Trina Schurman - Director, IR Blake Nordstrom - President Mike Koppel - CFO Pete Nordstrom - President, Merchandising Jamie Nordstrom - President, Stores Erik Nordstrom - President, Direct

Matthew Boss - J.P. Morgan Dorothy Lakner - Topeka Capital Markets Paul Trussell - Deutsche Bank Oliver Chen - Cowen and Company Paul Swinand - Morningstar, Inc. Ed Yruma - KeyBanc Capital Jeff Stein - Northcoast Research Michael Exstein - Credit Suisse Lorraine Hutchinson - Bank of America Kimberly Greenberger - Morgan Stanley Jennifer Black - Jennifer Black & Associates Joan Payson - Barclays Paul Lejuez - Wells Fargo Michael Binetti - UBS Bob Drbul - Nomura Securities

Hello and welcome to the Nordstrom Third Quarter Conference Call. At the request of Nordstrom, today's conference call is being recorded. All lines will be on a listen-only mode until the question-and-answer session. [Operator Instructions]. And I would now like to introduce Trina Schurman, Director of Investor Relations for Nordstrom. You may begin.

Good afternoon and thank you for joining us. Today's earnings call will last 45 minutes including about 30 minutes for your questions. Before we begin I want to mention that our speakers will be referring to slides which can be viewed by going to nordstrom.com in the Investor Relations section. Today's discussion may include forward-looking statement so please to the slide showing our Safe Harbor Language. Participating in today's call are Blake Nordstrom, President; and Mike Koppel, Chief Financial Officer, who will discuss the company's third quarter performance and outlook for fiscal 2014. Joining during the Q&A session will be Pete Nordstrom, President of Merchandising; Jamie Nordstrom, President of Stores; and Erik Nordstrom, President of Direct. With that, I'll turn the call over to Blake.

Thank you for joining us for our earnings call. For the past several quarters we've communicated that we are focused on a customer strategy, which we think is critical to our business in delivering a superior customer experience. This strategy provides clarity as we address allocation of our resources, both capital and people, to serve our customer in the manner they expect from us. This focus has positioned us to engage with the customer across multiple channels in full-price, off-price, stores, and online. Most importantly, we know the customer views as simply as Nordstrom. Customers increasingly value speed, convenience, and personalization. We're focused to create synergies across our business through service and experience, product, customer acquisition and retention, and companywide customer capabilities. We had a number of new store openings this quarter, including three full-line stores inclusive of a second store in Houston, Texas, and our first store in Jacksonville, Florida. We also entered Canada in Calgary on September 19. We would like to call out the terrific job that our team led by Karen McKibbin, President of our Canada Division, has done leading up to our opening. For the past couple of years, they have been working behind the scenes to address the unique challenges of crossing the border with supply chain, inventory, loyalty, talent, systems, and other material aspects of the business. The warm reception we've received from the customers in Calgary is encouraging. We're also pleased with the stores performance which has significantly exceeded expectations. We believe we're going in the right direction and in a good position to open our second store on March 6, 2015, in Ottawa. In total, as you know we're committed to six stores in Canada, with Vancouver following Ottawa, and then three in Toronto. Also during the quarter the Rack opened 16 stores for a total of 27 for the year. Next as we discussed in the August call, we're excited about the acquisition of Trunk Club, which closed in late August. Trunk Club offers a differentiated way in serving customers on their terms to an experience that is personalized, relevant, and convenient. This partnership clearly aligns with our strategic priorities to increase relevance with customers and strengthen our capabilities. The business is on track with its growth plans which include a fifth showroom that will open on December 1, in Manhattan; it will be in a terrific location on 51st and Madison. With New York representing Trunk Club's largest market, it is a meaningful opportunity to increase engagement with existing customers and serve new customers. Our combined teams have also been developing plans to leverage our capabilities around product, services, and supply chain. Now we'd like to provide some additional color on our current execution. We generated a top-line increase of 8.9% during the quarter. Our comparable sales increase of 3.9% was generally consistent with the trends we've experienced over the last year or two. In terms of our inventory, we've been making investments to support store and online growth throughout the year. That said we ended the quarter with approximately 2% of our inventory that was unplanned which was attributable to the Rack. Though there are numerous factors that contributed to this, the simple fact is we bought more than we should have. We're still committed to meeting our year-end plans and we're confident we can manage this appropriately. Mike will be providing additional context on this in his remarks. Now we'd like to talk to you about our clearance strategy. As you know we've historically held clearance events notably our half yearly sales. As we listen to our customers we acknowledge there is an opportunity to improve. We have begun to make adjustments to our clearance strategy, and we expect that overtime these changes will result in a better customer experience, a reduction of clearance days, and an improvement to our inventory turn. We will comment on our progress as we move forward. As we head into the fourth quarter, our plans are consistent with what we've been focused on for the year. We think we're in a good position this holiday season and we're pleased with our team's efforts not only for the fourth quarter but to position the company for 2015 and going forward. I'd now like to turn it over to Mike.

