due to increased volume being offset by higher payment rates. Our credit SG&A expense is expected to be flat to down $10 million versus last year. While we are expecting lower write-offs, we will be cycling against the $45 million of bad debt reserve adjustments taken in 2010. Our guidance reflects no reduction in the bad debt reserve, but we will continue to monitor the performance of our Credit business and make adjustments if appropriate. EBIT as a percentage of sales is planned to be in the range of 12% to 12.5% for the year. This is an improvement over 2010, and in terms of EBIT dollars, is projected to be near the highest in the history of the company. In the past, we have discussed that in a normalized environment, 25% to 35% of every sales dollar above plan should flow to the EBIT line. As our strategy evolves, we will continue to support new ideas and growth opportunities. As a result, sales growth above our current guidance will likely produce earnings flow through at the lower end of the range. Interest expense is anticipated to be flat to down $5 million due to lower borrowing facility rates. Free cash flow is planned to be approximately $400 million for 2011. The highest and best use of our cash is to invest profitably in our business. Beyond that, while maintaining adequate liquidity and flexibility, we look to return value to shareholders through dividends and share repurchase, of which $411 million remains in our existing authorization. In 2011, we will report same-store sales for the total company, Nordstrom and Nordstrom Rack. Nordstrom, formally referred to as multi-channel, includes full-line stores and Direct. As we have discussed throughout 2010, we're combining our full-line and Direct results, because it best reflects how our customer is shopping with us. In closing, we begin 2011 from a position of strength. Our customer-driven model provides us the ability to quickly adapt to the changing consumer environment. We are gaining market share in a competitive retail industry. At the same time, we continue to operate under a strong financial framework focused on creating a superior shopping experience for our customers and producing high returns for our shareholders. With that, I'll turn the call over to Rob. Thank you.

Thank you, Mike. Before taking the first question, we want to ask that each person limit himself or herself to two questions 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.

Our first question today comes from Deborah Weinswig of Citigroup. Deborah Weinswig - Citigroup Inc: Can you talk about -- obviously, the sales performance is much better than you had originally expected. But can you talk about if there's anything particularly you did on the expense side in the quarter?

I would say it was our normal disciplines that we like to operate the business under. We basically kept our variable expenses right around the planned percents of sales, and any additional expenses were planned things we did in certain areas like technology and marketing. Other than that, I would just credit our entire team for the discipline that they exercised during the quarter. Deborah Weinswig - Citigroup Inc: And secondly, I really commend you for the investment in the technology side, and you're one of the only retailers talking about the focus on customization and localization and personalization. How should we expect to see that play out in 2011 and beyond?

This is Jamie. That's a great question. We are focusing on those things quite a bit. We've got a lots of or a number of pilots and tests underway with various different kinds of technologies, both in our store as well as in the e-commerce space. We've got nothing to really announce right now, but I think that you will see us over the next year as we're able to share with you that we'll be making some pretty big strides with using mobile technologies in our stores and lots of other ways as well. So we got a lot going on, and we'll be sharing them with you over the course of this year.

Our next question comes from Jennifer Black of Jennifer Black and Associates. Jennifer Black - Jennifer Black & Associates: Your purchase of HauteLook validates that having a competitive online strategy is imperative in today's market. What's your go-forward strategy for this distribution channel, including your shipping, customer acquisition and customer service strategies? And what kind of current overlap do you have of your customers?

Jennifer, this is Jamie. That's, again, something we've been talking about a lot. I mean, what you just described is what has formed a lot of the rationale around our growth strategy, particularly in e-commerce. We do have big ambitions for our e-commerce growth, and I think this is a good example of a number of things that we need to do to be more innovative and faster in responding to how customers shop. In terms of the specifics around customer overlap and things like that, we don't have any numbers to share with you right now. We'll have to look into that. But what I can tell you is that a lot of our customers, as we've been talking to them and listening to them over the past year, are clearly telling us that this is one of the ways that really resonates with them in terms of a great shopping experience, and we need to be better at those things. So this represents a step in that direction. Jennifer Black - Jennifer Black & Associates: I wondered, with the new trends in denim, have you been seeing more traction in Savvy and t.b.d.?

