NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a rating of 'A-' to Nordstrom, Inc.'s (Nordstrom, NYSE: JWN) $500 million 4% senior unsecured notes due October 15, 2021. The Rating Outlook is Stable. Proceeds from the offering will be used for general corporate purposes. A full ratings list is shown below.

The rating reflects Nordstrom's position as a market share consolidator in the department store sector and strong execution via its differentiated merchandise and a high level of customer service that have enabled the company to enjoy strong customer loyalty and high operating margins relative to its industry peers. Sales trends have been very strong over the last two years and reflect the company's strong merchandise presentation at sharper price points, the improved mix of regular priced selling, as well as strong inventory management.

Fitch expects same-store sales to be around 6% in 2011 and in the 2-4% range in 2012-2013, on top of an 8% increase in 2010. Overall sales growth, including contribution from new stores, should be in the 10-11% range for 2011 and in the mid-single digit range for 2012-13. This should enable Nordstrom to strengthen its #5 market share position (of department store sales using NAICS codes with 2011 share expected to increase to 5.5% from 4.9% in 2010) as industry sales are expected to be flat to down 1% over the next two years.

Operating EBIT dollars in 2011 are expected to increase 7-8% and operating margins are expected to be in the 11% plus range (11.5% in 2010). With the addition of $500 million in debt, Fitch expects adjusted debt/EBITDAR to be around 2.6 times (x) in 2011-12, slightly above 2.4x in 2010.

Fitch notes that Nordstrom and Target Corporation are the only two publicly rated companies in its U.S. retail coverage that still own their credit card receivables and these credit metrics are encumbered with the full amount of debt associated with the more highly leveraged credit card business. Assuming Nordstrom's credit card receivables are financed using a mix of 80% debt and 20% equity, core retail debt/EBITDAR is expected be 1.6x in 2011-12.

Fitch expects the company to manage its capital structure, including share buybacks, to its publicly stated target of 2.0x -2.5x consolidated adjusted debt/EBITDAR leverage (using 8x rent expense net of property incentives). This roughly equates to a leverage target of 2.25x -2.75x, based on Fitch's methodology of using 8x gross rent expense. At these levels, core retail credit metrics, excluding the more leveraged credit card business, would be between 1.4x to 1.9x, which would be consistent with its current ratings based on peer comparisons.

Fitch expects Nordstrom to generate annual free cash flow in the $300 million range in 2011-2012. Upcoming debt maturities include $500 million in secured notes in April 2012, which Fitch expects will get refinanced.

The company's liquidity is also supported by a $600 million senior unsecured revolving bank credit facility that is scheduled to mature in June 2016. The company has a 364-day $300 million variable-funding facility backed by Nordstrom private-label card receivables and a 90% interest in the co-branded Nordstrom VISA credit card receivables, and this facility expires in January 2012. There were no outstanding borrowings under these facilities as of July 30, 2011.

Fitch currently rates Nordstrom as follows:

--Long-term Issuer Default Rating (IDR) 'A-';
--$650 million bank credit facility 'A-';
--Senior unsecured notes 'A-';
--Short-term IDR 'F2';
--Commercial paper 'F2'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com. The ratings above were unsolicited and have been provided by Fitch as a service to investors.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 12, 2011);
--'Short-Term Ratings Criteria for Non-Financial Corporates' (Aug. 12, 2011).

Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
Short-Term Ratings Criteria for Non-Financial Corporate
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647249

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CONTACT:

Fitch Ratings
Primary Analyst:
Monica Aggarwal, CFA, +1-212-908-0282
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Philip M. Zahn, CFA, +1-312-606-2336
Senior Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com

KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Professional Services  Finance

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