Thanks, Blake. This quarter's performance reflects the ongoing commitment to our customer strategy. Both the current operating performance and ongoing strategic investments support our goal of delivering a superior customer experience. Over the past several years our investments to enhance the customer experience have fueled growth in stores and online. And now our entry into Canada represents a new channel of growth. When we made the strategic decision we knew it requires significant effort and learnings to establish the infrastructure and processes to support operating in a new market. So we are particularly proud of the team's accomplishment and a disciplined approach they've taken along the way. Now we'd like to provide some additional color on our current performance. Earnings per diluted share of $0.73 were in line with our expectations, reflecting sales trends that have been generally consistent throughout the year. Our quarterly results included a $0.04 dilutive impact related to the acquisition of Trunk Club. The multiple elements of our growth strategy contributed to our top-line increases of 8.9% which aligns with our long-term goal of high-single-digit sales growth. Comparable sales increased 3.9% driven by our full price business, which reflected continued momentum in online sales and a slight improvement in full-line stores. Moving to the Rack, total sales grew 15% reflecting 27 store openings during the year. Comparable sales increased 1.7% down from its year-to-date increase of 4%. In the online off-price business sales at Nordstromrack.com and HauteLook grew 34%. This was meaningfully ahead of the 13% growth in the first half of the year, reflecting the building momentum in this channel and inventory investments to expand selection. Now we'd like to provide additional color on our gross profit and inventory performance. Gross profit was 33 basis points lower than last year, which reflected Rack's accelerated store expansion and some impact from price matching in our full price business. Price integrity is very important to us, as we strive to earn and maintain our customer's trust. This has been a longstanding policy of ours and we will continue to monitor and respond accordingly. On a square footage basis, ending inventory growth of 18% outpaced sales growth of 5%. Roughly 75% of the inventory growth was planned largely driven by store and online growth. Remainder of the growth was due to Rack inventory being over planned. We are very focused on long-term ROIC performance and understand inventory productivity as a significant driver. We feel confident in our ability to make meaningful progress, improving our inventory position by the end of the year, with potential impact incorporated in our expectations. Moving to SG&A, we continue to focus on our expense execution. Our SG&A rate including Trunk Club, Canada, and our ongoing technology investments was relatively flat to last year. As we previously shared with you we have estimated a full year EBIT impact of Canada which consists of infrastructure and preopening expenses to be roughly $35 million. We are on track with two-thirds incurred to-date. Now we'd like to provide an update of our full year outlook. Our earnings per diluted share outlook is $3.70 to $3.75, compared with the prior outlook of $3.80 to $3.90. This now includes the additional impact to Trunk Club, which is expected to be diluted by approximately 3% compared to our initial estimate of 3% to 5%. Comparable sales are expected to increase roughly 3.5% compared with an increase of 3% to 4% from the prior outlook, which is generally consistent with our year-to-date trend. Our SG&A rate outlook is expected to be increase 40 to 45 basis points over last year, compared to our prior outlook of 10 to 20 basis points due to the impact of Trunk Club. Before we wrap up, I'll note that the process regarding potential sale of our credit card receivables is going as planned and is expected to be completed around the first half of 2015. In closing, we are on track with executing our customer strategy, which we believe will drive long-term profitable growth and deliver top quartile total shareholder return. With that, I'll turn the call over to Trina.