Jennifer, it's Pete. Our t.b.d. business has definitely improved, where we have the bulk of our premium denim business, as you know. And that -- in the last probably two to three months, that has gotten much better. Jennifer Black - Jennifer Black & Associates: Do you think that part of that has to do with the new trends?

Well, sure. I mean, newness always tends to continue to drive the business. But if you look at the skinny styles which we've been selling for some time, they continue to perform really well. There's updates that are a little more subtle, but there's a lot going on with the difference in rise that's out there and wider leg. And so there's actually quite a bit of selection in total. It's not just in one thing that's happening out there. I think that when you offer customers lots of choices and selection and newness, they love it.

Our next question comes from Neely Tamminga, Piper Jaffray. Neely Tamminga - Piper Jaffray Companies: Just a question here about HauteLook, just wondering some of the physical assets that you guys might be also acquiring. Do they own any of their warehouses? And what is the kind of -- is there inventory risk associated with this kind of initially? Maybe just help us, who are stuck in retail land, think about that. And then I just have a follow-up for Pete as well.

Sure. Neely, this is Jamie. In terms of their physical assets, it's pretty minor, they've got some leases and things like that. As far as merchandise goes, their model is somewhat unique in that it's really more of a kind of a flow-through model, where they're not owning or sitting on much merchandise at all. And it's a fun model. It's pretty interesting. It's something that can evolve, and it's something that we can help them evolve with our scale and experience. So we've got lots of opportunities for helping them improve how they do that, and we're really excited to get working on it. Neely Tamminga - Piper Jaffray Companies: Pete and just overall, as you look at as we round here into spring and just look at 2011 relative to 2010, on the whole, are you seeing more innovation in fashion or less this year?

Well, it's probably similar. I think in some ways, if you look at it over a longer span of time, I think it's getting better just because things seem to be stabilizing out there in the market in general. And when you get more of that stabilizing, I think that you get more people trying new things. And so the hunker down mode of a couple of years ago is over, and I think people are very anxious, vendors and retailers alike, to drive sales. And again, it's not a secret that newness drives sales. So there's a lot to choose from. That's for sure.

Lorraine Hutchinson, Bank of America. Lorraine Hutchinson - BofA Merrill Lynch: I just wanted to ask a quick question on commodity cost inflation. I'm wondering what your vendors are saying about prices for the fall, and how do you expect that to impact unit sales?

Well, this is Pete. Well, I think everyone's looking at a lot of same issues about prices appear to be going up. The degree to which we have any control over that is really only through the product that we source and design ourselves. And I can tell you, in that end, there's a lot of effort that's been going on now for several months about diversification strategies in different places where we source goods and have goods manufactured that will help mitigate some of the risk around rising prices. I think it's a little too early to tell exactly what that's going to mean. So I would only be speculating on that, but it's definitely a subject that's got everyone's attention. And I think ultimately, if the vendors and the retailers can work together on what's in the best interest of the customers, we'll be able to keep the prices as reasonable as possible.

Edward Yruma, your line is open, from KeyBanc. Edward Yruma - KeyBanc Capital Markets Inc.: A quick question about your comment on the contribution EBIT in excess of your plan. If I heard you correctly, does it -- it sounds like you're expecting to step up investment if results come in at the high end of your existing sales plan?

Ed, this is Mike. I think what we said, that could be true. But I think more of the tone of the comment was the fact that we expect to continue to be curious and trying new things out there. And I think to expect a kind of a normalized flow through in an environment where there's a lot of change going on would be detrimental to the long-term health of the business. Edward Yruma - KeyBanc Capital Markets Inc.: And one follow-up on share repurchases. I know that you've got the outstanding facility. How should we think about your capital redeployment to shareholders?

