Rob Campbell - Treasurer, Vice President of Investor Relations Blake Nordstrom - President Mike Koppel - Chief Financial Officer and Executive Vice President Pete Nordstrom - President of Merchandising Erik Nordstrom - President of Stores Jamie Nordstrom - President of Direct

Prashant Rao - Citi Research Barbara Wyckoff - CLSA Limited Dorothy Lakner - Topeka Capital Markets Jennifer Black - Jennifer Black & Associates Kimberly Greenberger - Morgan Stanley Neely Tamminga - Piper Jaffray Joan Payson - Barclays Capital Edward Yruma - KeyBanc Capital Markets Inc. Paul Swinand - Morningstar Inc Paul Trussell - Deutsche Bank Lorraine Hutchinson - Bank of America Merrill Lynch Michael Binetti - UBS Tracy Kogan - Wells Fargo Liz Dunn - Macquarie Research Rob Wilson - Tiburon Research Group Mark Altschwager - Robert W. Baird & Company

Hello, and welcome to the Nordstrom First Quarter Conference Call. At the request of Nordstrom, today's conference call is being recorded. (Operator Instructions) And I would now like to introduce Rob Campbell, Treasurer and Vice President of Investor Relations for Nordstrom. You may begin, sir.

Hello, everyone, and thank you for joining us. Today's earnings call will last 45 minutes and will include about 30 minutes for your questions. As we get started, I'd like to refer you to the slide showing our Safe Harbor Language regarding forward-looking statements. 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 first quarter performance and outlook for fiscal 2014. Joining during the Q&A session will be Pete Nordstrom, President of Merchandising; Erik Nordstrom, President of Stores; and Jamie Nordstrom, President of Direct. Before we begin, I want to mention that Blake and Mike will be using Slides, which can be viewed by going to nordstrom.com in the Investor Relations tab. With that, I'll turn the call over to Blake.

Thank you, Rob, and good afternoon everyone. Our first quarter earnings performance was above our expectations. Comparable sales improved in each month of the quarter, highlighted by the continued outside growth for our online business and accelerating sales trend in the Rack. This was partly offset by ongoing softness in full-line store sales, consistent with what we've experienced in 2013. Mike’s upcoming comments on this call will provide additional detail on the quarter. Along with those we'd like to show a broader perspective of our business, including a current example of the progress we're making that’s indicative of our strategic direction. And then conclude with a few comments on our announcement regarding our credit receivables. We continue to focus on the execution of our customer strategy with our in-store or online, full price of off-price. At its core, it’s about providing a superior customer experience with our investments and efforts directed toward one Nordstrom approach, that creates synergies and leverages shared assets and capabilities across all channels. An example of this is our launch last week of the Nordstrom Rack e-commerce site and the associated mobile app. We've stated for some time our desire to be wherever our customers want us to be. Our multi-year expansion of Rack stores, which included 10 openings in the first quarter, is giving us increasing relevance with more customers looking for great fashion at great prices. Our HauteLook acquisition several years ago, which now has over 17 million members has enhanced our e-commerce capabilities. Now we're combining forces to provide a powerful platform for elevating the customer experience in the online off-price segment. Nostrumrack.com built on the strength of both HauteLook and the Rack. It involves the integration of talent, combining the e-commerce expertise of HauteLook which developed the platform for the site and the merchant expertise of the Rack. It includes one of the largest merchandize offerings in the online off-price segment that encourages shopping a limited time flash sale event, side-by-side, with the persistent selection of off-price product. It allows merchandize to be shipped faster than most off-price competitors, enabled by our new fulfilment center shared by Rack and HauteLook. Finally, it accommodates easy returns through the mail or at any Rack location, a capability we added in 2013. Concurrent with this is the launch of the associated nordstromrack.com app; its functionality which enables a single login shared shopping cart and streamlined checkout process, reflects of strategic focus on mobile enhancing the customer experience that we will continue to build on as we go forward. As you can imagine we’re excited about nordstromrack.com and its ability to serve customers on their terms. Leveraging the many assets and capabilities within our company, in this case, things like people, product, technology, stores and supply chain to provide a superior seamless shopping experience, is something you'll see more from us in the future. Again, we are only a week old here and there is a lot of learning in front of us. We are committed to expanding the merchandise offering as we learn more about what our customers want online and transitioning overtime to a more consistent offering relative to our Rack stores. We're off to a good start and we’ll keep you informed of our progress. Now I'd like to discuss the announcement of our earnings release related to our credit card receivables. As we've commented on in the past, our credit program is an extension of our brand and an intrical part of the customer experience. Because of this, it’s critically important that we are able to manage all key aspects of this part of our business. In addition, we have an outstanding team of Nordstrom employees that manage and execute our credit business extremely well. That said, the credit environment has evolved, such that today we believe we can pursue an arrangement that allows us to maintain and enhance our customer focus while gaining greater financial flexibility to the potential sale of our credit receivables. We anticipate any partnership to have a minimal impact on existing operations and jobs. In conclusion, we feel encouraged by the progress we are making. We are strong in our convictions as ever about our customer strategy and the investments we're making to support it. And we look forward to continued progress throughout the year. With that I’ll turn over the call to Mike.