Thank you, Mike. Before we get started, we like to request that you ask one question and if necessary one follow-up. If you have additional questions please return to the queue. We will now take the first question.

Thank you. Our first question comes from Matthew Boss from J.P. Morgan. Matthew Boss - J.P. Morgan: Hey. Good afternoon guys. So brick and mortar full-line comps were flat, best in over a year. Can you talk about the drivers of some of the improvements and the sustainability of flatter or the potential for positive brick and mortar base going forward?

Sure Matthew. This is Jamie. I think this has been for continuation of a lot of initiatives that have been underway for some time to improve our full-line business. As we keep saying, we don't -- we don't have a channel strategy, we have a customer strategy. So there's lot of things that we've been doing with technology and with e-commerce to elevate how we serve customers in total. But that being said, there is lot of things that have been happening in our stores around space allocation, staffing, our stylist program which we've been talking about for some time now has been great. Doing things like pop and shops, creating more reasons for customers to want come to our stores, but ultimately flow of new great products is typically what drives our business. And that's nothing new, but when we're good at that, when we have a good flow of new stuff that people want to see, our business gets better and I think this quarter is a good example of that. Matthew Boss - J.P. Morgan: Great. And just a quick follow-up question on the brick and mortar. As we think about some of the strategic changes that you've made as it relates to promotions, what's the best way to think about the underlying merchandize margins going forward?

We really haven't made any changes with regards to promotion. I think you might be referring to our transition away from the half yearly model, with our clearance strategy. Our -- as you're probably aware, our half yearly clearance strategy goes back decades and back to when we were a shoe business. We felt that that model really kind of handicapped our ability to improve our flow of fresh new regular price goods. We saw some opportunities to improve that because we know that's what our customers want. And that's what drives our business. So we think by evolving how we clear merchandise, we can improve our flow of regular priced goods. And so we've started that transition. And so far we're encouraged with our progress. But I want to be clear; it's not about adding more promotions. In fact, what you'll see is over the next year we'll actually have less days with clearance on our floors than we did with the old model.

Thank you. Our next question is from Dorothy Lakner from Topeka Capital Markets. Dorothy Lakner - Topeka Capital Markets: Wondered if you could update us on the progress that you've been making in terms of your assortments, particularly on the, I guess the women's side of the business. Where are you in terms of the top shops you've put into place? How are things like the brass Plum doing? You brought in new brands like Sarah Jessica Parker shoes. Just wondering how the overall performance of women's has done relative to expectations.

This is Pete. We have such a broad offering in women's that goes from juniors all the way through designers. That at any given time you can point to some things that are working well and some things that are not as well. I think our story now is really has been fairly consistent and a continuation of where we've been. We've seen improvement in our juniors business and brass Plum. It's definitely kind of bottomed out. I think we've had a couple of tough years there and that has improved. I think part of that is what we've been able to do with Topshop and how that's bringing more customers into our stores and online, some new customers. That's been very positive. The Topshop, Topman business has been very good for that. For us we're in 53 doors now we're going to expand that more as much as it's practically possible as soon as it's possible. So it's been a lot of work on the Topshop parts to make that happen but they've been really good partners and we're very encouraged about where that's going. I guess what I would add is we continued to do well when we can maximize the power of brands that are important to our customers and we continue to invest in those not only in the way that we merchandise and display them on the floor but just literally our ownership there and we've had success in women's on that angle. Dorothy Lakner - Topeka Capital Markets: Great. Thanks. And good luck.

Thank you.

Thank you.

Thank you. Our next question is from Paul Trussell from Deutsche Bank. Paul Trussell - Deutsche Bank: Good morning. Just moving to the Rack, if you can just give us a little bit of detail on the deceleration in the quarter. Was it traffic related? Where other competitors in the marketplace, aggressive on promotions? What did you see in the store? And then what has been the reception been to nordstromrack.com over these last few months?