Ed, well, we will continue to evaluate, on a periodic basis, our share repurchase program based on what we see is appropriate value. I mean, clearly, we want to maintain a very balanced capital structure, and we're going to continue to look at it that way.

Michelle Clark, Morgan Stanley. Michelle Clark - Morgan Stanley: Question as to the reasoning behind using stock for the acquisition of HauteLook. And then consistent with that, Mike, maybe if you could discuss what are your plans for your increased cash balances for 2011 and go-forward.

Well, first, in terms of using stock as a currency, there were basically two major elements that drove that. One and probably most important is the fact that it allowed us to build some very effective retention mechanisms in with management over the next three years, and that was very important to us to retain what we believe is a really terrific team at HauteLook. The second thing is that it was an advantage for the sellers, because it's a tax-efficient way to do the transaction, and so that clearly helped us out in terms of the negotiations. And as far as cash balances going forward, we have maintained a very prudent position in terms of cash. We still think there are some levels of uncertainty. We still think there's opportunities to invest in the business for future growth. All that being said is we're still going to evaluate means to return value back to the shareholders in ways that we deem appropriate.

Wayne Hood, BMO Capital. Wayne Hood - BMO Capital Markets U.S.: Mike, one at the same line, I guess I had one question related to these acquisitions. How much dilution are you guys willing to accept, in the near term, related to these acquisitions? And would this be considered one of the larger ones you would be looking at? And the earnout that you talked about, is that earnout based on them getting to a return on invested capital that would be equal to the company average of 15% in the third year? Or how are you structuring these deals as you look at them? Then I have another question.

Sure. Well, first, in terms of dilution, we did state that this transaction will be diluted in the first 12 to 24 months. The primary driver of dilution is the amortization related to the purchase accounting and the increase in shares. The company itself, we expect, on a rough EBITDA basis, to be breakeven in 2011 and profitable thereafter. In terms of the amount of dilution that we're willing to accept, I think that's a tough question, Wayne, because a lot of the reason we do this is because we believe these are strategic opportunities to grow our business and to better connect with our customers. And so I think we'll evaluate that on a case-by-case basis. In terms of the question on the earnout, that was built on earnings goals. Those earnings goals, we believe, were appropriate for this business at the stage that it's in. And I think we're also very, very confident in the due diligence that if these earnings goals were met, that this investment would create some real value for us. Wayne Hood - BMO Capital Markets U.S.: And my last question, I guess, when you step back a second and you look at what you did with Groupon in the fourth quarter and now with HauteLook, as you think about the longer-term, what does it do to the structural nature of your existing business in terms of your ability to get higher margins off of peak levels when you're going down a different path?

Well, Wayne, I don't know if that gets in the way. I think it could be a means to achieve better margins. I think we are going through a period where we've got to be curious. We got to test. We got to experiment to learn, because things are happening so quickly. And during that period, there will be things that will cost us on a short-term level. But hopefully, on a long-term level, we'll deliver a lot of value. So we'll continue to try those things. And when they work, we'll let you know, and when they don't work, we'll let you know too.

Adrianne Shapira, Goldman Sachs. Adrianne Shapira - Goldman Sachs Group Inc.: Mike, I was just wondering in light of the fact that you obviously embrace this whole multi-channel model much more so than a lot of your competitors, help us think about what this means for your square footage growth plans over time. Especially now as you're acquiring one of these private sales, how should we be thinking about the right number of Rack stores, especially as you're opening double-digit numbers this coming year?

Sure. Well, Adrianne, the reality is, is that in the traditional mall growth, where we've had great success with full-line stores, that the opportunities to grow, certainly, that we see over the medium-term are more limited. Square footage per capita in the U.S. is pretty high right now, and I think the recession kind of slowed things down in terms of capital development in that space. So we don't see as much opportunity as probably we saw four, five years ago. In terms of the Rack growth, we continue to see some very good opportunity. We've had 15 to 17 stores open the last several years, and we plan that in the next few years to come. But all that being said is that clearly, the opportunity for growth is online commerce, mobile commerce, things like that, look to be a much bigger opportunity in the future. Adrianne Shapira - Goldman Sachs Group Inc.: And so in terms of -- you're not looking to address that outlet shopper more online than in stores with the Rack?

