Financial Statement Analysis: Family Retail Clothing

GROUP
Amandeep Kaur Dhara Patel Hera Jetpuri The GAP Inc. Abercrombie & FitchCo. American Eagle Outfitters Nordstorm Inc. Prashant Rai

Introduction: The U.S. economy has taken several dips in the past several years. As a result, almost all industries, across the board, have felt its suppressive and fairly negative effects. Among these industries, the family retail industry was not an exception. As Americans began to watch their money more closely and as more Americans were passing through stages of unemployment, a great deal of them could afford as little as possible on apparel. The following is an analysis of The Gap, Abercrombie & Fitch, American Eagle Outfitters, and Nordstrom Inc. as part of the family retail industry and an evaluation of their performance in the last three years.

Company Profiles: The Gap, Inc. is a leading company that was formed in California in 1969 to provide apparel, accessories, and personal care products for all age groups through its distinct brands: Gap, Old Navy, Banana Republic, Piperlime, and Athleta. The Gap Inc. is a global company with stores and online merchandise made available throughout the world. Between 2007 and 2011, the company has more than tripled its franchise stores. American Eagle Outfitters, Inc. was incorporated in Delaware in 1977. Over the years, it has introduced the following brands: American Eagle, Aerie, and 77 Kids by American Eagle. Until 2010, it also operated the Martin+OSA brand. The company is a leading retailer that offers in- stores and online shopping throughout the United States and Canada. It also provides apparel, initimates, and accessories to ages 15-25 years, with denim, knit tops, and fleece being the companys key products. Abercrombie & Fitch Co. was founded in Delaware in 1996. It offers a wide variety of apparel, accessories, and personal care products under its distinct brands: Abercrombie & Fitch, Abercrombie kids, Hollister, and Gilly Hicks. As of January 2012, the company manages 946 stores in the United States and 99 stores outside of the U.S. After being founded as a retail shoe business in 1901, Nordstrom Inc. incorporated in Washington in 1946. Today, the company is made up of two business segments: retail and credit. The retail segment consists of the full-branded Nordstrom stores, an online Nordstrom, discounted Nordstrom Rack stores, online private Haute Look retailer, Jeffry boutiques, philanthropic Treasure & Bond store, and a clearance store called Last Chance. The credit segment includes the companys owned federal savings bank, through which it provides cards to its customers that can offer them loyalty rewards. With 225 stores across 30 states, the company has become one of the leading retail stores in the United States.

Accounting Policies: The accounting policies are fairly consistent across the companies - most list the same policies that would be viewed as "significant". The quality of information disclosed in this section is excellent among the four companies. Retail sales accounts for the majority of their revenues and all recognize revenue at the point of sale. Valuation of inventory is also similar between companies basing inventories on costs associated with merchandise, property and equipment. Reporting of the method to determine fair value of stock-based compensation is consistent with all four companies using the Black Scholes valuation method.

Quality of Accounting Disclosure: As when making investment decisions, it is important to understand the company and its position, the quality of accounting disclosures plays an integral role in allowing investors a clear picture of every company. In this case, quality is often measured by the details and thoroughness as well as ease of interpretation provided by the annual reports and financial statements. Across the board, each of the four companies have exactly 15 line items. Additionally, the thorough and clear notes as well as the large number of exhibits provided are easy to follow for interpretation on profitability, valuation and overall assessment. As the formats of all four companies are similar, it is relatively simple and easy to compare these companies and their financial status. Furthermore, managements review is also essential as this step validates all the information illustrated in the annual reports and financial

statements. As indicated in their 10Ks, management acknowledges that they have reviewed and approved of the issued reports. Thus, in terms of quality of accounting disclosure, all four companies do equally well in disclosing their finances.