Paul, this is Blake. We did see a deceleration from the trends we've had almost four years, towards the end of the quarter predominantly in October. We don't have strong data from a customer count point of view. We do from a transaction point of view but our business was softer and there is I guess a number of factors that contributed to it but it was a blip and we're hoping that the fourth quarter is not a reflection of that because certainly that's a very narrow window and so we're not trying to over overreact to that but we wanted to share that with you. We didn't see anything different from a competitor promotional point of view. It just was softer in our stores and it was reflective in our top-line for the month of October. Paul Trussell - Deutsche Bank: And then, just to follow-up, maybe we can just quickly touch based on Trunk Club. Could you just give us a little bit of color around the overall impact now as we think about modeling that out for 4Q and beyond in terms of revenue and SG&A share count impact?

Well, Paul, this is Mike. In terms of the impact it's going to have to our EPS for the year, we've said it's roughly 3% dilutive. And we did call out that it's roughly $0.04 in the third quarter so you can do the math and understand the impact in the fourth quarter. As far as breaking it out by line item we're not providing that kind of specific guidance right now. That being said, we continue to be excited about the momentum in the business. The business has achieved so far our expectations in terms of a rolling 12-month growth and we're looking forward to see how it performs during the holiday season.

Thank you. Our next question is from Oliver Chen from Cowen and Company. Oliver Chen - Cowen and Company: Hi, guys, thanks for the details. And regarding the inventory and your comments about having a bit more than you wanted at Rack, what's the nature of that inventory? Like what kind of products was it and where is your conviction lie in terms of your confidence that you can work through it? Like how might that be done? Thank you.

Oliver, this is Blake. We've done both in the Rack and throughout the Company; our merchandising teams for a number of years have had terrific disciplines on inventory management. And it's even more important in the Rack where you want to be really fluid and be able to react and respond to goods that are available. I would just tell you and I tried to in my remarks, take accountability and not point to any one thing because there's a number of factors but it really starts and stops with having grounded plans and our teams executing accordingly to them and our merchants particularly our general merchandise managers have done a terrific job of opening the doors in the partnerships we have with our best vendors and it's simply a case of our buying teams in the Rack buying too much for the size of the business. And so in months or quarters past, there might be fallout, there might be increased sales that kind of masked that. And we think the end of the quarter there; there were a number of things that contributed to it. So that said, if you're in a more fashion type business and you get overbought, you can almost the methodology or the math shows right to what it does to the margin or markdowns. We feel pretty good about the quality and content and aging of this merchandise and then part of this is with our pack-and-hold that we've been running a little bit higher for some time compared to previous years. And these are goods that our top vendors are clearing at the end of season that we're holding for roughly six months and bringing back in the appropriate season and so we think this is really solid merchandise. Our team feels confident by the end of the quarter we can be back in line and again our numbers are in our plans that we just shared with you. And so we fully expect to meet our plans but we just felt it was really important to be as transparent as possible with all of you that these are above our plans. It's unacceptable and we're getting after it. Oliver Chen - Cowen and Company: Thank you. And just a follow-up. The outlook seems pretty solid. What do you think about volatility in the marketplace and what you're seeing in kind of the health of our consumer as we embark in some macros that looked more encouraging but things are pretty promotional?

Well, Oliver, we're asked that each quarter. And we're only as astute or smart as our last transaction or our figures. And so I think what we're trying to share with you is that our business has been really consistent for almost two years now. So that's how we view the fourth quarter. That's how we're planning the year. That's how we're thinking about going to 2015. That this is the hand we're dealt and we need to plan and execute accordingly. There's been pockets where it gets a little more promotional. And as Mike said, we feel very strongly about one of our core principles, about having integrity with our pricing and being competitive. So we will respond accordingly, but we don't foresee anything material changing than what we experienced last year.

Thank you. Our next question is from Paul Swinand from Morningstar, Inc. Paul Swinand - Morningstar, Inc.: Good afternoon. And thanks for taking the questions as always. Wanted to drill down a little bit more on inventory. Would you care to give us some guidance on whether you would get back to some of your former inventory days or inventory turns per year? It's been up a little bit the last few years.