No, I think -- the strategy behind HauteLook was another way to further maximize the customer experience and ways that we can acquire capabilities and learn how to operate better in that world. So it's not necessarily a "Rack strategy." Adrianne Shapira - Goldman Sachs Group Inc.: And then my follow-up was really on the inventory turn. You've done such a great job getting it to peak levels at 5.6x this year. How should we be thinking about where there's further opportunity to improve turn?

Well, I think as a team, we look at each other every year and try to improve turn. We still believe there's opportunities. I think we talked a little bit this year about the work we're doing with our merchant team in terms of improving our planning practices and our allocation and assortment tools. And we think, over the next couple of years, as those programs come in place and we start to use them more effectively that, that could help us with that as well. So we continue to believe that's a big opportunity. And it's clear every time we improve it, it has a real noticeable effect on our result.

Erika Maschmeyer, Robert W. Baird. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: Could you provide any additional color on your comps guidance, the nascence of cadence between the first and second half of the year on a two-year basis, at least give your comparisons in the first half? And also any comment on ticket? I know that increased over the last couple of months. Kind of what do you think are the drivers of this? And do you think it's the start of a trend?

Well, Erika, this is Mike, I'll take the first part of that question. In terms of the comp sales, we're looking at the first half of the year to be roughly 100 to 150 basis points higher than the second half of the year. And I think that's primarily reflective to the multi-year comps that we're up against. As far as the price, Pete, do you want to take that?

Yes. Our regular price business has continued to grow as a percentage of the total. And now we're pretty much aligned with what would've been of average for us between '04 and '07 on the regular price business. Our regular price sell-through as a percentage is actually at an all-time high. Therefore, when you look at the prices kind of across the board and can compare it against -- look [ph] on an average from '04 and '07, our average price point sold now is a little bit higher than it was at that time. I would say, reiterate again that this is not a pricing strategy as much as it's just a reflection of where the customer demand is and our ability, with the breadth of our inventory assortment to able to align pretty quickly and nimbly with what the customer demand is. And we've had some great results, as you've heard us talk about for the last couple of years in some of our more expensive classifications. In particular, our Jewelry and our Shoe areas have done really well. You look at Shoes -- the top-performing Shoe area has actually been our Salon Shoe area. As it's more specifically, our boot sales has been tremendous, and those are higher price points. So I think as fashion ebbs and flows and things come and go, we're going to be responsive to that. And if the customer naturally takes us to the higher price points, because that's what they want then that's what we're going to deliver. Ultimately, the measure of success there is regular price sell-through. Erika Maschmeyer - Robert W. Baird & Co. Incorporated: And just a quick follow-up on that, do you think that the strength that you're seeing in boots can continue for another year?

I do. We think it's still happening for sure. And you get that indication from just looking, not only on our selling but what the vendors are looking at and how they're projecting things and just being out in the market and looking at trends. So it's hard to predict exactly what it's going to look like, but it should be a very meaningful part of the business again this year.

Bob Drbul, Barclays Capital. Robert Drbul - Barclays Capital: The question that I have is when you look at the fourth quarter performance in the Rack business versus some of the earlier quarters of last year, do you think that business has turned? And I guess what do you think you figured out in terms of the merchandising mix or the success that you had that we should look forward for this year?

Bob, this is Blake. The fourth quarter, we mentioned earlier, benefited from a promotional environment that we took place with Groupon that lifted that trend that we've had five or six months prior, and so I think it's important to note what that was. We've been very pleased overall with the Rack, and Mike talked about those numbers and results in terms of productivity and efficiency and bottom line results. And so we feel really good about the growth strategy that we have with it. So overall, we're gaining market share, but we're mindful of what's been happening with the comps. They've been relatively flat. And we continue to work on a number of things, but it doesn't deter us from the growth plans we have, because we're still encouraged on so many fronts. Robert Drbul - Barclays Capital: And then Mike, just a follow-up on the flow through, I guess how that relates to the leverage point on your comp. Has that changed? Or is that changing? Or how should we think about that as we look at the plans for '11?

