Nordstrom family proposes taking its department store chain private
The Nordstrom family wants to take its namesake department store private in a $3.8 billion deal, the company confirmed Wednesday.
The deal, led by chief executive Erik Nordstrom and his brother Pete Nordstrom, president and chief brand officer, proposes $23 per share in cash, slightly more than Tuesday’s close and less than its value as recently as mid-July.
The group making the offer includes Mexican department store and real estate company El Puerto de Liverpool, which already has a 10 percent stake in Nordstrom and would own 49.9 percent of the company if the deal goes through.
A special committee will review the offer “in consultation with independent financial and legal advisors to determine the course of action that is in the best interests of Nordstrom and all shareholders,” the Seattle-based company said in a news release.
Founded in 1901, the company remained private for 70 years before going public. In 2019, the Nordstrom family made a failed attempt at taking the company private. The new proposal, which includes $250 million in bank financing, would award 50.1 percent ownership to the family.
The proposal comes at a challenging time for department stores. The middle-market consumer who once flocked to department stores to indulge in retail therapy or splurge on an accessible-luxury handbag is showing restraint as grocery prices and interest rates remain high.
Other department stores have already responded to the pressure: Macy’s earlier this year announced it was shuttering 150 stores, shifting focus to its luxury store footprint, which includes Bluemercury, Bloomingdale’s and its smaller Bloomie’s locations. Saks Fifth Avenue announced in July it was acquiring Neiman Marcus for $2.65 billion, a move that the two retailers hope will create stability as they grapple with sluggish growth.
Nordstrom, whose stock price hovered around $22.68 midday Wednesday after the deal was announced, has been buoyed by its off-price subsidiary Nordstrom Rack. The company opened 11 new Rack locations and plans to open 22 more by the end of the fiscal year. Same-store sales during the quarter at Rack were up more than 4 percent, compared to less than 1 percent growth for Nordstrom’s traditional stores. The company’s overall results exceeded Wall Street’s expectations as the company continues to make up ground after years of weak sales. Its stock price is up almost 24 percent since the beginning of the year.
The retailer has been “getting back on track,” but its market value has been limited by the weakness in its core business, said Neil Saunders, managing director of GlobalData. “However, the business remains one of two halves. The department store division has various structural challenges, while the off-price Rack division is starting to produce some good growth,” he said.