Thanks Blake. Before commenting on our first quarter’s performance, I'd like to reinforce Blake’s comments by emphasizing the importance we place on the subject of relevance and our ability to evolve with our customer. In today’s rapidly changing environment, we are uniquely positioned to serve customers to multiple touch points, whether it’s in-store or online, full price, or off-price. This is enabled through ongoing investments in all of our channels and more importantly through the synergies across channels. Through these synergies we are differentiated in our ability to better serve our existing customers and to attract new customers by creating a seamless shopping experience. The launch of nordstromrack.com, which is integrated with HauteLook’s online and mobile experience is a great example of this. We are encouraged with the opportunities ahead, to further maximize our customers' experience through the synergies created by your ongoing investments in stores, technology, marketing and supply chain. Now, let’s turn to our financial performance for the first quarter. Our earnings per diluted share of $0.72 were above our outlook of $0.60 to $0.70 that we provided at the beginning of the year. We delivered total sales growth of 6.8% over last year with comparable sales increase of 3.9%. We continue to be pleased with our inventory performance and in the quarter with inventory that is current and on plan. On a square-footage basis ending inventory growth of 10% over last year outpaced sales growth of roughly 4%, primarily due to increased pack and hold inventory to fuel Racks growth, planned increases in well performing merchandize categories and the buildup of inventory related to the nordstromrack.com launch. Gross profit decreased by 124 basis points over last year, in part due to increased competitive markdowns. In keeping with our long-standing practice of not being undersold on like items, we took additional markdowns in response to the heightened promotional environment. More than half of the decrease in gross profit was associated with planned growth related to Nordstrom Rack’s accelerated expansion and our Nordstrom Rewards program. We continued to be encouraged with the momentum in our Nordstrom Rewards program, with over 275,000 accounts opened this quarter, an increase of roughly 25% over last year. On the expense side, we demonstrated consistent execution, driving an improvement of 40 basis points in SG&A rate over last year. This improvement reflected lower variable costs in addition to overhead expense leverage on higher sales volume. Next, I'd like to add some color on our long-term growth strategy. As we previously shared with you, we plan to invest $3.9 billion in capital over the next five years as we focus on serving more customers through store and online growth. An important element is our technology investments, which represent $1.2 billion or 30% of our capital plan. Approximately 40% of our technology capital relates to infrastructure to support our growth plans and to facilitate enterprise-wide synergies. This encompasses systems to support merchandizing, Canada Rack store growth and marketing. Another 40% is planned in support of our online growth, including expansion of our fulfillment network to increase speed of delivery and furthering our customers' mobile and personalization experience. The remaining 20% is focused on increasing our relevance in stores with enhanced tools for our salespeople, such as our new texting platform and point-of-sales solutions. Over the last several months we've made meaningful progress in our investments. Highlights include delivery of the inventory system to support our upcoming entry into Canada. In addition, our new fulfillment center in San Bernardino is now supporting our integrated off-price online offer of nordstromrack.com and HauteLook. Finally, our tools to produce better customer data analytics are providing greater insights into the acquisition and retention of customers, their migration between channels and their shopping preferences, all of which we are incorporating into our efforts to create a better customer experience. These investments contribute to us achieving long-term profitable growth. Our confidence remains high in our customer strategy, which we believe will generate top quartile shareholder returns to high single digit sales growth and mid-teens ROIC. Now, I'd like to add to Blake’s comments regarding our announcement on our credit card receivables. Our credit business represents a core component and how we serve customers. We continue to be pleased with the performance of our credit portfolio, as demonstrated through continued improvement in credit metrics, including delinquency and write-off rates which are near a five-year low. Due to a variety of factors, we believe the time is right to explore a potential partnership that could enable us to gain greater financial flexibility while retaining our control over the customer experience. As there's been the case with others who have gone through this process, we expect the final outcome to take 12 months to 18 months to complete. During this time, we will refine our plan for the use of proceeds, consistent with our capital structure framework and balanced approach to capital allocation. To assist us, we have retained Goldman Sachs and Guggenheim Securities to serve as financial advisors. We will provide additional communication once this exploration process is concluded. I'd like to wrap up by providing a few comments on our 2014 outlook. We reiterate our earnings per diluted share outlook of $3.75 to $3.90 per share, which incorporates our first quarter results including the full-year impact of share repurchases. Our topline expectations are unchanged, with total sales growth of 5.5% to 7.5% and a comparable sales increase of 2% to 4%. Gross profit rate is expected to decrease 30 basis points to 50 basis points over last year, compared with prior outlooks decrease of 10 basis points to 30 basis points. This adjustment reflects current performance and assumptions around the promotional environment in the near term. As always we look forward to providing updates on our progress throughout this year. With that I’ll turn the call over to Rob.