I think the leverage point in the comp is still roughly the same, that low single-digit comp.

We'll go on to Richard Jaffe, Stifel, Nicolaus. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Really questioning where to from here you envision this company in five years being a balance between the different channels you've described, the off-price channel, the Internet channel and stores? That is to say, do you see bricks and mortar becoming less and less important in the future? How do you anticipate the business developing from here?

Richard, this is Blake. I think we look at it a little differently than the way you phrase the question, because I think what we're really encouraged about and tried to convey in this call is the amount of doors open or the strength that we have at this point. And we want to be able to be flexible or nimble enough to stay in lockstep with our customer. And if that means five or 10 years from now that online becomes that robust to the total then we look at it so be it. So we're less wedded to any particular one channel. But now given said that, the bricks and mortar are really important, and we think the multi-channel experience gets strengthened as online and mobile and information technology improves. So we think it improves and evolves that shopping experience in the stores. But I guess the $64,000 question that we don't know, and I don't know if anyone else knows is, what percentage or what type of square footage growth does that require to achieve those goals. Again, I just think our ability to financially and systems-wide information supply chain people, merchandising to continue to improve those capabilities and stay close to our customer gives us a future that we're very encouraged by. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: One question about New York City. Anything you want to share with us about that? Still interested?

Again, this is Blake. Yes, we're very interested. And we've looked, and there's been some rumors in the past. We don't have anything to announce there. We do have, as you know, the one Rack there, where we're learning a little bit from the customer in that particular niche. But Manhattan is a marketplace that there's a lot of customers there, and it's very competitive, and we really enjoy being in the best shopping centers in town. And we'd like to be there, but there's a number of requirements that have to occur for it to be appropriate investment for our company and our shareholders. And so that could be in the short term or that could be in the long term, but we have nothing to announce. I think we wish we did, but we don't.

Ken Stumphauzer, Sterne Agee. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: Just a couple of quick questions for you, first, as far as any systems initiatives that you're planning to undertake in 2011.

Well Ken, this is Mike. I think other than the things that Jamie talked about in terms of continuing with efforts with our online and mobile capabilities, the most significant project we have is our assortment and allocation project that we should begin this year and over the next couple of years implementing some of the tools that are going to help our merchants with that. But that's the most significant, I think, different project. Everything else is about continuing to build on some of these other things we talked about. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: And that would be a slow rollout commencing in the back half of the year. Is that correct?

Yes, it'd take us a couple of years. Yes. Kenneth Stumphauzer - Sterne Agee & Leach Inc.: And then I was just wondering if you guys could comment on California, where you're at, whether you see the potential for a meaningful inflection there in 2011.

This is Erik. A store question, I'll take it. California is improving as there's overall improvement, but it is lagging our company average as it has for the last couple of years. So it's -- relative to our overall business, it's about the same.

Dana Telsey, Telsey Advisory Group. Dana Telsey - Telsey Advisory Group: As you think about your trends in credit card customers in California, I think those were are the first ones that drove the majority of the increase in bad debt expense. With that improving, are you seeing any differentiation there? And then just on a totally other vein, any update on the contemporary business and how that business is progressing and what you see there?

Well, Dana, this is Mike. I'll take the credit card question and then Pete can take the contemporary question. We definitely, over the last several quarters, have seen our customers in California who have our credit cards improve, actually, at a rate faster than the rest of the country. Now I think you have to keep that in perspective, because that group also had the furthest to come. So we are seeing improvement there, but clearly, to Erik's point, that hasn't necessarily translated into faster improvement in the retail sales. But hopefully, as California heals, we'll see that improve in the future. Pete?

