- Nordstrom shares are trading nearly $20 a share lower than a $50 a share buyout offer it rejected as too low two years ago.
- The slide doesn't mean the company won't be able to recover.
- Part of the pressure on its shares is Nordstorm is making the investments it needs to survive, and being punished as a result.
Two years ago, Nordstrom was offered a buyout offer at $50 a share. It's shares are now trading 38% lower than that, but there's still hope for the retailer.
Nordstrom's stock is down roughly 35% year-to-date, swept up in the general malaise investors have shown the retail sector. Nordstrom's challenges are not unique to the industry. Its competitors, Macy's, J.C. Penney, are Kohl's are facing their own hurdles as they grapple with too many stores and shoppers choosing to buy online or from brands directly.
But Nordstrom — with its affordable luxury price-point and high-touch customer service — has long been viewed as the darling of the sector. That perception was part of the argument that family members, who own 31.2% of the company, used in their quest to take the company private two years ago. The goal at the time was to avoid the pressure of the public market and make needed tougher decisions, like store closures, that are harder when at the mercy of quarterly reports and public investors.
That deal never came to fruition, however. A special committee advising the company's board rejected the family's offer of $50 a share as too low, and the two ultimately called off talks.
Now, with Nordstrom's shares depressed along with the rest of industry, it seems its fears of the impact of being a public company have come to fruition.
Some of Nordstrom's pain is self-inflicted. Executives acknowledged in May its fourth-quarter earnings were hurt by a poor roll-out of its "Nordy Club" loyalty program.
Pressure is also being put on Nordstrom by the the pall currently cast across the department store sector. And the retailer is being punished by investors for making the investments it needs to survive, like e-commerce and new stores.
Nordstrom reportedly spent north of $500 million on its New York flagship, set to open in October. The retailer has said it expects that flagship, along with the Nordstrom Local neighborhood service hubs expected to open this fall, will "contribute a meaningful sales lift for this market."
It's off-price retail concept, Nordstrom Rack, is a roughly $5 billion business that has recently slowed, but it benefits from the same bargain shopping trends that have sent shares of TJ Maxx parent, TJX, up nearly 25% year-to-date.
Meantime, Nordstrom continues to be well-positioned in its real estate. As retailers progressively view expansive store bases as a burden rather than a strength, Nordstrom touts a relatively small footprint in largely urban areas — roughly 120 full-line stores compared with Macy's roughly 600 stores.
The retailer also continues to have strong relations with brands, as other department stores — which can't promise preserving the high-end shopping experience they were once known for — struggle to obtain today's best merchandise.
And Nordstrom's competitors' pain may be its gain.
Hudson's Bay Co. has announced it is exploring options for its Lord & Taylor store and people familiar with the matter tell CNBC it could include further store closures. Richard Baker, the executive chairman of the Saks parent, is trying take the company private in a deal that could pave the way for it run its business more in line with Baker's real estate background, rather than as a retail company.
Meantime, private-equity-backed Neiman Marcus has been struggling with onerous debt load that can limit its ability to invest for the future.