Yes. Paul, this is Mike. That's a great question. As I said in my comments, we fully understand and are very focused on the impact that a productive inventory has on our overall our overall return. And over the last year or so we've been in a fairly accelerated cycle in terms of funding growth and in various channels. And so we expect for the foreseeable future to continue funding for that growth so there's going to be a little bit of a lead lag relationship between inventory investment and the sales as we move forward but our long-term goals continue to be to improve that metric and to drive overall returns in the Company. Paul Swinand - Morningstar, Inc.: Okay. Is the acquisition; is it faster turning inventory on average?

Are you talking about Trunk Club? Paul Swinand - Morningstar, Inc.: Yes.

Well, Trunk Club is a lifeline. There is a very small amount of inventory. There is also some custom there. So -- and even if it was materially different in the metric, it's not going to make an impact to our total inventory. We carry about $2.2 billion of inventory and Trunk Club at this point is relatively small to that. Paul Swinand - Morningstar, Inc.: Okay. Great. Best of luck for the holidays.

Thank you.

Thank you. Our next question is from Ed Yruma from KeyBanc Capital. Ed Yruma - KeyBanc Capital: Hi guys. Thanks very much for taking my question. I guess first, on the price match I know it's been roughly a year since you've been more I guess outward about your "we will not be undersold". Do you think you're saying the economic or customer return from that investment in price? And I guess now that you're laughing that, should we expect the year-over-year impact to be more muted?

Ed, this is Jamie. I don't know if it's something that we've done necessarily differently over the last year. We've always been competitive on price. Nothing has changed about I think our stand. So I think what's changed is, is that the world has gotten little smaller. And we used to compete on price with the stores across the street and now its entire world via the Internet. So the game has changed a little bit and our approach to it has not changed. That being said, I think it's been -- there's a trend around the promotional activity out there in the marketplace, has been fairly consistent over the last year. It tends to rise and fall with how inventories across the marketplace or whether they're healthy or not. And as inventories rise and some of the competition out there needs to mark stuff down to their business that affects prices. It's -- and of course, we have to be competitive with that. This -- so far this year, it's been a little less than we experienced last year. We're not quite sure what's going to happen in Q4 but well we're ready for it.

And Jamie, this is Blake. I'll quickly -- just I would add that we can really see it in the e-commerce business. And so when for any reason we find ourselves behind and not competitive you can see it in the sales. And so overall some of that for the total company is hard to measure. But if you're not competitive you're just not in the game in the long run. Ed Yruma - KeyBanc Capital: Great. And a follow-up, if I may. In terms of the excess inventory at Rack, is it more systemic of the learning curve, of the pack-and-hold strategy or is it just because the comps have come in a little bit lighter than you would have expected? Thank you.

Yes, there are so many factors. Both that you just said apply. We get goods from the full-line sources in term of transfer. We buy merchandize from our top vendors. We also have the pack-and-hold as you alluded to. We now in the last year are taking HauteLook returns, which has been a great customer service for our customer; it's been a great driver of foot traffic in the Rack's but its more inventory come in the rack. So there's just countless inputs that add to this. There is some system issues in terms of information and knowledge on it. But the bottom-line is we have it to manage it better. And we're not going to fully achieve our long-term goals if we have volatility in our inventory management.

Thank you. Our next question is from Jeff Stein from Northcoast Research. Jeff Stein - Northcoast Research: Good afternoon guys. Wondering if you could talk a little bit about the Calgary store, some of the early learnings and takeaways you have from the business. And wondering if you've been able to get all of the local brands up in Canada that you desire? Thank you.

Hey Jeff, this is Jamie. We really did our homework on Calgary. I think we started working on, opening a store about three years ago. We put together a team to really focus on, on learning that customer I think that paid off and it's a dynamic town with great customers and we're focused on serving them well. As Blake mentioned we're significantly ahead of plan there, pretty encouraged by the results and the first impression we've made with that customer. But we're going in business there for a long time. So we've still got a lot to learn on how we can serve that customer well. But we've decided to open in Ottawa in March, and then later in 2015 in Vancouver. But it's about those cities and those towns of customers we've got to learn what they want, we got to learn whether it's the weight of the fabric in those different climates. It's not about necessarily about Canada it's about those towns. So we've got a lot to learn but we're really, really encouraged by our results and as we open more stores in Canada, I think we're going to continue to find ways of serving those customers better. Jeff Stein - Northcoast Research: Right. And your HauteLook returns increased in the second quarter, I'm wondering if you could just speak to that business and are you still seeing a fairly high return rate and if so any thoughts as to why?