Thank you, Mike. Before taking the first question we want to ask that each person ask one question and if necessary one follow up in order to give as many of you as possible an opportunity to ask a question. If you have additional questions please return to the queue. With that in line we’ll take the first question.

Thank you. Our first question is from Oliver Chen from Citi Research. Oliver, your line is open. Please check your mute feature. Prashant Rao - Citi Research: Hi, this is Prashant Rao in for Oliver Chen. How are you guys doing?

Good. How are you? Prashant Rao - Citi Research: Good. I had a couple of questions, first one on the inventory guidance, if you could talk about going forward, how you are thinking about inventory and sort of the nature of your current inventory and what you’re thinking in terms of the next couple of quarters?

Sure. Well, in terms of inventory guidance, we don’t normally guide specifically as it relates to inventory, but that being said, we continue to monitor the aging of our inventory very well and balance improving our turns with the fact that we’re funding growth businesses. So, I think you should see similar relationships as we go through the year and certainly as we start to comp some of the growth you’ll see the inventory line up more closely with sales. Prashant Rao - Citi Research: Okay, great. And then if I could, I'm curious about the Rack -- the 6.4 comp. I was wondering how much of that was traffic led?

We don’t measure, this is Blake. We don’t measure traffic per se, but we’ve been really pleased with the conversion and receptance from the customer on the product offering. And so, it is an improvement from the trend over 2013 and we’re really encouraged by a number of things that have been focused on by the Rack team and how the customer is responding to it. So we’re hopeful that will continue throughout this year.

Thank you. Our next question is from Barbara Wyckoff from CLSA. Barbara Wyckoff - CLSA Limited: Hi, everyone. Good job in a tough environment. Could you talk about the crossover from -- any crossover from Rack and HauteLook over the past year with the full-line stores? And then also could you quantify the 17,000 customers -- can you give us the last year number?

Sure, in terms of the crossover -- Jamie do you want to?

Sure, are you asking about crossover between customers who shop in HauteLook and Rack and full-line store? Barbara Wyckoff - CLSA Limited: Yes.

So we don’t, I don’t think we have numbers that we share on that but I think it’s safe to say that what we feel that we can create lot of value and particularly relevant customer experiences when we can do things for customers that create those seamless experiences between those channels. So an example of that is something we’ve been doing for long time where you can buy something on nordstrom.com, you can return it in one of our full-line stores, last year we enabled that, to be able to return HauteLook items into our Rack stores. And we know that when we do that customers appreciate because they appreciate the convenience and the speed of making that return easier. So, we got a number of things that we do -- the breakdown those seams between those channels and as we make further progress on that, we see more customer migration between them.

Barbara, this is Mike and the second part I think you were referring to the 17 million members at HauteLook? Barbara Wyckoff - CLSA Limited: Right, 17 million. Yes.

And that number last year was roughly in the 14 million range. Barbara Wyckoff - CLSA Limited: Okay, thanks.

You're welcome.

Thank you. Our next question is from Dorothy Lakner from Topeka Capital Markets. Dorothy Lakner - Topeka Capital Markets: Thanks, good afternoon everyone. Congratulations on the results and also on the rack.com launch. Just wondering on the full-line stores, it seems like the comp there was a little bit better. And I know you’ve made a lot of progress in terms of the women’s apparel offering, changes to the Savvy assortment and Topshop introductions. I'm just wondering how you’re feeling about that segment of the business obviously accessories has been strong kind of everywhere, but wondering how you’re feeling about women’s apparel at this point?

This is Pete, women’s apparel -- it's a story we’ve been talking about here for the last gosh 18 months or so where we've improved to the point where we've been at par outpacing the average growth that we’re having amongst all divisions in this -- this last quarter we were right pretty much on line with the average. So it’s gone pretty well, I think that it’s fair to say that the things that we tried to do to evolve the departments to be more relevant and gain more customers has worked, but that journey is not ended and we have to keep going. I think probably the part of that equation when you look at women’s apparel in totality is we've got to figure out a way of improving the juniors’ part of the business. It’s a big business for us and it serves more than just the teenage customer, it serves young women as well. And I think that we’ve got to make that better and when we do I think it'll benefit the entire women’s results.

And then just any changes, any update on what you are doing with Topshop? If you're planning on expanding that further? Topeka Capital Markets: And then just any changes, any update on what you are doing with Topshop? If you're planning on expanding that further?

