Advertisement
UK markets closed
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • FTSE 250

    19,884.73
    +74.07 (+0.37%)
     
  • AIM

    743.26
    +1.15 (+0.15%)
     
  • GBP/EUR

    1.1712
    +0.0019 (+0.16%)
     
  • GBP/USD

    1.2624
    +0.0002 (+0.01%)
     
  • Bitcoin GBP

    55,531.15
    -165.09 (-0.30%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • CAC 40

    8,205.81
    +1.00 (+0.01%)
     

Nordstrom Falls: Will Privatization Surface Post Holiday?

Cohen & Steers (CNS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Shares of upscale departmental store retailer, Nordstrom, Inc. JWN lost 5.3% on Oct 16 on the news that Nordstrom family’s plans to take the company private are on hold for the time being. The Nordstrom family, which has been exploring options to fund the privatization for a while now, informed the “Special Committee” that it has deferred the search process for the rest of the year.

While the Nordstrom family alias the Group notified that it plans to resume exploration initiatives after the holiday season, it remains to be seen if any deal can actually surface amid the tough retail landscape. Though the possibility of finding a lender may depend on Nordstrom’s performance in this crucial selling season, some reports suggest that it depends on the overall holiday season scenario.

Nevertheless, let’s delve deeper and analyze what just happened.

Privatization on Hold – Why?

It was in June when Nordstrom first announced that the family (which currently owns about 31% stake in the company) was seeking viable options of taking the company private, by buying all the outstanding shares of Nordstrom. Then, Nordstrom formed a “Special Committee” including its board of directors. This “Special Committee” that consists of Nordstrom’s independent directors, will act on the company’s behalf on anything related to the aforementioned privatization.

Since then, the Group has been looking for potential sponsors. In fact, there were rounds that the Nordstrom family was nearing a deal with Leonard Green & Partners, apart from being in talks with Apollo Global Management LLC and KKR & Co LLP to help the deal pass through. However, it looks like the family and the private equity firms are facing a hard time securing funds for the transaction. This can be largely blamed upon the troubles looming over the retail sector, which has weighed upon lenders’ confidence.

Little About the Retail Hurdles: Where’s Nordstrom Headed?

Retailers, including big-wigs like Target Corporation TGT and Macy’s Inc. M have long been battling evolving consumer trends and the mounting competition from e-commerce giant, Amazon.com Inc. AMZN. With consumers’ accelerated transition to the dot.com world, retailers are suffering soft sales as store traffic has been hit hard. Moreover, costs associated with efforts to boost omni-channel initiatives are straining the companies’ margins. Owing to these challenges, the retail space has also witnessed various bankruptcies, mergers and acquisitions.

Given such circumstances, going private was considered a prudent move for Nordstrom, as it will help the Nordstrom family reshape the organization and overcome the hurdles faster, which is not that easy as a public entity. As a private firm, it will be easier for Nordstrom to make the required investments per the changing consumer trends, without caring much about stockholders’ short-term responses.  

However, it looks like the lenders are waiting to see retailers’ holiday season performance amid these challenges, as this season generates a considerable chunk of revenues for most retailers. Undoubtedly, this is likely to create a pressure on Nordstrom, which has tumbled 13.6% this year, though it performed better than the industry that plunged 25.8% in the said time frame.   

Notably, Nordstrom has been gaining from its off-price Rack store business. Also, the company’s e-commerce initiatives are bearing significant results, as evident from its online sales growth of 20% in the second quarter of fiscal 2017. So for now, we remain hopeful about the company’s holiday season performance, which might just switch on the Nordstrom family’s search mode on again.

The Nordstrom family comprises the company’s three Co-Presidents — Blake W. Nordstrom, Peter E. Nordstrom and Erik B. Nordstrom; President of Stores — James F. Nordstrom; Chairman — Emeritus Bruce A. Nordstrom, and Anne E. Gittinger, together. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Nordstrom, Inc. (JWN) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Macy's Inc (M) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.