Nordstrom Family Eyes Private Shift, Shares Up 4%

Key Takeaway

• Nordstrom founding family, including CEO Erik Nordstrom, considers taking the company private amid retail sector challenges.
• Shares rose over 4% following the announcement, reflecting investor optimism despite the company's recent financial struggles.
• With shares down 50% in five years and facing operational hurdles, Nordstrom evaluates growth through online sales and Nordstrom Rack expansion.

Founding Family Considers Buyout

Members of the Nordstrom founding family, including CEO Erik Nordstrom and President Pete Nordstrom, have expressed interest in exploring a potential deal to take the department store chain private. This development comes as the retail sector, particularly department stores, faces ongoing challenges. Nordstrom Inc. has responded by forming a special committee of independent directors to evaluate the proposal from the Nordstrom family, as well as any other potential offers. The committee is collaborating with financial advisors from Morgan Stanley and Centerview Partners to assess the feasibility and terms of such a transaction. Despite these discussions, there is no certainty that this exploration will lead to a formal buyout offer or any transaction.

Market Reaction and Historical Context

Following the announcement, Nordstrom's shares experienced a notable increase, closing up more than 4% on Thursday. This uptick reflects investor optimism but also underscores the volatile nature of retail stocks in the current economic climate. Historically, the Nordstrom family has explored taking the company private on several occasions, most notably in 2017 with a bid that was ultimately rejected by the board for being too low. The family, which controls approximately 30% of the company's shares, has been a significant influence on the company's strategic direction. Another key shareholder is El Puerto de Liverpool SAB, a Mexican firm that operates high-end department stores and holds a 9.9% stake in Nordstrom.

Financial and Operational Challenges

Nordstrom has faced a series of financial and operational hurdles in recent years, with its shares declining roughly 50% over the past five years, valuing the company at about $3 billion. The retail landscape has been particularly challenging for department stores, with Nordstrom and its rivals grappling with weak sales amid high inflation and elevated borrowing costs. These factors have prompted consumers to cut back on discretionary spending. Additionally, Nordstrom's decision to close its Canadian operations and a cautious outlook for the current fiscal year highlight the pressures facing the retailer. Despite these challenges, Nordstrom is focusing on growth areas such as online sales and expanding its off-price Nordstrom Rack locations.

Management Quotes

• Erik and Pete Nordstrom, CEO and President of Nordstrom:

  "Recently told the board they are interested in exploring a deal for the company."

• Erik Nordstrom, CEO of Nordstrom:

  "The company is focused on increasing online sales and opening more of its off-price Nordstrom Rack locations in the coming years."