Nordstrom Explores Going Private

Nordstrom Aventura Mall

For the second time in six years, Nordstrom is considering going private.

The retailer's founding family has reached out to Morgan Stanley and Centerview Partners to float a potential deal to private equity firms, Reuters reported. An agreement has not yet been made. Members of the family own a 30% stake in the department store company.

This is the second attempt at a take-private deal after talks fell apart in 2018.

In 2017, the Nordstrom family explored a deal with numerous private equity firms, including Leonard Green & Partners. The board rejected an initial offer of $50 a share, saying it was too low. It sought to up the price, using Leonard Green's equity and Nordstrom’s ability to get more debt and third-party financing as leverage. Unable to come to an agreement on price, talks fizzled out.

Securing a buyer in the retail space was tricky at the time, as many buyouts at the time were resulting in bankruptcy or low-yielding bonds, according to CNBC. In that climate, lenders and investors were hesitant to acquire struggling retailers.

The landscape is different now. National retailers are shifting strategies to weather high inflation and interest rates. Despite this, retail this year is set to outperform 2023 due to high transaction volume from shoppers, a strong labor market and earnings growth, primarily from open-air retailers. Investor confidence in the sector began to tick upward last year as pandemic concerns waned, and firms such as Lincoln Property and Crow Holdings launched ventures to acquire billions in retail real estate.

To counter inflation concerns, Nordstrom is planning to emphasize its more affordable arm, Nordstrom Rack, which opened 19 new locations in 2023. The retailer plans to add 22 more this year, primarily along the Midwest and Sun Belt region. The push is in the hopes that the expanded customer base will create brand loyalty to its upscale parent, as 40% of new customers come from the Rack. Nordstrom's national footprint spans 350 stores.

Nordstrom's net earnings for 2023 came in at a dull $134M, which is $111M less than the previous year.

Its shares spiked 12% Tuesday following the news of a potential deal before falling off slightly. As of 3:45 p.m. ET Tuesday, its stock price is $18.73, up 9.8% from $17.06 at market close Monday.

Macy's is similarly exploring an acquisition. Talks are ongoing, but the company rejected Arkhouse and Brigade's $5.8B stock offer in December. Earlier this year, Macy's announced its plan to shutter 150 stores, a plan that would leave mall landlords in the lurch for billions of dollars in debt.

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