Nordstrom is Going Private: What It Means and Why It’s Happening
Nordstrom Flagship in New York
Big changes are underway at Nordstrom (JWN). After years of declining earnings and lackluster investor interest, the company is returning to its private roots. The founding Nordstrom family, which currently owns 33% of the company, is partnering with Mexican retailer El Puerto de Liverpool, owner of a 10% stake, to buy up all remaining shares. Together, the family will hold 50.1% of the business, with Liverpool owning the other 49.9%.
The $6.25 billion transaction, expected to close in the first half of 2025, will be financed through a mix of equity contributions from the Nordstrom family and Liverpool, cash commitments from Liverpool, up to $450 million in new borrowings, and company cash on hand. Nordstrom, which has $2.7 billion in debt, will pay $24.25 per share in the deal—a 36% premium over the stock’s price at the start of 2024 but far below the $50-per-share offer rejected by the board in 2018. Back then, the company was in a much stronger position, with net earnings having plummeted 76% between 2018 and 2023.
This move signals a strategic shift for Nordstrom as it navigates a rapidly evolving retail landscape marked by inflation, shrinking consumer spending, and intense competition from online giants like Amazon. Let’s break down why Nordstrom is making this move, the challenges it faces, and the opportunities going private could create.
Why is Nordstrom Going Private?
Like many retailers, Nordstrom has struggled to keep up with inflation, declining consumer spending, and fierce competition from online giants like Amazon. Their stock performance has suffered, making it hard for them to stay attractive to public market investors. But this isn't just about challenges—it's also about opportunity.
Going private allows Nordstrom to step away from the pressures of quarterly earnings reports and shareholder expectations. It gives them the breathing room to restructure, adapt, and focus on long-term growth. Think of it as a way to reset without the constant spotlight of Wall Street.
Why Now?
In finance, timing is everything. The Nordstrom family likely sees this as the right time to act for two reasons:
Low Stock Price: At its current value, the company can be taken private at a more affordable cost compared to six years ago. The family and its partners can offer a premium to shareholders (making them happy) without overspending.
Need for Flexibility: The retail landscape is changing rapidly, and staying public can be limiting. Going private allows Nordstrom to experiment with new strategies without having to justify every decision to analysts and investors.
Challenges of Going Private
While there are benefits, going private isn’t a magic fix. Nordstrom will face some significant challenges, including:
High Costs of the Deal: A $6.25 billion buyout is no small feat. Most of this will likely be financed through debt, which increases financial pressure on the company. This is known as a leveraged buyout (LBO)—a strategy that can work wonders if things go well but can be disastrous if revenues don’t improve.
Restructuring Risks: Once private, Nordstrom will need to rethink its operations, focus on profitability, and adapt to the e-commerce-driven world. This is easier said than done, especially with competitors like Amazon setting the bar.
Stakeholder Approval: Convincing two-thirds of shareholders to approve the deal might be tricky. There’s always the chance that some investors feel the $24.25 per share offer undervalues the company, even if it’s a significant premium to current stock prices.
Opportunities for Nordstrom
Despite these challenges, this move gives Nordstrom a chance to play the long game. Here’s what they can do:
Reinvest in E-Commerce: By going private, Nordstrom can double down on its online presence, streamline logistics, and improve its app and website. Competing with Amazon won’t be easy, but there’s still a market for a curated, high-end online shopping experience.
Focus on Customer Experience: Nordstrom’s brand has always been synonymous with exceptional service. Going private means they can focus on enhancing in-store and digital experiences without worrying about short-term profits.
Strategic Partnerships and Collaborations: They can explore innovative partnerships, like collaborations with influencers, exclusive product lines, or even tech integrations (think augmented reality fitting rooms). Without public scrutiny, they can take calculated risks.
What Can We Learn From This?
This isn’t just a story about Nordstrom—it’s a lesson in corporate strategy and finance. Going private isn’t just for companies in trouble; it’s a way to adapt to changing market conditions, take control, and prioritize long-term success over short-term gains. For Nordstrom, it’s a chance to reclaim their footing in an industry that’s been turned upside down by inflation, online competition, and evolving consumer habits.
The Big Picture
As Nordstrom moves forward, their success will depend on how well they manage this transition. The stakes are high, but so is the potential for a comeback. Whether they emerge stronger or struggle under the weight of new debt remains to be seen, but one thing’s for sure: this is a pivotal moment for the company.
What do you think—will Nordstrom thrive as a private company, or are the challenges too great? Let’s discuss.