Profitability (Exhibit-3): With the difficulties of not just national but global recession between the years of 2008 and 2012, retail companies have also been feeling the effects of the downward sloping economy. Below is a discussion of some key measures of profitability demonstrated in Exhibit 3 that shed light on the trends of these numbers as shown in Exhibit 4. Gross margin is calculated by subtracting the cost of goods sold from net sales, then dividing by net sales. During the most recent reporting, U.S. apparel firm Abercrombie & Fitch Co. has generated the highest gross margin of 61% among the companies examined here, surpassing the gross margins of American Eagle Outfitters with 39 %, followed by Nordstorm with 37% and Gap with 36.2 %. The abnormally high gross margin for A&F is due to distribution costs not being included in the cost of goods sold, which in turn makes gross profit higher. Whereas, Gap, AE, and Nordstorm include distribution costs in the cost of goods sold which drive down the gross profit. Over the past three years, this measure has dropped by an average of 3% for all the companies with the exception of Nordstrom as a reflection of the economy. Nordstorms gross margin increased from 35% in 2009 to 37% in 2011. The downward trend of the gross margin for these companies is consistent over the three-year period demonstrating weak demand in the retail clothing industry. Profit margin is the key profitability ratio as well. It captures non-operating expenses such as taxes and interest payments and represents the industrys actual earnings. Here, Nordstorm is at the top of the sector, with a profit margin of 7 %, followed by American Eagle at 5%, Abercrombie & Fitch at 3% and Gap at 0.06 %. With the exception of Nordstorm, the profit margins follow the same trend as gross margin as AE, A&F and Gap profit margins have successively declined over the years signaling a decrease in net income of other companies when compared to that of Nordstorm. Asset Turnover is an indicator of both profitability and efficiency. Companies that use their assets (such as capital equipment, plant facilities, and cash-on-hand) most efficiently will tend to generate higher ROAs than competing industries. With respect to this indicator, Gap is the most efficient with a ROA of 2.01, followed by AE, A&F and Nordstorm. As a whole, the asset turnover measure has been increasing except for AE, whose asset turnover has declined to 1.48. Long-term debt in relationship to stockholders equity is a measure of how well the industry is leveraged over the longer-term (usually more than one year). The higher the ratio, the more vulnerable the industry is to an extended downturn. A&Fs debt to equity ratio of 0.26% is the lowest of all the retailers examined in this report. A&F has also been able to lower its ratio over the three year period of 2009 to 2011. In contrast, Gap has one of the higher levels of debt with a debt to equity ratio of 1.69, followed by Nordstorm at 1.32 and AE at 0.29. Unlike A&F, Gap, Nordstorm and AEs debt has been increasing over the three year period as reflected by the increasing trend in this ratio.

Opportunities /Threats: The apparel industry is subject to rapidly evolving fashion trends, and companies must continuously offer innovative and upgraded products to maintain and grow their existing businesses. Failure to offer innovative and upgraded products may adversely affect their sales and lead to excess inventory, markdowns and/or dilution of our brands. Due to the competitive nature of the apparel industry, there can be no assurance that the demand for products will not decline or that the companies will be able to successfully evaluate and adapt their products to align with consumers preferences, fashion trends and changes in consumer demographics. As is typical with new products, market acceptance of new designs and products is subject to uncertainty. In addition, the introduction of new lines and products often requires substantial costs in design, marketing and advertising, which may not be recovered if the products are not successful. Any failure on retailers part to develop appealing products and update core products could limit their

ability to differentiate their products. Additionally, such a failure could leave them with a substantial amount of unsold excess inventory, which they may be forced to sell at lower price points. Any of these factors could result in the deterioration in the appeal of their brands and products, adversely affecting business, financial condition and operating results.

Overall Assessment: If we look at the key financial ratios from exhibit 3, in terms of ROE in 2011, Nordstorms leads the race with a ROE of 34 percent, which means that an investor would get maximum return from Nordstorm, also over the years ROE for, Nordstorm has increased as compared to its peers, considered in this analysis, who have seen a downfall in their ROEs over the years. Looking at profit margin for 2011 it becomes evident that Nordstorm again leads the race with a profit margin of 7 percent and this figure has increased over the past years for Nordstorm, whereas for other competitors the profit margin is following a downturn over the years which means Nordstorm is a more profitable company that has better control over its costs compared to its competitors. In terms of gross margin for 2011, Nordstorm ranks second with 37 percent, which means the company would retain $0.37 from each dollar of revenue generated, to be put towards paying off selling, general and administrative expenses, interest expenses and distributions to shareholders. This figure is also consistent over the years. Asset turnover for Nordstorm for 2011 is 1.32 which is comparable to its peers whose asset turnovers are within a range of 1-2, this means that every company considered in this analysis use their assets in similar manner to generate revenue. For receivable turnover, Nordstorms ratio is only 5.17 which is significantly low when compared to its peers who maintain a ratio of approximately 50 percent. This relates to the fact that Nordstorm should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm. For the year 2011, the inventory turnover ratio for Nordstorm is highest at 6.2 which is approximately 8 percent more than its nearest competitor GAP in the same segment. Which means Nordstorm has stronger sales figures as compared to its peers. Debt equity ratio for Nordstorm is 1.32 and is second to GAP at 1.69, this figure suggest that Nordstorm has been aggressive in financing its growth with debt. Current ratio for the year 2011 for Nordstorm is 2.16 which is in the same range as compared to other peer companies in this analysis, whose current ratio are in the range of 2-3, this suggests that every company under analysis has a good liquidity and stands a good chance to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The quick ratio for Nordstorm stands highest at 1.52 as compared to its peers for the year 2011 which suggest that Nordstorm has more liquid assets to pay off its short term liabilities and rest of the participating companies have more assets in form of inventory which could pose some problem in converting the inventory to cash, in order to pay off the debt. Times interest earned for Nordstorm for 2011 stands at a fair rate of 9.61 which is in sync with previous years, other companies have too many fluctuations in their TIE (please refer to exhibit 3), which leads to the interpretation that Nordstorm maintains a fair amount towards interest payments to debt holders in order to prevent bankruptcy and side by side invests a fair amount in projects that would yield greater returns and borrowing at a lower cost of capital than what it is currently paying to meet its debt obligations. Referring to above points, it can be stated that Nordstorm Inc. is likely to be most stable and successful in the future.