Right, it's been good for us. We've learned a lot together. We've had good growth and it's doing exactly what we hoped it would. It's bringing in new customer, it's making the customer we have happy. It's kind of enabled the entire women's business to grow, it's lifted all boats, so we've got in 41 stores I believe now and we were just in London recently and talking about how we can continue to expand, to be in more stores and I'm not sure what that ultimate number is. So we'd like to be able to add more in the fall, say 20 more stores in the fall. We haven't nailed all those plans down specifically, but the spirit of intense has aligned and we're going to continue to grow that business.

Thank you. Our next question is from Jennifer Black from Jennifer Black & Associates.

Congrats on a good quarter in a tough environment. I have two questions, one just a follow-up to the question you just answered. Would you think to shrink the square footage for BP? Because there seems to be a lot of overlap. And then I just wondered if you thought you would have BP changed for the anniversary sale, because you talked about that a little bit on the last call? And then I have one other question. Jennifer Black & Associates: Congrats on a good quarter in a tough environment. I have two questions, one just a follow-up to the question you just answered. Would you think to shrink the square footage for BP? Because there seems to be a lot of overlap. And then I just wondered if you thought you would have BP changed for the anniversary sale, because you talked about that a little bit on the last call? And then I have one other question.

In terms of shrinking square footage, I think the answer is probably no in that regard. But if you look at what we've done in women's apparel and the way that we've laid out stores and then to renovations in new stores, we've created way more flexibility so that we can find the appropriate amount of space to chase the business that's really working for us. And I think anything that we can do to make that space more flexible, more dynamic, is probably going to be a good thing for us. But I think in terms of being able to serve that customer segment, we need to make that investment for a space and in inventory I think to do a good job serving that customer segment, which is an important segment for us. Now the second part, I don't know if you could repeat that question, Jennifer?

Well, do you think that you'll have the BP merchandise teams in time for anniversary sale? Jennifer Black & Associates: Well, do you think that you'll have the BP merchandise teams in time for anniversary sale?

Well, we'd like to think we've made all the necessary corrections to have it work super well. But the good news about that business is it turns pretty fast and we have the ability to react and so we're on it. We have a team that feels like we would address the issues and we've learnt from some of the shortcomings we've had in the last year. So I think you should expect that business to improve and it has relatively, but we have ways to go still. So we're cautiously optimistic there.

Thank you. Our next question is from Kimberly Greenberger from Morgan Stanley. Kimberly Greenberger - Morgan Stanley: Hi, thank you so much. It looks like you had a nice sort of resurgence in sales here in the first quarter with the $180 million increase year-over-year. It doesn't seem to be translating into net income growth, I'm wondering if maybe you could just bucket for us the biggest reason for that differential? And then if you look at the year, do you think that we could actually start seeing some net income growth as we get into the back half of the year? Thank you so much.

Kimberly, this is Mike. Our performance in the first quarter as it relates to that is very consistent with our plans and what we shared last quarter. In that -- we are incurring costs to prepare for the launching in Canada. We add those costs that are not accompanied by any sales right now, so that's putting some pressure on the P&L. We also have had some significant amount of technology investments from an infrastructure standpoint that are playing out in the P&L, and we also have a large Rack growth planned this year. And as we bring those leases online, we're incurring the lease expense for that before the store is open. So, all those things are very consistent with what we've been talking about, so nothing has changed materially from our plans and the performance that's reflected this quarter. In terms of the back half for the year, some of that should normalize just a slight bit as those stores start to open and you start to see the anniversary of that. But clearly the commitments we've made to grow our business and to invest in the future is what's impacting the P&L this year. Kimberly Greenberger - Morgan Stanley: That's really helpful. Thank you.

You're welcome.

Thank you. Our next question is from Neely Tamminga from Piper Jaffray.

Good afternoon. My question is around the new Rack app that you guys just launched with HauteLook. Just first off, I really commend the team for the checkout path. I would completely agree with your assessment, that is very slick, very much on par with straight up e-commerce guys out there, so well done. But, Mike I'm wondering a little bit here on financially, as it relates to how these sales are going to roll into the P&L. Are we going to see some more restatements as to how you guys are going to be reporting the Direct sales? Will the Rack division sales go in Direct, or will it be its own Rack Direct or HauteLook? I mean, could you give us some sense as what you're doing? Thanks. Piper Jaffray: Good afternoon. My question is around the new Rack app that you guys just launched with HauteLook. Just first off, I really commend the team for the checkout path. I would completely agree with your assessment, that is very slick, very much on par with straight up e-commerce guys out there, so well done. But, Mike I'm wondering a little bit here on financially, as it relates to how these sales are going to roll into the P&L. Are we going to see some more restatements as to how you guys are going to be reporting the Direct sales? Will the Rack division sales go in Direct, or will it be its own Rack Direct or HauteLook? I mean, could you give us some sense as what you're doing? Thanks.

