A bright Christmas reignites Nordstrom buyout hopes

After a USD 10 billion deal was killed in the fall, the Nordstrom family would now have to pay more to take the retailer private

The failed effort by the Nordstrom family to take the namesake department store chain private will be remembered as a missed opportunity amid the selloff in retailers’ stocks last fall.

With a lower tax rate, competitors in decline, and improved sales even in the face of Amazon’s onslaught, Nordstrom Inc. is looking more certain to be one of retail’s survivors.

“There’s a lot to make a lender interested,” says Bill Smead, chief executive of Smead Capital Management, which owns over 800000 Nordstrom shares.

Sadly for the Nordstrom family, a deal could have been done more cheaply last fall. The family, including co-presidents Blake, Erik and Peter Nordstrom, own nearly a third of the company’s shares. A USD 10 billion deal with private-equity firm Leonard Green & Partners would have made it possible for them to take the remaining 70 %. But lenders got jittery.

“The aftermath of Whole Foods being bought by Amazon was probably the point of maximum pessimism—even on the survival of the best retailers,” says Mr. Smead.

The family has said it would resume efforts for a go-private deal after the holidays but the shares, which approached USD 49 Wednesday, January 10, 2018 are roughly 20 % higher than they were when the deal fell apart.

On Tuesday, January 9, 2018 it reported that net sales for November and December climbed 2.5 %. Same-store sales at Nordstrom Rack, its off-price division, were up 2.9 %, after falling 5 % in the third quarter. Nordstrom rarely pre-announces results, adding to the speculation that the family could try again soon. The company also updated its fiscal 2017 guidance: it now expects a net sales increase of 4.2 % and adjusted earnings per share of USD 2.90 to USD 2.95, the higher end of its previous outlook.

Those numbers should calm lenders’ nerves. The family would be wise to move quickly on a deal. Its first full-line store in Manhattan, slated for 2018, is expected to bring a 7 % – 10 % sales increase and juice the online business, too. Nordstrom’s star may only grow brighter.