Jeff, this is Erik. We have not seen an increase in HauteLook return in the last quarter and I'm sure what you're referring to there.

I think perhaps the comment that we're taking more returns in the Rack.

Okay.

But not overall returns, you loved it, it's more people are returning in the Rack.

Right, it's HauteLook specifically the returns we think it has more tangible example of what you've heard I talk about for a while now. Our four-box strategy of being in online offline and full-price and off-price businesses through just customer desire, customer doing what serve them best and they have chosen to take returns to our Rack stores. We haven't done lot of marketing on that. To the point where over 70% of our HauteLook returns are coming to our Rack stores. It's a way we can serve the customer better and we can serve them better because where we have these multiple businesses that have a synergy that have common merchandise they're on the same platforms. So that's been very encouraging to us, the HauteLook business remains very healthy. The big news in our online off-price business, the last quarter particularly has been with rack.com, which our HauteLook team is supporting all of our rack team here in Seattle. That business is really picking up. Our selection is more than double since we first launched the site and I think more than just the quantity of merchandise the quality of the merchandise again is being driven by this synergy of working with our vendors in the multiple business we have. I think that the quality of the merchandise really improved and the customers responding accordingly.

Our next question is from Michael Exstein from Credit Suisse. Michael Exstein - Credit Suisse: Good afternoon everyone. Just two quick follow-up questions, one is what is the impact of Packaway inventories, its relatively new way for you to operate and how does that impact then. And how are you thinking about Trunk Club going forward, how do you integrate it into Nordstrom and really lever it going forward?

Well Michael, in terms of the Packaway as you know over the last roughly 18 or 24 months we've increased our investments there, because we found that if we were out there early and in the market for the best product that seasons were transitioning, we could be the first at the table and get to that stuff. And so that's made our entire offer more compelling in the Rack, our sell-throughs on Packaway are measurably higher than other products. So it's a very solid investment. And we're -- I think the challenges right now as we built so much momentum in the business and momentum in procuring the product that we got to make sure that we're balanced in how we approach it. And in terms of Trunk Club, Pete?

Yes, with regards for Trunk Club our focus in the short-term is mostly supporting their existing growth strategy. They've been on a more of an doubling of their business every 12 months and we really like their growth strategy. We think we can help them and obviously we can help them and we can focus on the short-term supply chain is an obvious one. I think there is some customer service elements like alterations that we can help them. There is some products areas that we can help them and have already made some progress with. So that's our focus right now. We do think their business model has additional growth aspects that we will want to explore. At this time most of our focus has been really trying to support very good standards.

Thank you. Our next is from Lorraine Hutchinson from Bank of America. Lorraine Hutchinson - Bank of America: Thank you, good afternoon. Just continuing on that topic, I was wondering if there are any lessons learned from the HauteLook acquisition that you could apply to Trunk Club in the coming years.

Sure, it's Erik. The answer is yes, very much so. I think similarly with HauteLook, HauteLook had a very strong growth strategy and we didn't want to get distracted too much at the beginning on that. I think the lesson is well that was the right thing to do, we could have been more thoughtful in a multiyear plan of where things are going because there is big value as we start to integrate some elements of business, elements like the merchandising between HauteLook and Rack has been more integrated over the last year in particular. So that's we're at now where Trunk Club is. Well, we're not looking to have a lot of formal integration in the next quarter with it. We are playing out a three-year plan of where we think that the business going and having the right pace and identifying the right areas to integrate is something that we have learned from our HauteLook experience.

Thank you. Our next question is from Kimberly Greenberger from Morgan Stanley. Kimberly Greenberger - Morgan Stanley: Great thanks so much. I wanted to ask, Mike, about the Trunk Club acquisition. Is the full impact to EPS being felt here in Q3 and Q4? Or will there be some lingering impact in 2015 that you would like us to keep in mind? And then, secondarily, on the gross margins, year-to-date there's a little bit of pressure in the gross margin. It seems to be coming from two areas -- the accelerated growth in Rack and also, as you mentioned in today's press release, the increase in competitive markdowns. Are those factors that you would expect to remain as we look out into 2015?