Exhibit 1: Significant Accounting Policies:

Accounting Method The Gap American Eagle Outfitters Abercrombie & Fitch Stores: point of sale Online: estimated time when the customer receives the merchandise (receipt date) based on shipping terms and historical delivery terms. Lower of cost or market (LCM) Weighted average cost / retail method Nordstrom

Revenue Recognition

Stores: point of sale Online: estimated time when the customer receives the merchandise (receipt date)

Stores: point of sale Online: estimated time when the customer receives the merchandise (receipt date)

Stores: point of sale Online: estimated receipt by the customer

Merchandise Inventory

Lower of cost or market (LCM) Weighted average cost / retail method

Lower of cost or market (LCM) Weighted average cost / retail method

Lower of cost or market (LCM) Weighted average cost / retail method Property and Equipment: cost less accumulated depreciation. Life: 3-40 years Land: historical cost Straight line Based on the expected present value of future cash flows

Land, building, & Equipment

Life: 3-39 years

Life: 5-25 years

Life: 3-30 years

Depreciation Goodwill, intangible assets, & long-lived assets

Straight line Based on estimated discounted future cash flows of the assets

Straight line Based on the expected present value of future cash flows

Straight line (also for amortization) Based on estimated discounted future cash flows of the assets

Exhibit 2: Quality of Accounting Disclosure

Measures 1) Number of line items* 2) Thoroughness and content of 10K 3) Interpretation of notes 4) Format 5) Management review** Overall The Gap 15 Average Above average Easy Conducted Above average American Eagle Outfitters 15 Average Above average Easy Conducted Above average Abercrombie & Fitch 15 Average Above average Easy Conducted Above average Nordstrom 15 Average Above average Easy Conducted Above average

*The following are the listed 15 line items: business, risk factors, unresolved staff comments, properties, legal proceedings, mine safety disclosures, market for registrants common equity, selected financial data, managements discussion and analysis of financial condition and results of operations, quantitative and qualitative disclosures about market risk, financial statements and supplementary data, changes in and disagreements with accountants on accounting and financial disclosure, controls and procedures, other information, directors, executive officers and corporate governance, executive compensation, security ownership, certain relationships, principal accounting fees and services, and exhibits. **Management review is addressed in line item 9: controls and procedures.

Exhibit 3: Key Financial Ratios

Ratios: Return on Equity % Profit Margin Gross Margin Asset Turnover Receivable Turnover Inventory Turnover Debt Equity Ratio Current Ratio Quick Ratio Times Interest Earned 2011 24% 0.06 36.2% 2.01 57.96 5.73 1.69 2.02 1.03 19.4 Gap, Inc. 2010 27% 0.08 40.2% 1.95 82.6 5.7 0.73 1.87 0.84 -246 2009 24% 0.08 40.3% 1.83 80.1 5.7 0.63 2.19 1.2 302.5 American Eagle Out 2011 2010 2009 10% 11% 13% 5% 6% 6% 39% 40% 41% 1.48 1.43 1.54 80 80 80 5.73 5.70 6.04 0.29 3.03 1.01 2.61 0.26 2.86 0.96 3.38 0.28 2.31 1.04 2.56 Abercrombie & Fitch 2011 2010 2009 7% 8% 15% 3% 4% 9% 61% 64% 64% 1.44 1.22 1.08 50.10 48.18 54.75 4.70 3.68 2.96 0.26 2.59 1.63 46.50 0.30 2.73 1.69 76.33 0.30 2.38 1.28 -60.0 Nordstrom, Inc. 2011 2010 2009 34% 34% 32% 7% 7% 5% 37% 37% 35% 1.32 1.33 1.35 5.17 4.59 4.15 6.20 6.29 5.93 1.32 2.16 1.52 9.61 0.93 2.57 1.88 8.80 1.28 2.01 1.41 6.04