Thanks Neely. Well, you know something that's a great question, because clearly how we, how the customer looks at it and how the customer experience isn't necessarily always the way it gets reported. But in this particular case, the whole online experience for Rack will be reported under the HauteLook numbers. All that activity is being supported by the HauteLook technology platform and the controls all exist there. And so currently that's how we're looking at it.

Great, thanks. Piper Jaffray: Great, thanks.

Thanks Neely.

Thank you. Our next question is from Joan Payson from Barclays.

Hi, good afternoon and congratulations on the solid quarter. I have a question about Canada and I guess any updated thoughts you have, now that you've started developing, maybe what you've learned about the market in terms of how it's differentiated from the U.S. And then any updated plans around your operating loss expectations? Barclays Capital: Hi, good afternoon and congratulations on the solid quarter. I have a question about Canada and I guess any updated thoughts you have, now that you've started developing, maybe what you've learned about the market in terms of how it's differentiated from the U.S. And then any updated plans around your operating loss expectations?

I'll take that, this is Erik. We're up to our eyeballs right now preparing for our Calgary launch in September, and it's going real well. It's a lot of work, there is a lot of business process changes to go through. And as you know, our strategy has been to open one store at a time and we're even more encouraged about that than ever. We'll go in with one store and we have the five others planned out. But no doubt, we'll learn a lot. The nice thing of going with one store is we're going to be able to scramble around and I think make those adjustments very, very quickly to what we learn from the customer. So, your question, have we learned more? We think we have, but I hesitate in saying too much about it, because we really won't know until we open. We go in with a lot of humility, it's not easy to go to another country and we have to win with the customer. So we're going in with an underdog mentality. And we've hired a department manager at this point. We're really encouraged with the quality of those folks, but they are on a hard track right now to get up to speed. The merchandise, we're encouraged about, we've had great reception from our vendor partners. But again, we're going to go in very humble and see how it works, and I think we're positioned very well to respond quickly and be very nimble.

John, this is Mike. The second part of the question was on the operating loss related to Canada this year. And I think last quarter we talked about roughly $35 million, and we're on track, we incurred roughly, I guess a quarter of that in the first quarter. So, no changes to that.

Thank you. Our next question is from Edward Yruma from KeyBanc.

Hi, good afternoon. Thanks for taking my questions. I guess first, you guys have managed your credit card business extraordinarily well through the tough parts of the credit cycle. I guess is there anything strategically that's causing you to rethink keeping those receivables on balance sheet, is it a financing environment issue or is it? And how should we think about the longer term return profile of the business ex-credit? KeyBanc Capital Markets Inc.: Hi, good afternoon. Thanks for taking my questions. I guess first, you guys have managed your credit card business extraordinarily well through the tough parts of the credit cycle. I guess is there anything strategically that's causing you to rethink keeping those receivables on balance sheet, is it a financing environment issue or is it? And how should we think about the longer term return profile of the business ex-credit?

Sure. Well, Ed, I'll take that, this is Mike. We've been pretty consistent over a long period of time emphasizing how important it is to serve our customers in a brand consistent way with our tender of products. And we always felt that that was so important that we were willing to carry that asset and basically earn a return that was noticeably lower than the rest of our business, because we felt there was great synergy there. But that being said, we've seen a lot of changes in the industry over the last several years, and we believe there could be an opportunity for us to monetize those receivables and at the same time continuing to retain control over the customer experience. So, we finally have reached the point where we're going to explore that and I'll underscore the word explore, because it's something we don't necessarily have to do. It's something that we believe if we can successfully execute, then it'll be a win-win. So, that's how we're thinking. In terms of the impact to the return on the business -- if you do the simple math on it, it's a multiple hundred basis point impact to return on capital post some execution and deployment of the capital that we would get out of that. Edward Yruma – KeyBanc Capital Markets Inc.: Great. And a follow-up if I may. On the promotional environment, I know you've been -- you've always had the mantra that you will not be undersold in the full-line stores and clearly competitors are using promotions more aggressively. Is there anything you could do from a merchandising perspective or a relationship with vendor perspective to alleviate some of this pressure that you see in the marketplace? Thanks.

This is Pete. Yes, the competitive issue has been, it's been made more dramatic by the fact that the online business has really made things much more transparent and really better for customers if all the choices are out there. And so, the game is changing a little bit in terms of exactly how we compete, but we want to stick with this idea that we want to have integrity and transparency with our customers and to having the best prices for the stuff that we sell. I think information is always helpful in terms of finding a path forward in terms of when we work with vendors, what have you. So we're talking to each other about the impacts of what all these competitive decisions mean and how we can grow our business together. But it's hard to say much really beyond that, other than they have a stake in this as well and we have to be dynamic in terms of the way we look at it, make sure that we're making decisions that are in the best interest of the customer and that's the path we're on.

