Nordstrom (JWN) is returning to its private roots after years of earnings struggles and investor indifference.
The founding Nordstrom family, which owned about 33% stake, worked with retail investor El Puerto de Liverpool, owner of a 10% stake, to take the company private. El Puerto is a real estate and department store conglomerate with boutiques including household names such as Gap, Banana Republic and Williams Sonoma, in addition to department stores and other format retailers.
Both will acquire all outstanding shares in an all-cash deal valued at approximately $6.25 billion.
The 123-year-old retailer, based in Seattle, Washington, has 381 locations, including 93 Nordstrom and 280 Rack locations, a growing business for the brand.
Following the closing of the transaction, which is expected to occur in the first half of 2025, the Nordstrom family will own a majority stake. Two-thirds of the company’s shareholders must approve the deal.
Each shareholder will receive $24.25 cash for each share held. The offering price, a hair above the current share price of $24.19, is a premium of almost 36% to where the shares started the year at $17.78.
Morningstar analyst David Swartz was “disappointed by the final offer, as it is well below” his valuation of $38.50 per share.
In 2018, the company’s board rejected the Nordstrom family’s offer to take it private for about $50 per share. Net profit fell by 76% between 2018 and 2023.
But Swartz expects the deal to go through “at the proposed price” as Nordstrom’s board of directors, including Erik and Pete Nordstrom, have unanimously approved the deal and there is “no (apparent) opposition.”
Swartz thinks both the Nordstrom family and El Puerto de Liverpool are getting a “good deal,” despite his doubts about the price.
“While we do not anticipate any opposition, we are disappointed that shareholders will not receive a price closer to our previous valuation and believe the Nordstroms and El Puerto de Liverpool are acquiring Nordstrom at a time when results are under pressure,” he added to.
Still, he believes that “public shareholders have not been willing to give strong valuations to department store companies.”
The company has shown positive growth recently.
Nordstrom’s same-store sales grew 4% for its namesake brand in the third quarter. Sales of the off-price business, Nordstrom Rack, grew by 3.9%.
Analysts estimate Nordstrom’s full-year 2024 revenue at $14.5 billion, up slightly from last year’s $14.2 billion.
Nordstrom is performing better compared to its department store peers because it focuses on e-commerce. Jefferies analyst Ashley Helgans said Nordstrom has benefited from “leadership with brands first and price second.”
The company has also focused on “improving the selection and depth of customers’ favorite brands,” from Deckers’ (DECK) running sneaker brand Hoka and On Holding’s (ONON) performance shoes to smart and contemporary menswear brands.
But Nordstrom still remains cautious as it grapples with shorter holidays, uneven consumer spending patterns in the new year and an “uncertain” external environment.
“Across all of our businesses, we saw a slowdown in trends” starting in the last week of October, CEO Erik Nordstrom said during an earnings call.
GlobalData’s managing director of retail, Neil Saunders, said Yahoo Finance’s private venture would allow Nordstrom to make long-term decisions without having to respond to public market pressures.
‘While a change of ownership will not automatically solve all the problems with the department store’s operations, it will enable the family and their supporters to take a long-term view of the business and make the necessary investments and changes away from the short-term criticism of the department store. public markets,” Saunders said in an email.
He added that the company is not what it once was.
“Many changes and investments are needed to address recent missteps in merchandising, operations and store standards. The family has the talent and ability to make changes, just like El Puerto de Liverpool. They will likely run the business as a retailer rather than as some sort of financial play… which we think is very positive for the long-term health of the brand,” he said.
SAN DIEGO, CALIFORNIA – DECEMBER 5: Shoppers walk into a Nordstrom store at the Westfield UTC shopping center on December 5, 2024 in San Diego, California. (Photo by Kevin Carter/Getty Images) ·Kevin Carter via Getty Images
Nordstrom is not alone in its struggle.
Macy’s (M), Kohl’s (KSS), and Nordstrom are fighting to stay in the market by closing lagging stores and pouring money into online operations as they look to compete with the rise of retail giants Amazon (AMZN), Walmart (WMT), and Goal (TGT). That’s in addition to the rise of off-price retailers like Ross Stores (ROST) and TJX Companies (TJX), which owns TJ Maxx and Marshall’s.
“One of the things we’ve seen in retail in recent quarters is an acceleration of the bifurcating trends in retail, between market share winners like off-price and other specific brands with newness and innovation interacting quite positively with each other and a harder trend in department stores in general,” Brooke Roach, vice president at Goldman Sachs, told Yahoo Finance.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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