Exhibit 4: Key Financial Ratios - Charts

Exhibit 5: The Gap Inc. Consolidated Balance Sheet (2008-2011)

(in $ Millions) Assets: Current Assets: Cash Inventory Short Term Investments Restricted Cash Other current assets Long Term Assets: Property and Equipment Other long-term Total Assets Liabilities: Current Liabilities: Accounts Payable Income taxes payable Current Maturities of debt Accrued expenses and other Long-Term Liabilities: Lease and other Long Term Debt Total Liabilities: Stockholders Equity: Common Stock ($0.05 par value) Paid in capital Retained Earnings Other accumulated income Treasury Stock Total Stockholders Equity Total Liabilities and Stockholders Equity 2011 % $1,885 $1,615 $0 $0 $809 25% 22% 0% 0% 11% $1,561 $1,620 $100 $0 $645 2010 % 22% 23% 1.4% 0% 9.1% $2,348 $1,477 $225 $18 $596 2009 % 29% 18.5% 2.8% 0.2% 7.5% $1,715 $1,506 $0 $41 $743 2008 % 23% 20% 0% 0.5% 10%

$2523 $590 $7422

34% 8% 100%

$2563 $576 $7065

36.3% 8.2% 100%

$2,628 $693 $7985

33% 9% 100%

$2,933 $626 $7564

39% 8% 100%

$1066 $5 $59 $1066

14% 0.1% 0.8% 14%

$1049 $50 $0 $996

15% 0.7% 0% 14%

$1027 $41 $0 $1063

13% 0.5% 0% 13.3%

$975 $57 $50 $1076

13% 0.8% 0.7% 14%

$933 $1606 $4667 $55 $2867 $12,364 $229 (12,760)

12.5% 22% 63% 0.7% 39% 167% 3% -172%

$890 $0 $2985 $55 $2939 $11,767 $185 ($10,866)

12.6% 0% 42% 0.8% 42% 166.5% 3% -154.8%

$963 $3094 $55 $2935 $10,815 $155 ($9069)

12% 39% 0.7% 37% 135% 2% -113.5%

$1019 $3177 $55 $2895 $9,947 $123 ($8,633)

13.5% 42% 0.7% 38.3% 131.5% 1.5% -114%

$2755 $7422

37% 100%

$4080 $7065

58% 100%

$4891 $7985

61% 100%

$4387 $7564

58% 100%

Exhibit 6: The Gap, Inc. Consolidated Income Statement (2009-2011)

(in $ Millions) Net Sales Cost of Goods Sold = Gross Profit Operating Expenses = Operating Income Interest Expense + Interest Income = Income before income taxes Income Taxes = Net Income 2011 $14549 $9275 $5274 $3836 $1438 $74 $5 $1369 $536 $883 Percent % 100% -64% 36% -26% 10% -0.51% 0.034% 9% -3% 6% 2010 $14,664 $8775 $5889 $3921 $1968 -$8 $6 $1982 $778 $1204 Percent % 100% -60% 40% -27% 13% -0.05% 0.05% 13% -5% 8% 2009 $14,197 $8473 $5724 $3909 $1815 $6 $7 $1816 $714 $1102 Percent % 100% -60% 40% -27% 13% -0.04% 0.04% 13% 5% 8%

Exhibit 7 & 8: Abercrombie & Fitch Co.

