Stock-Based Compensation

12 Months Ended

Jan. 28, 2023

Share-Based Payment Arrangement, Noncash Expense [Abstract]

NOTE 9: STOCK-BASED COMPENSATION

Under our deferred and stock-based compensation plan arrangements, we issued 3.4, 1.6 and 2.2 shares of common stock in 2022, 2021 and 2020. Under the 2019 Plan, the aggregate number of shares to be issued may not exceed 24.5 plus any shares currently outstanding under the 2010 Plan that are forfeited or expire during the term of the 2019 Plan. As of January 28, 2023, we had 24.5 shares authorized, 13.6 shares issued and outstanding and 13.9 shares remaining available for future grants under the 2019 Plan.

Under the ESPP, employees may make payroll deductions of up to 15% of their base compensation for the purchase of Nordstrom common stock. At the end of each six-month offering period, participants apply their accumulated payroll deductions toward the purchase of shares of our common stock at 90% of the fair market value on the last day of the offer period. As of January 28, 2023, we had 16.1 shares authorized and 2.4 shares available for issuance under the ESPP. We issued 0.9, 0.5 and 1.0 shares under the ESPP during 2022, 2021 and 2020. At the end of 2022 and 2021, we had current liabilities of $6 for future purchases of shares under the ESPP.

The following table summarizes our stock-based compensation expense:


Fiscal year	2022	2021	2020
RSUs	$41	$52	$53
Stock options	11	22	12
Other1	7	5	2
Total stock-based compensation expense, before income tax benefit	59	79	67
Income tax benefit	(15)	(20)	(26)
Total stock-based compensation expense, net of income tax benefit	$44	$59	$41

1 Other stock-based compensation expense includes PSUs, ESPP and nonemployee director stock awards.

The stock-based compensation expense before income tax benefit was recorded in our Consolidated Statements of Earnings as follows:


Fiscal year	2022	2021	2020
Cost of sales and related buying and occupancy costs	$9	$15	$16
SG&A expenses	50	64	51
Total stock-based compensation expense, before income tax benefit	$59	$79	$67

Restricted Stock

Our Compensation, People and Culture Committee of our Board of Directors approves grants of restricted stock units to employees. The number of units granted to an individual are determined based upon award amounts and the fair value of the restricted stock units at the time of grant. Restricted stock units typically vest over four years.

A summary of restricted stock unit activity for 2022 is presented below:


Fiscal year	2022
	Shares	Weighted-average grant date fair value per unit
Outstanding, beginning of year	4.6	$36
Granted	3.1	21
Vested	(2.3)	27
Forfeited or cancelled	(0.8)	26
Outstanding, end of year	4.6	$32

The aggregate fair value of restricted stock units vested during 2022, 2021 and 2020 was $62, $50 and $44. As of January 28, 2023, the total unrecognized stock-based compensation expense related to nonvested restricted stock units was $66, which is expected to be recognized over a weighted-average period of 29 months.

Stock Options

Our Compensation, People and Culture Committee of our Board of Directors approves grants of non-qualified stock options to employees. The number of awards granted to an individual are determined based upon award amounts and the fair value of stock options at the time of grant. Our options primarily vest equally over a four-year period or at the end of two years, and expire ten years after the date of grant. We used the following assumptions to estimate the fair value for stock options at each grant date:


Fiscal year		2022		20211		20202
Assumptions
	Risk-free interest rate: Represents the yield on U.S. Treasury zero-coupon securities that mature over the 10-year life of the stock options.	1.18% – 1.95%		0.11% – 1.51%		0.18% – 0.62%
	Weighted-average volatility: Based on a combination of the historical volatility of our common stock and the implied volatility of exchange-traded options for our common stock.	52.4	%	52.2	%	60.1	%
	Weighted-average expected dividend yield: Our forecasted dividend yield for the next 10 years.	3.4	%	3.4	%	3.4	%
	Expected life in years: Represents the estimated period of time until option exercise. The expected term of options granted was based on our historical exercise behavior, taking into consideration the contractual term of the option and our employees’ expected exercise and post-vesting employment termination behavior.	8.3		8.3		7.7

Grant Date Information
	Date of grant	March 3, 2022		March 4, 2021		June 1, 2020
	Weighted-average fair value per option	$10		$13		$7
	Exercise price per option	$26		$36		$17

1 The options granted on March 4, 2021 include market performance-based stock options with a contractual term of ten years that were awarded to certain members of senior management as well as time-based options. The price-hurdle options contain a market condition that requires the closing price of our stock to meet or exceed certain price thresholds for 20 consecutive trading days in order for shares to vest.

2 Additional non-qualified stock options were also granted to certain company leaders on August 27, 2020 at an exercise price per option of $15. The assumptions used to estimate the fair value for the additional stock options were similar to the 2020 grant assumptions presented in this table. In 2020, we also granted stock options to certain qualified employees outside of the June and August grant dates, which were insignificant in aggregate.

A summary of stock option activity for 2022 is presented below:


Fiscal year	2022
	Shares	Weighted- average exercise price	Weighted-average remaining contractual life (years)	Aggregate intrinsic value1
Outstanding, beginning of year	10.4	$39
Granted	1.1	26
Exercised	(0.9)	15
Forfeited or cancelled	(2.1)	47
Outstanding, end of year	8.5	$38	5	$6
Vested, end of year	6.3	$41	4	$6
Vested or expected to vest, end of year	7.6	$39	5	$6

Fiscal year		2022	2021	2020
Aggregate intrinsic value of options exercised		$4	$—	$1
Fair value of stock options vested		$27	$2	$8

1 The aggregate intrinsic value represents the amount realized if all in-the-money options were exercised on the final business day before January 28, 2023.

As of January 28, 2023, the total unrecognized stock-based compensation expense related to nonvested stock options was $5, which is expected to be recognized over a weighted-average period of 32 months.