Yes. In terms of the contemporary business, interestingly enough for us, in terms of where we're having the most relative growth in terms of comp, it's in the upper price ranges for us in that contemporary side of the business. On the whole, it's pretty good, but it's probably the most volatile part of that business as well. So I really don't have anything to report there other than I think we're pretty hopeful about our strategies, and it does seem like there's a lot of energy in that segment of the business in terms of participation by different vendors. There seems to be a lot of different vendors involved in that part of the business now. So I think that's in some response to what customers are interested in buying.

David Glick, Buckingham Research Group. David Glick - Buckingham Research Group, Inc.: Pete, just a quick question on what you see as the big category drivers in 2011? Is it going to be another accessories year? Or do you see men's and women's apparel being better relative performers in 2011?

Well, if you look at it over the terms of a multi-year comp, it would imply that we've got probably more room for upside growth in men's. And we've had really good momentum in our men's business of late, but we still have some more room to go to achieve some of the all-time highs we had a couple of years ago. So I would say that's a big category for us. If we can continue to have growth there, that would bode really well. Women's apparel, similarly, while we've been having increases, it hasn't been quite to the average. So I think we lose a lot of upside women's apparel. We'd probably have more initiatives, I would think, that we're working on in that area in terms of trying new things. So that'll be interesting as time goes on. The accessory business, from jewelry to handbags and everything in between, has been great for us for many years. And just when we think maybe it might start plateauing, it just keeps right on growing. So I don't think it's a bad idea to place a bet on those guys again. It's a good category, and I think we've really got some great people at Nordstrom working on that. David Glick - Buckingham Research Group, Inc.: And just a follow-up for Mike, in terms of the product cost inflation issue. Obviously, you guys didn't comment, or there doesn't seem to be any implosive pressure in your outlook on gross margin from higher product cost. And just kind of wondering what gives you guys the confidence that you could avoid any pitfalls there.

Well, Dave, to the extent that we understand what that looks like, we've included it in our plans for 2011. I think there's a couple of things that we've considered. One is the fact that we do tend to play more in a fashion space, and so we have a little bit less price resistance. And then I think the component of raw materials in a lot of our product tends to have a lower percent than perhaps it would in some more commodity products, so those are things to consider. And on top of it, our private label group has done a great job of finding ways to resource and to get some more efficiencies out of our own supply chain. So we have considered it, but clearly, it's something we need to keep an eye on.

Our final question today comes from Michelle Clark, Morgan Stanley. Michelle Clark - Morgan Stanley: I just had two quick follow-up questions. First, on the Credit business, obviously, Mike, you've seen nice improvement in credit trends, both in delinquency and charge-off rates, as of late. What assumptions are you making behind your credit card revenue outlook for 2011? And then second follow-up question, do you expect the growth in Racks to hit gross margin volume in 2011?

Michelle, in terms of the Credit Card revenue, we're assuming, basically, roughly flat balances. I mean, even though we've seen a lot of growth in our Credit Card volume and activity, we continue to see payment rates get higher and higher, and that's great. I mean, we're very happy with that. We like our customers not to revolve. We want them to be active spenders in our stores, and so that's been a positive. In terms of the yield on the Credit Card, it's roughly the same as it was last year. So the overall revenue is planned roughly flat on a year-over-year basis. And then the second -- could you repeat the... Michelle Clark - Morgan Stanley: Yes, sure. The second question, you had mentioned in your commentary on your gross margin outlook for 2011 that you expect the growth at Racks to fit or pressure the gross margin rate. How many basis points are you expecting that pressure to be?

I don't think we -- we didn't break out between Rack or full-line or Direct what was basis points are. But I think our commentary was based on the fact that Rack are all leased locations, so we'll see rent increase. That's part of gross profit. And then the Rack model is very consistent with other off-price models, which means that the margins tend to be lower, but the expenses are lower as well. So we were just trying to give a little color on the geography on the P&L, Michelle.

Thank you for joining us today for our fourth quarter call. As a reminder, a webcast 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.

This does conclude today's conference. Thank you for participating, and you may now disconnect.