Sure, Kimberly. Starting with Trunk Club, as we stated the annual 2014 impact is roughly 3% dilutive and we've recognized roughly a third of that in the third quarter, the balance will be in the fourth quarter. In terms of 2015 we'll certainly provide that clarity in terms of as far as 2015 when we give our guidance in February. But I will refer you when we publish the 10-Q after this quarter there will be very detailed disclosure on the purchase accounting and the resulting impact and you should get that details in that as well going forward. In term of the gross margin, as far as the Rack I think we've been pretty consistent for a numbers of years as we've accelerated growth that we've set the geography of the Rack P&L is different than the majority of the business and that we tend to have lower merchandise margins but we also tend to have lower SG&A cost. And so at that business becomes a larger percentage of total it's just by very nature averaging down the gross margin. So yes, we should continue to see that at least over the next couple of years as we continue to open a lot of stores there. And then, in terms of the competitive markdown, it was relatively small this quarter. We called it out, because it was an element, and it's a big subject that's being talked about. Whether or not, that's going to continue at what level, I don't think we have an exact answer for that. But we will certainly continue to monitor that and respond accordingly to assure our customers have that same relationship with us over time.

Thank you. Our next question is from Jennifer Black from Jennifer Black & Associates. Jennifer Black - Jennifer Black & Associates: Good afternoon and thanks for taking my question and congratulations.

Thank you. Jennifer Black - Jennifer Black & Associates: I wondered I have two different questions. My first question in regards to HauteLook, I wondered if you could talk about your marketing campaign strategies, what your learnings are from your TV advertising. That's my first question.

Hi Jennifer, this is Erik. Jennifer Black - Jennifer Black & Associates: Hi, Erik.

HauteLook has done some TV and has been effective with it. I guess learnings from it is that it can be very targeted, if it's very targeted, it's very effective. So specific cable programs that have aligned with their customer base which is little younger as you know, than our overall customer and it's been effective so far. Jennifer Black - Jennifer Black & Associates: So that is something you're going to continue.

I think so. Jennifer Black - Jennifer Black & Associates: Okay. I wondered you haven't talked about Active as a category, I think a couple of quarters ago, I asked about men's and you were talking about that you were in the development process of doing something in private label in men's. So I wondered if you could just talk about Active, I know, it's a growth category in women's, where you are, and where you are with men's. Thank you.

Hi, Jennifer, this is Peter. Active has been a strong category. But I think where it really plays itself out that's it's not a siloed thing, it's very specific to just one brand or one kind of functional activity, it's really been much more incorporated into kind of a -- almost an extension of Sportswear. So you wouldn't necessarily just see the impact of Active in just the Active department, it actually kind of plays out across multiple fronts. But there is still a big opportunity for us to be more meaningful with the most important brands. And so we have had good expansion there. And as you've mentioned with our label program with Zella specifically in women's Active it's been really good. Really, really good. And we're figuring out how to be able to extend that into men's and we're early days on that but I think we're encouraged by what we think is powerful there.

Thank you. Our next question comes from Joan Payson with Barclays. Joan Payson - Barclays: Hi. Good Afternoon. So you mentioned the Rack.com business a little bit earlier in terms of how the product dynamics have changed over time. But could you may be discuss the difference between the full-line online business and Rack.com in terms of consumer behavior? May be how it differs in terms of transaction size, traffic conversion and some of those metrics.

Joan, this is Erik. We're not sharing those specifics, I don't have them right them in front of me but when I say the rack.com we're still very much on a steep learning curve on that. It is -- it's a young, just like an industry, the online off-price, and as you know, we've launched rack.com our persisting offer earlier this year. So if there are some differences we're learning between the flash sale business in HauteLook and persistent business in rack.com. There is -- and I think our improved results for the last couple of months, reflects some adjustments along the way there. I will say what is reaffirming is the synergies from those businesses, with the rest of our business and specifically on the vendor side, the story to vendors of how we can acknowledge our customers better by showing their product in these different channels. But how we can help their business? We have more and more examples of that and there is an absolute synergy when we feature brands on HauteLook with a flash event and as well it's featuring big brands on rack.com. The only synergy amongst those business we see lift in our other businesses to those brands as well. So that story is resonating more and more with the marketplace and we think there is even more game to be had there. Joan Payson - Barclays: Great. And is there any target in mind in terms of how big that business could ultimately be?

