Nordstrom Inc's Business Segments

We also operated 49 stores under the name 'Nordstrom Rack' and one clearance store under the name 'Last Chance.' The Nordstrom Rack stores purchase merchandise directly from manufacturers, as well as serving, in part, as outlets for clearance merchandise from our large specialty stores.

We also operated one free-standing shoe store under the name 'Nordstrom' and five U.S. specialty boutiques under the name 'Fa'onnable'. As a result of the acquisition of Fa'onnable, S.A.S. of Nice, France in October'2000, we also operated 31 Fa'onnable boutiques located primarily in Europe. Fa'onnable is a wholesaler and retailer of high quality men's and women's apparel and accessories.

We generate catalog and Internet sales through Nordstrom Direct (formerly known as Nordstrom.com) and service charge income through Nordstrom Credit, Inc.

We purchase merchandise from many suppliers, no one of which accounted for more than 2% of 2003 net purchases. We believe that we are not dependent on any one supplier, and consider our relations with our suppliers to be satisfactory.

We have approximately 102 registered trademarks. The loss or abandonment of the Federally registered names 'Nordstrom' or 'Fa'onnable' would materially impact our business. The loss or abandonment of the Federally registered trademarks 'Brass Plum', 'Baby N', 'Caslon', 'Classiques Entier', 'Frenchi', 'Halogen' and 'Rubbish' may impact our business, but not in a material manner. With the exception of the above-mentioned Federally registered trademarks, the loss or abandonment of any particular trademark would have little, if any, impact on our business.

We offer our customers a liberal return policy at our full-line stores. Nordstrom Rack stores accept returns up to 30'days from the date of purchase. In general, our return policy is somewhat more generous than industry standards. We properly accrue for estimated sales returns based on our historical knowledge of return trends. We strive to maintain our inventory at optimum levels that enable us to maximize sales while minimizing markdowns.

Our business is highly competitive. Our stores compete with other national, regional and local retail establishments within our operating areas which carry similar lines of merchandise, including department stores, specialty stores, boutiques, and mail order and Internet businesses. Our specific competitors vary from market to market. We believe the principal methods of competing in our industry include customer service, value, quality of product, fashion, advertising, store location and depth of selection.

The Retail Stores segment derives its revenues from sales of high-quality apparel, shoes and accessories. It includes our full-line, Nordstrom Rack and Faconnable stores as well as our product development group, which coordinates the design and production of private label merchandise sold in our retail stores.

The Credit Operations segment revenues consist primarily of finance charges earned through issuance of the Nordstrom private label and VISA credit cards.

The Catalog/Internet segment generates revenues from direct mail catalogs and the Nordstrom.com website.