Thank you. Our next question is from Paul Swinand from Morningstar Inc.

Good afternoon, and thanks for taking all the questions. Just wanted to ask a little bit more about the inventory. I think you alluded to that it was mostly pack and hold and that's in the Rack. Is that primarily pack and hold from your own goods or is that just extra good deals that you got from vendors and besides you couldn't pass it up? Morningstar Inc: Good afternoon, and thanks for taking all the questions. Just wanted to ask a little bit more about the inventory. I think you alluded to that it was mostly pack and hold and that's in the Rack. Is that primarily pack and hold from your own goods or is that just extra good deals that you got from vendors and besides you couldn't pass it up?

Paul, this is Mike. The pack and hold refers to the product that we're purchasing directly from vendors, and yes it's usually great opportunistic buys that we have that usually come at the -- towards the end of the season that we can get some significant units at a great value for the following season.

So, when you say following season, you mean year-over-year? Morningstar Inc: So, when you say following season, you mean year-over-year?

Yes, year-over-year season. Thank you.

Yes. And then, so eventually with that reverser, or do you see that as sort of an ongoing strategy that would have just more inventory in general? Morningstar Inc: Yes. And then, so eventually with that reverser, or do you see that as sort of an ongoing strategy that would have just more inventory in general?

Yes well, we've seen it grow pretty substantially over the last several years for a couple of reasons. Number one is, we've made it a key strategic lever for us to get the best product and best brands. But the second is with the growth of the Rack. The Rack is growing at such a pace, we not have the impact of that core strategy, but we have the impact of a significant growth in the business, which as you can see is -- grew 20% last year.

Thank you. Our next question is from Paul Trussell from Deutsche Bank.

Good afternoon. Great quarter guys. Just starting with the credit card, just a follow up on that. Is the best way to think about the portfolio Mike still -- kind of make an assumption that 80% of the receivables is backed by debt. So in a scenario in which you did receive proceeds and have a transaction, you would probably primarily use the proceeds to pay that corresponding debt down? Deutsche Bank: Good afternoon. Great quarter guys. Just starting with the credit card, just a follow up on that. Is the best way to think about the portfolio Mike still -- kind of make an assumption that 80% of the receivables is backed by debt. So in a scenario in which you did receive proceeds and have a transaction, you would probably primarily use the proceeds to pay that corresponding debt down?

Well, I think on a more theoretical basis that's how some may view our balance sheet. In fact, we only have a little over 300 million that securitized against those receivables. And as I said in my comments, if this should happen we will go back and re-evaluate our capital structure. We've always said we want to be 1.5 to 2.5 adjusted debt-to-EBITDAR. We'll go back and look at that and see what makes sense for us, if in fact we don't have those receivables on the books. Paul Trussell - Deutsche Bank: Understood. And then just on full year guidance, the 6.8% sales growth in 1Q was pretty close to the middle of your full year guidance. And obviously, you're opening up a number of stores as the year goes on including three full-line stores, one in Canada in 3Q. I'm just trying to get some color on why the sales view was not adjusted? Higher perhaps. Is there anything that we need to keep in mind? And on a similar front, the gross profit performance obviously in 1Q is well below what you're modeling for the full year. I'm just wondering why that dynamic will change so dramatically over the next few quarters on the final gross margins?

Well, starting with the sales -- first to make sure we have clarity, the full year total sales guidance was 3.5% to 5.5%, I'm sorry, 5.5% to 7.5%. And yes, we did reach the high end of that. One quarter in our mind doesn't give us enough certainty and clarity that that's the trend for the entire year. So, we believe it's prudent at this point in time to stay with our initial sales guidance. There's not enough material difference between baking that in and what the future could bring to make any adjustments. So, we're stuck with that. In terms of gross profit, clearly the first quarter, we felt was pretty significant from a promotional standpoint. I think there's some that believe there is an element of that that related to a very tough weather pattern that created some excess inventory in the system that was cleared. We have accounted for some level of promotion going forward, but certainly not to the same extent that we experienced in the first quarter.

Thank you. Our next question is from Lorraine Hutchinson from Bank of America.

Thank you, good afternoon. Just as a follow-up, the gross margin guidance maybe a little bit lighter, you also changed your SG&A guidance, and I was just curious as to what's changing on that line item for the year? Bank of America Merrill Lynch: Thank you, good afternoon. Just as a follow-up, the gross margin guidance maybe a little bit lighter, you also changed your SG&A guidance, and I was just curious as to what's changing on that line item for the year?