ABERCROMBIE&FITCHCO. CONSOLIDATED STATEMENTS OF INCOME (Thousands, except share and per share amounts)

2011 2010 NET SALES $4,158,058 $3,468,777 Cost of Goods Sold 1,639,188 1,256,596 2,518,870 2,212,181 GROSS PROFIT Stores and Distribution Expense 1,888,248 1,589,501 Marketing, General and Administrative Expense 437,120 400,804 Other Operating Expense (Income), Net 3,472 -10,056 190,030 231,932 OPERATING INCOME Interest Expense (Income), Net 3,577 3,362 186,453 228,570 INCOME FROM CONTINUING OPERATIONS BEFORE TAXES Tax Expense from Continuing Operations 59,591 78,287 $126,862 $150,283 NET INCOME FROM CONTINUING OPERATIONS $796 $ INCOME (LOSS) FROM DISCONTINUED OPERATIONS, Net of Tax $127,658 $150,283 NET INCOME

2009 $2,928,626 1,045,028 1,883,598 1,425,950 353,269 -13,533 117,912 -1,598 119,510 40,557 $ 78,953 -$78,699 $254,000

100% 39.42 60.58 45.41 10.51 0.08 4.57 0.09 4.48 1.43 3.05 0.02 3.07

Percentage 100% 36.23 63.77 45.82 11.55 -0.29 6.69 0.10 6.59 2.26 4.33 $ 4.33

100% 35.68 64.32 48.69 12.06 0.00 4.03 1.00 4.08 1.38 2.70 -2.69 8.67

ABERCROMBIE&FITCHCO. CONSOLIDATED BALANCE SHEETS (Thousands, except par value amounts) 2011 ASSETS CURRENT ASSETS: Cash and Equivalents Marketable Securities Receivables Inventories Deferred Income Taxes Other Current Assets TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT, NET NON-CURRENT MARKETABLE SECURITIES OTHER ASSETS TOTAL ASSETS $826,353 $669,950 $522,122 $118,044 32,356 530,486 74,777 90,865 53,110 53,801 385,857 310,645 372,422 333,153 60,405 44,570 43,408 36,128 79,389 77,297 80,948 68,643 1,426,781 1,225,683 1,072,010 1,140,255 1,154,759 1,244,019 1,398,655 1,318,291 100,534 141,794 229,081 259,341 210,370 148,435 109,052 $2,941,415 $2,821,866 $2,848,181 $2,567,598 28.09 2.54 13.12 2.05 2.70 48.51 39.26 3.42 8.82 100% 23.74 18.33 4.60 1.15 20.66 3.22 1.86 2.10 11.01 13.08 12.98 1.58 1.52 1.41 2.74 2.84 2.67 43.44 37.64 44.41 44.08 49.11 51.34 5.02 8.04 7.45 5.21 4.25 100% 100% 100% 2010 2009 2008 Percentage

LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES: Accounts Payable Accrued Expenses Deferred Lease Credits Income Taxes Payable TOTAL CURRENT LIABILITIES LONG-TERM LIABILITIES: Deferred Income Taxes Deferred Lease Credits Long-Term Debt Other Liabilities TOTAL LONG-TERM LIABILITIES

$137,235 $ 150,134 300,100 246,289 41,538 43,597 73,491 9,352 552,364 449,372 33,515 192,619 68,566 203,567 498,267 47,142 212,052 71,213 214,170 544,577

$92,814 $108,437 241,231 280,910 42,358 37,925 16,455 72,480 449,797 543,113 34,085 211,978 100,000 206,743 552,806 22,491 213,739 169,942 406,172

4.67 10.20 1.41 2.50 18.78 1.14 6.55 2.33 6.92 16.94

5.32 8.73 1.54 0.33 15.92 1.67 7.51 2.52 7.59 19.30

3.26 8.47 1.49 0.58 15.79

4.22 10.94 1.48 2.82 21.15

1.20 0.88 7.44 8.32 3.51 7.26 6.62 19.41 15.82

STOCKHOLDERS EQUITY: Class A Common Stock 1,033 1,033 1,033 1,033 Paid-In Capital 349,258 339,453 328,488 319,451 Retained Earnings 2,272,317 2,183,690 2,244,936 2,051,463 Accumulated Other Comprehensive Income (Loss), net of tax -6,516 -8,973 -22,681 -7,118 Treasury Stock, at Average -725,308 -687,286 -706,198 -760,752 1,890,784 1,827,917 1,845,578 1,618,313 TOTAL STOCKHOLDERS EQUITY TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $2,941,415 $2,821,866 $2,848,181 $ 2,567,598

