Investing.com -- Nordstrom Inc (NYSE:JWN) announced on Thursday afternoon that it is closing its longstanding credit card transaction with TD Bank USA, in an effort to improve the company's capital efficiency by unloading its multi-billion dollar credit card portfolio.
The high-end fashion retailer intends to use the proceeds to return $1.9 billion to shareholders through a dividend and share repurchase program. After spending $325 million in debt reduction and transaction costs, Nordstrom said it will make a special cash dividend of $4.85 per share of outstanding common stock payable on October 27 to shareholders of record at the close of business on Oct. 12.
With the close of the credit card transaction on Thursday, Nordstrom also announced that it is initiating a long-term agreement with TD Bank to become the exclusive U.S. issuer of Nordstrom-branded Visa consumer credit cards.
"We look forward to our collaboration with TD, a premier financial institution that shares our customer focus. Our mutual commitment to having Nordstrom employees serve our customers directly is paramount to this partnership," said Blake Nordstrom, co-president, Nordstrom, Inc. in a statement "We are also pleased to be able to return capital directly to our shareholders using our balanced approach to capital allocation."
Nordstrom also said in a statement on Thursday that the program will include up to $1 billion in repurchases of the company's outstanding common stock and will run through March 1, 2017. Nordstom's existing share repurchase plan has $591 million outstanding as of Sept. 30, and will expire on March 1, 2016.
Nordstrom, which was founded in 1901, operates 315 stores in 39 U.S. states and Canada. During the company's second quarter, which ended in mid-August, Nordstrom reported diluted earnings per share of $1.09, including an increase in 0.16 per diluted share on a year-over-year basis. In addition, the company increased comparable store sales by 4.9% from the same quarter in 2014, which it attributed to consistent upward trends over the last year.
Shares in Nordstrom gained 2.60 or 3.64% in after-hours trading to 74.00.