Lorraine, this is Mike. Well, a big part of that was, some of the efforts in the first quarter allowed us some pretty good leverage and we see some of that continuing. The most significant is we've made some really good progress in some of our fulfilment efforts which is a pretty significant variable cost. And we see those activities somewhat continuing as the year goes on. But it was mostly about first quarter performance.

And then just to clarify on the gross margin, do you expect the competitive pressures to abate as the year goes on? Bank of America Merrill Lynch: And then just to clarify on the gross margin, do you expect the competitive pressures to abate as the year goes on?

Well, as I just stated, we don't believe it's going to be as significant as it was in the first quarter, because of the seasonal transition in the weather patterns. But I think, frankly it's as good as guess as any as to whether or not that's going to continue.

Thank you. Our next question is from Michael Binetti from UBS.

Hey guys, congrats on a nice quarter. I know we've beat you to death on the gross margin question at this point, but as you think about it, Mike if you do see the competitive environment getting more promotional, which we are seeing in some of the more mid-tier retailers. Would your preference be to go after the share and the traffic at the expense of gross margins or would you try to protect margins? UBS: Hey guys, congrats on a nice quarter. I know we've beat you to death on the gross margin question at this point, but as you think about it, Mike if you do see the competitive environment getting more promotional, which we are seeing in some of the more mid-tier retailers. Would your preference be to go after the share and the traffic at the expense of gross margins or would you try to protect margins?

Well, I would start with our basic principle, and that is, we've always said that on any like item, we're not going to be undersold. And that's how we're going to operate. We've been very consistent, our customers expect that from us and that's how we'll move forward. Now that being said, we would hope that our product offering is substantially differentiated from some of those mid-tiers that you stated. So hopefully that gives us a little bit more strength in pricing.

Okay. And then I guess at a higher level, as you think about moving into the Rack.com business -- what kind of things do you think about as far measuring the incrementality of that business versus the risks that come up when you think about, perhaps somebody switching from a higher price point item on your full-price Nordstrom, even like more expensive shirt for the same brand, I can find a less expensive version on Rack. How do you think about protecting yourself from that? We've certainly seen the retailers who've had less good luck trying to isolate the channels like that. UBS: Okay. And then I guess at a higher level, as you think about moving into the Rack.com business -- what kind of things do you think about as far measuring the incrementality of that business versus the risks that come up when you think about, perhaps somebody switching from a higher price point item on your full-price Nordstrom, even like more expensive shirt for the same brand, I can find a less expensive version on Rack. How do you think about protecting yourself from that? We've certainly seen the retailers who've had less good luck trying to isolate the channels like that.

Well, I'll start by saying we're not interested in isolating the channels. The reason we've invested the way we have is because we want to have a complete offering online, in-store, regular price and off-pricing. We believe that that's going to allow us to engage with more customers and we also believe particularly in the online and off-price segment that it's a great vehicle for us to acquire new customers. And we find that a lot of those customers do migrate to a regular price offering as time goes on, and we also have regular price customers that periodically look to shop at the Rack. And as long as we can continue to offer that more robust offering, we believe we're going to create more lifelong customers.

Thank you. Our next question is from Paul Lejuez with Wells Fargo.

Hey, thanks. It's Tracy filling in for Paul. Just had another question on more aggressive promotions. Was that primarily at the full-line stores or did you find that at the Rack you also needed to be a little more aggressive on pricing? And secondly, does Rack.com, does that change your view of the ultimate potential number of stores you could have for the Rack business? Thanks. Wells Fargo: Hey, thanks. It's Tracy filling in for Paul. Just had another question on more aggressive promotions. Was that primarily at the full-line stores or did you find that at the Rack you also needed to be a little more aggressive on pricing? And secondly, does Rack.com, does that change your view of the ultimate potential number of stores you could have for the Rack business? Thanks.

This is Pete. In terms of the promotional pricing, it was really largely full-line stores. Full price business where we, not just stores, but online too. But the full price part of our business where that was an issue.

This is Blake, regarding your question on Rack.com and how it may or may not impact our aspiration for opening the stores. We think it's a key component of complementing the customer experience for that store growth, and that they go hand in hand, just like over the last 10 years with the full-line store customer having the corresponding e-commerce experience, it's important in off-price online.

Great, thanks. Wells Fargo: Great, thanks.

Thank you. Our next question is from Liz Dunn from Macquarie. Liz Dunn - Macquarie Research: Hi, let me add my congratulations on a great quarter. I guess in looking at your business in the first quarter, I guess it would probably be fair to say that weather impacted you on the topline less than the rest of the retail space given your geographic concentration, that's a question although I stated it as a comment. And if that's the case, did you not see the sort of improvement that other people are talking about in April and May? Thanks.