0.04 11.87 77.25 -0.22 -24.66 64.28 100%

0.04 12.03 77.38 -0.32 -24.36 64.78 100%

0.04 11.53 78.82 -0.80 -24.79 64.80 100%

0.04 12.44 79.90 -0.28 -29.63 63.03 100%

Exhibit 9: American Eagle Outfitters Co. Consolidated Balance Sheet (2008-2011)

American Eagle Outfitters, Inc. Balance Sheet 2011 2010 Assets Current assets: Cash and cash equivalents Short term investments Accounts receivable Merchandise inventories deferred tax assets, net Prepaid expenses and other Total current assets Property and equipment,at cost, net of acc depreciation Goodwill Long term investments Non-current deferred income taxes Other assets Total asse ts Liabilities and Shareholders' Equity Current liabilities: Accounts payable Note payable Accrued compensation and payroll taxes Accrued rent Accrued income and other taxes Unredeeemed gift cards and gift certificates Current portion of deferred lease credits Other liabilities and accrued expenses Total current liabilities Deferred lease credits Non-current accrued income taxes Other liabilities Commitments and contingencies Shareholders' equity: Preferred stock Common stock Contributed capital Accumulated other comprehensive income Retained earnings Treasury stock income Total shareholders' equity Total liabilities and shareholders' equity

2009

2008

667,593 67,102 36,721 301,208 48,059 53,727 62.47% 34.21% 0.61% 0.31% 1.04% 1.35% 100%

35.51% 3.57% 1.95% 16.02% 2.56% 2.86% 1,174,410 643,120 11,472 5,915 19,616 25,465 1,879,998

693,960 4,675 34,746 326,454 60,156 47,039 54.58% 33.35% 0.52% 9.25% 1.28% 1.01% 100%

32.46% 0.22% 1.63% 15.27% 2.81% 2.20% 1,167,030 713,142 11,210 197,773 27,305 21,688 2,138,148

473,342 10,511 41,471 294,928 45,447 59,660 47.12% 37.70% 0.55% 12.78% 0.76% 2.89% 100%

24.10% 0.54% 2.11% 15.02% 2.31% 3.04% 925,359 740,240 10,706 251,007 15,001 21,363 1,963,676

116,061 503,878 31,920 286,485 47,004 35,486 54.66% 33.49% 0.61% 8.88% 1.30% 1.06% 100%

6.21% 26.98% 1.71% 15.34% 2.52% 1.90% 1,020,834 625,568 11,479 165,810 24,238 19,751 1,867,680

167,723 34,954 70,390 32,468 41,001 16,203 25,098 20.63% 4.18% 2.06% 1.27%

8.92% 1.86% 3.74% 1.73% 2.18% 0.86% 1.34% 387,837 78,606 38,671 23,813

158,526 30,000 55,144 68,866 20,585 39,389 17,388 19,057 19.13% 4.19% 1.81% 1.05%

7.41% 1.40% 2.58% 3.22% 0.96% 1.84% 0.81% 0.89% 408,955 89,591 38,618 22,467

152,068 75,000 29,417 64,695 6,259 42,299 13,726 18,299 20.46% 4.50% 2.03% 1.26%

7.74% 3.82% 1.50% 3.29% 0.32% 2.15% 0.70% 0.93% 401,763 88,314 39,898 24,670

157,928 49,494 62,161 22,803 54,554 12,953 16,285 20.14% 3.77% 2.40% 1.92%

8.46% 2.65% 3.33% 1.22% 2.92% 0.69% 0.87% 376,178 70,355 44,837 35,846

2,496 546,597 28,072 1,711,929 -938,023 71.87% 100%

0.13% 29.07% 1.49% 91.06% -49.89% 1,351,071 1,879,998

2,486 554,399 16,838 1,764,049 -759,255 73.83% 100%

0.12% 25.93% 0.79% 82.50% -35.51% 1,578,517 2,138,148

2,485 513,574 -14,389 1,694,161 -786,800 71.75% 100%

0.13% 26.15% -0.73% 86.27% -40.07% 1,409,031 1,963,676

2,481 493,395 35,485 1,601,784 -792,681 71.77% 100%

0.13% 26.42% 1.90% 85.76% -42.44% 1,340,464 1,867,680

Exhibit 10: American Eagle Outfitters Co. Consolidated Income Statement (2009-2011)

INCOME STATEMENT:

