The family intends to resume exploring going private after the holiday season, and possibly make a proposal then.
There have been reports that Nordstrom has had difficulty lining up financing and that banks would be more apt to extend loans for a deal that aren’t too burdensome to Nordstrom after the holiday selling period, assuming the season goes well enough. Nordstrom is said to have been in talks with private equity firm Leonard Green & Partners.
The family group includes Nordstrom Inc. copresidents and brothers Blake, Pete and Erik Nordstrom; their cousin Jamie Nordstrom, who serves as president of stores, and chairman emeritus Bruce Nordstrom, the father of Blake, Pete and Erik. Also in the group is Anne E. Gittinger, the sister of Bruce Nordstrom and the granddaughter of Nordstrom Inc. cofounder John W. Nordstrom. Nordstrom was founded in 1901.
If the family comes up with a proposal, it will have to go through a special committee composed of independent directors. The committee is being advised by Centerview Partners LLC as financial adviser and Sidley Austin LLP as legal counsel.
The announcement of the postponement pushed shares of Nordstrom down 5.3 percent to $40.40 on Monday and weighed on the department store sector. Among the other companies losing ground for the day were Bon-Ton Stores Inc., off 5.5 percent to 34 cents; Hudson’s Bay Co, down 4.6 percent to 11.74 Canadian dollars, and Macy’s Inc., 1.5 percent to $19.89.
The company declined to comment on whether it’s faced challenges arranging financing under suitable terms. The climate for retail deal-making has been weak, considering many retailers are closing stores, which will limit growth; questions are being raised about the relevancy of the traditional department store format in the age of the Internet; consumer shopping habits are changing, and there have been several instances where lenders have been burned by overleveraged retailers. Ares Management and the Canada Pension Plan Investment Board, owners of Neiman Marcus Group, which has $4.4 billion in long-term debt, have been unable to sell the business. Store officials last week indicated that sale talks were no longer occurring. And TPG Capital and Leonard Green have been struggling to turn around J. Crew Group Inc.
Nordstrom, however, is considered among the nation’s stronger retailers, partly because it has aggressively invested in technology, service advancements and other innovations, has a well-developed Rack off-price division, and doesn’t operate as many department stores as some rivals. Its full-line department store division this year has been posting results that are less negative than the competition’s.
The Seattle-based retailer put efforts to obtain the financing for going private on hold so the team could focus more on the holiday season. If the retailer delivers good results for the season, that should help arrange the financing. In the meantime, Nordstrom said in a filing with the Securities and Exchange Commission that it “will remain focused on running the business and delivering the best shopping experience for customers.”
“It’s definitely fair to say that with the correct [retail] climate, the financing should go through for the deal,” said one source.
Most retailers are expecting an OK holiday season, marked by midsingle-digit sales gains. The National Retail Federation recently projected holiday retail sales in November and December — excluding automobiles, gasoline and restaurants — to increase between 3.6 and 4 percent for $678.75 billion to $682 billion, up from $655.8 billion last year.
“Our forecast reflects the very realistic steady momentum of the economy and overall strength of the industry,” NRF president and chief executive officer Matthew Shay said at the time. “Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season.”
Back in June, the Nordstrom family said it formed a group to explore going private involving the acquisition by the group of 100 percent of the outstanding shares of common stock of the company. The family already owns more than 30 percent of the stock, raising the changes of going private.
Despite being among the nation’s healthier retailers, Nordstrom’s stock price has been dragged down by the rest of the retail sector. Going private would get the company and its team to get out from under the glare of Wall Street and be able to take additional risks. While going private is not expected to change much from a vendor perspective, Nordstrom buyers could be more experimental and willing to test additional concepts without worrying about short-term results.
In Los Angeles, the company opened a small, service-oriented store manned with stylists who can assist with customers in placing orders online, tailoring and manicure services, and an area for same-day pickup of online orders. It has no inventory for sale on the premises. In addition, the Nordstrom team has brought new concepts to the selling floor, including striking exclusive deals to sell Madewell and Topshop, two brands where wholesaling hadn’t been part of the business model.
For the last few years, Nordstrom has been rolling out a new store design in key locations to advance the shopping experience, and there was a string of out-of-the-box acquisitions in brick-and-mortar and the Internet, including Jeffrey stores, HauteLook and Trunk Club, giving the retailer new capabilities and growth, though Trunk Club has proven disappointing. Nordstrom also has two major New York developments in the works, the 367,000-square-foot Manhattan flagship, estimated at north of $500 million, beginning in 2018 with a men’s store and 2019 with the women’s store, and the Oct. 26 opening of its second Rack in Manhattan, which will be on 34th Street.
Nordstrom’s disclosure of its intent to go private sparked speculation that other retailers such as Dillard’s and Hudson’s Bay Co. might follow suit, though neither company has publicly expressed such interest.