Liz, this is Mike. I guess to the extent that the math as a percent of total would suggest that we have less business in the areas most hit the hardest, I guess the answer to that would be, yes. I mean those that were more concentrated in the Northeast corridor, and certainly others in Midwest would probably be hit harder. But that said, out stores in those regions did experience some very difficult business during that period. And I'm sorry, the second...

(Indiscernible) Our business did get better as the quarter went on. First month was, February was the toughest month of the quarter for us and last month was the best.

Okay great. And then just one on the credit, if I may, is the time period to get this deal done really in part influenced by your desire to just really get the right service agreement in place because it seems like a little bit of a longer time period and then what are we to assume that you'll do with the cash? Macquarie Research: Okay great. And then just one on the credit, if I may, is the time period to get this deal done really in part influenced by your desire to just really get the right service agreement in place because it seems like a little bit of a longer time period and then what are we to assume that you'll do with the cash?

First part of your question, the answer is yes. We are going to be very focused on insuring that we have an agreement that enables us to serve our customers at the highest level. And the second part in terms of the cash, you know at this point in time, we would evaluate that consistently with the way we've done every other use of capital and that is, we have a pretty balanced approach to our structure as well as our allocation. And should this happen, and we realize that cash, we'll be in a position to talk more about that.

Thank you. Our next question is from Rob Wilson from Tiburon Research.

Thanks for taking my question. Mike, is it fair to say in your gross profit margin guidance that you're expecting a year-over-year improvement by the end of maybe Q3 or Q4? Tiburon Research Group: Thanks for taking my question. Mike, is it fair to say in your gross profit margin guidance that you're expecting a year-over-year improvement by the end of maybe Q3 or Q4?

I don't believe so. I think when you look at our guidance for the year, it's down over the last year. Rob Wilson - Tiburon Research Group: Your guidance says negative 30 to negative 50, but it was now...

So you're saying the math on the back half of the year? Rob Wilson - Tiburon Research Group: Yes.

The math on the back half of the year is -- there is some volatility in there, but it's relatively flat. What you're seeing is just a mix that impacted the back half quarters being better than the first quarter.

If I could ask one follow-up, do you have a completely separate infrastructure in Canada? Tiburon Research Group: If I could ask one follow-up, do you have a completely separate infrastructure in Canada?

It's Erik. No, we have a President of Canada, Karen McKibbin. We certainly have a dedicated team, but for the most part we are leveraging our company assets across the organization to support that store.

Thank you. And our final question today is from Mark Altschwager from Robert Baird. Mark Altschwager - Robert W. Baird & Company: Thank you and good afternoon. Could you talk about your inventory strategy with Rack e-commerce business and how much integration exists between the physical and online offering? And obviously you're a company that's very focused on the customer experience, but with off-price inventory availability and breath of sizes can sometimes be a source of customer frustration. So, just wanted to know how if the lines between flash sale and off-price online merge, how you're thinking about ensuring that positive customer experience?

Jamie, you want to take that one or you want me to take it? This is Blake.

I'll take a stab at it. I think you nailed it. It's not exactly obvious how to create a great customer experience on that. I think one thing that we're excited about is the experience that our HauteLook team has in that space over the last five years of serving those customers, working with those brands, managing those inventories. They've learned a lot and they've done some pretty innovative things. You combine with our Rack team, our Rack merchants who've been running that business pretty darn well for a number of years now and have a lot of experience with, a lot of the same vendors in how to manage inventories of a lot of units, when you don't have a lot of depth and you don't have a lot of consolidation of cleaned sizements or those kinds of things. So, it's I think a lot of people who have tried this have been running lot of those challenges over the years. Again, what we're excited about is, as you take those two really talented teams, you're putting together. They've come up with what we think is a pretty compelling suite of offerings and experiences for customers in the off-price world, that's really differentiated. And I know, Neely mentioned the app earlier -- we're really proud of what that team has built and we think it's going to resonate with customer so far so good. And we're going to learn a lot and it's going to evolve over time and we think it's going to be a big business for us.

Mark, this is Blake. To add to Jamie's comments on the selection, I made a brief comment to that, that we feel compared to what's currently out there with some of our competitors that this is a superior offering. But we're in early days and a lot of this inventory is from the HauteLook side of the equation and our Rack merchants now are overtime now going to be adding the selection that we have on the Rack side. So, the selection, the amount of skills that we have will continue to build. And so we're really encouraged about what that means over the next couple of quarters.

Thank you for joining us today. As a reminder, a webcast replay of this call along with our slide presentation will be available for one year on the Investor Relations section of nordstrom.com under webcast. In addition, we've provided an overview of our performance and growth strategy at the end of our slide presentation. Thank you for your interest in Nordstrom. Bye.

Thank you. And this does conclude today's conference. You may disconnect at this time.