2011

2010

2009

Net sales 2967559 Cost of sales, including certain buying, occupancy and warehousing expenses 1796600 Gross profit 1,170,959 Selling, general and administrative expenses 713,197 Depreciation and amortization expense 140501 Operating Income 317,261 Realized loss on sale of investment securities -24426 Other income (expense), net 2249 Income before income taxes 295084 Provision for income taxes 113,150 Income from continuing operations 181,934 Loss from discontinued operations, net of tax -41287 Net income 140,647

100% 2,940,269 100% 2,948,679 100% 60.54% 1,766,839 60.09% 1,751,493 59.40% 39.46% 1,173,430 39.91% 1,197,186 40.60% 24.03% 725,278 24.67% 690,787 23.43% 4.73% 137,760 4.69% 123,602 4.19% 10.69% 310,392 10.56% 382,797 12.98% -0.82% -2,749 -0.09% -1117 -0.04% 0.07% -3,268 -0.11% 18908 0.64% 9.94% 304,375 10.35% 377,699 12.81% 3.81% 90,977 3.09% 147,715 5.01% 6.13% 213,398 7.26% 229984 7.80% -1.39% -44,376 -1.51% -50923 -1.73% 4.74% 169,022 5.75% 179,061 6.07%

Exhibit 11: Nordstrom Inc. Consolidated Balance Sheet (2008-2011)

Nordstrom, Inc. Balance Sheet 2011 Assets Current assets: Cash and cash equivalents Accounts receivable, net Merchandise inventories Current deferred tax assets, net Prepaid expenses and other Total current assets Land, buildings and equipment, net Goodwill Other assets Total assets Liabilities and Shareholders' Equity Current liabilities: Commercial Paper Accounts payable Accrued salaries, wages and related benefits Other current liabilities Current portion of long-tern debt Total current liabilities Long-term debt, net Deferred property incentives, net Other liabilities Shareholders' equity: Common stock Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity 2010 2009 2008

1,877 2,033 1,148 220 282 5,560 2,469 175 287 $8,491

22% 24% 14% 3% 3% 65% 29% 2% 3% 100

1,506 2,026 977 236 79 4,824 2,318 53 267 $7,462

20% 27% 13% 3% 1% 65% 31% 1% 4% 100

795 2,035 898 238 88 4,054 2,242 53 230 $6,579

12% 31% 14% 4% 1% 62% 34% 1% 3% 100

72 1,942 900 210 93 3,217 2,221 53 170 $5,661

1% 34% 16% 4% 2% 57% 39% 1% 3% 100

917 388 764 506 $2,575 3,141 500 319 1,484 517 -45 $1,956 $8,491 11% 5% 9% 6% 30 37% 6% 4% 17% 6% -1% 23 100

846 375 652 6 $1,879 2,775 495 292 1,168 882 -29 $2,021 $7,462 11% 5% 9% 0% 25 37% 7% 4% 16% 12% 0% 27 100

726 336 596 356 $2,014 2,257 469 267 1,066 525 -19 $ 1,572 $ 6,579 11% 5% 9% 5% 31 34% 7% 4% 16% 8% 0% 24 100

275 563 214 525 24 $1,601 2,214 435 201 997 223 -10 $1,210 $5,661

5% 10% 4% 9% 0% 28 39% 8% 4% 18% 4% 0% 21 100

Exhibit 12: Nordstrom, Inc. Consolidated Income Statement (2009-2011)

(all numbers in $ millions) Nordstrom, Inc. Income Statement (Multiple-Step Format) 2011 2010 Net sales Credit card revenues Cost of sales and related buying and occupancy costs Gross profit Operating expenses Selling, general and administrative expenses Retail Credit Total operating expense Income from operations Other revenues and expenses Interest expense, net Income before income taxes Income tax expense Net Income $ $ 10,497 380 6,592 4,285 100% 4% 63% 41% $ 9,310 390 5,897 3,803 100% 4% 63% 41% $

2009 8,258 369 5,328 3,299 100% 4% 65% 40%

2,807 229 3,036 1,249 130 1,119 436 683

27% 2% 29% 12% 1% 11% 4% 7% $

2,412 273 2,685 1,118 127 991 378 613

26% 3% 29% 12% 1% 11% 4% 7% $

2,109 356 2,465 834 138 696 255 441

26% 4% 30% 10% 2% 8% 3% 5%

References: 1. The GAP Inc 2011 Annual Report, 2. Horngren, Sundem, Elliott, and Philbrick. "Introduction to Financial Accounting", Ninth Edition. 3. Risk Factors and Financial Ratios, 10K reports, www.secinfo.com. 4. www.investopedia.com