Nothing that we --

Nothing that we have shared. But clearly, we see as a big opportunity.

Our next question comes from Paul Lejuez from Wells Fargo. Paul Lejuez - Wells Fargo: Hey, thanks guys. I'm just wondering on the Rack business if you saw a pretty consistent weakness throughout the quarter, if there was a pretty significant slowdown either in September and/or October? And from an inventory perspective, just wondering if there are any particular categories where you're a little bit heavy at the Rack position? Thanks.

Paul, this is Blake. I will try to articulate with the end of the quarter, so predominantly October so that's when we saw the sales soften, materially from the trend. In terms of inventory, it's pretty balanced by division. So we don't have an example where one merchandizing area is much more than the other. They all are in a position where they are little bit over and so they have all got to a job to do here. Paul Lejuez - Wells Fargo: Blake, can you quantify what Rack was running prior to October?

We don't break it out in the middle of the quarter. But for the trend prior to that Q2, I think we were up 4% from a comp store basis, and for the quarter, we are 1.7% so just a little over 200 basis point change.

Thank you. Our next question is from Michael Binetti from UBS. Michael Binetti - UBS: Hey guys, congrats on a great quarter.

Thanks Michael. Michael Binetti - UBS: At the risk of beating it to death on the Rack, you sound like you're pretty comfortable that it was a fairly short-term blip. Do you expect that business, as you think about the math you put behind the comp guidance you gave us for fourth quarter, do you expect that business to reaccelerate in the fourth quarter -- just to help us put bookends on your call out on that business here?

Well, Michael, this is Blake. We are not expecting it to accelerate to cure our eUphills. I mean, we're not hoping and praying that business will get better and then this inventory will go away magically. I mean there's some heavy lifting to do but we're pretty comfortable that we -- it is a blip and it's something that we can get after and do this again in this quarter, right. I guess, I would tell that we will talk about it next quarter and if it's still a problem, my brothers might kick me out of this part of it. But we all own it, and we're going to make it happen. Michael Binetti - UBS: Okay. Thanks. Is it -- and then, Mike, I know you don't want to get in to guiding on Trunk Club for next year. But my concern is that you have a lot of analysts fairly disorganized with the impact in their fiscal 2015 earnings here. Can you just help us think directionally? Because I think last time we talked to you that business was growing over 100%. And that operating margins were about to go from slightly negative to positive and certainly that top-line trajectory should improve may be. Just to avoid straightlining out the wrong kind profitability into next year, please.

Well, Michael, most of the impact on that Trunk Club is going to have next year will be on the impact of how we're treating the -- putting up the assets related to the acquisition and therefore, amortization. So I think we said last time that it would be roughly a 3% to 5% impact going forward. And I think directionally, that's in the ballpark, like I said, as we disclose the details of the purchase accounting you will get more visibility into that.

And we do have time for one final question. Our final question today is from Bob Drbul from Nomura Securities. Bob Drbul - Nomura Securities: Hi. Good evening. Just a question on -- can you just talk about the trends in like the Boot category and the Outerwear categories as you think about it for Q3 and into Q4?

Yes, this is Pete. I mean it's so much that's just heavily reliant on weather. And where you've seen the weather change and evolve, we've had risk sales in those typically cold weather classifications. So we're prepared for it, the weather is going to come, if it's not there already everywhere. And so I think we feel good about the content of our inventory and the balance of it and all that. So I would think generally, it's been fine, it's been pretty much near plan and that again plays itself out over time. If we look at our day-to-day or even a week-to-week basis a lot of this has to do with the weather. But I'm sure by the end of the quarter, that will tend will balance itself out and we'll be on plan there.

Again thank you for today's call. A webcast replay along with a slide presentation will be available for one year on our website. Additionally, you will find an overview of our performance and growth strategy at the end of the slide presentation. Thank you for your interest in Nordstrom.

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