The Nordstrom family has long wished to wrestle back control of the retail company founded by patriarch John W. Nordstrom in 1901. In the New Year, their wishes will be granted.
Led by great-grandsons and brothers CEO Erik and president Peter, along with chief merchandising officer cousin Jamie and the rest of the extended family, the Nordstrom clan has struck an all-cash deal valued at $6.25 billion to take the company private after more than 50 years trading as a public company.
Upon the expected closing in the first half of the 2025, the family will have a controlling 50.1% interest in the company to guide the 381-store-strong chain forward.
Lending a helping hand in the deal is Mexican retail giant El Puerto de Liverpool, which will have a 49.9% stake in the company after making a $300 million investment in 2022 to gain about a 10% stake in the company.
“For over a century, Nordstrom has operated with a foundational principle of helping customers feel good and look their best,” said Eric Nordstrom in a statement. “Today marks an exciting new chapter for the business.”
President Pete and chief brand officer added, “Since our founding in 1901, we have been committed to providing our customers with the best possible service – and to improving it every day. We look forward to building on that commitment in this next phase of the Company’s evolution.”
Long Bumpy Road To Private Ownership
Privatization of the company has been a long time coming. In 2018, the Nordstrom family, which held about one-third of company stock at the tome, made a $50 per share offer for the company in partnership with private equity firm Leonard Green & Partners.
It was a deal valued at $8.4 billion, according to Bloomberg. The board rejected that offer, calling it inadequate.
The current offer is a far cry from that at $24.24 per share. This is up from a $23 per share bid made in September by the family and Liverpool.
Now that the deal has the blessings of the Nordstrom board and its legal and financial advisors, including Morgan Stanley, it must be approved by regulators and two-thirds of Nordstrom shareholders; neither of which are expected to be a problem.
Fall From Grace
According to Neil Saunders, managing director of GlobalData, Nordstrom isn’t the business “it once was,” citing recent missteps in merchandising, operations and store standards, he shared with MediaPost.
Wall Street Journal reported the company reached a market value of nearly $15 billion about ten years ago then started to slide. And revenues peaked in 2019 at $15.9 billion when it operated 380 stores, about the same as today, but a dramatically different mix.
Back then, it had 116 full-priced Nordstrom luxury department stores, including six in Canada. Today it has only 93 Nordstrom locations, plus six Nordstrom Local service hubs and no Canadian stores.
The off-price Rack chain reached 242 stores that year and has continued to grow. Also in 2019, it operated Hautelook.com, Trunk Club and Jeffrey Boutiques, all of which have been shed.
Fiscal 2023 closed with $14.2 billion in revenues after dropping from $15.1 billion in 2022. Flagship Nordstrom ended the year down 8% to $9.4 billion, while Rack was off 1% to $4.8 billion.
Rack Has Led Growth
Nordstrom closed its most recent third quarter 2024 with net sales up 4.6% and nine month revenues reaching $10.7 billion with expectations that the year will be flat to up 1%.
However, the company’s growth has come from its 280-store Nordstrom Rack chain, up 11% this year, while its luxury flagship stores have languished, eking out a 1% uptick in the first three quarters.
Rack has become the proverbial tail that wags the dog, adding 23 stores this year with 16 more in the works for 2025. Rack generated $3.7 billion through the first three quarters compared with Nordstrom at $6.6 billion.
While Saunders has confidence that the family and its Liverpool partner have the “talent and ability” to bring Nordstrom back to past glory, he doesn’t expect much change in the strategic direction of the company and its aggressive expansion of the Rack side of the business.
What Liverpool Brings To The Party
Founded over 176 years ago, Mexican-based Liverpool has a diverse business mix. It operates 210 department stores under the Liverpool (124 stores) and Suburbia (188 stores) nameplates, some 119 specialty boutiques and owns 29 shopping centers.
In addition, Liverpool has a vibrant credit card business with more than 7.6 million credit card holders. And it brings a number of U.S. retail brands to its Mexican customers through licenses with Gap, Banana Republic, MAC, Kiehl’s, Pottery Barn, West Elm, Williams Sonoma and others.
Nearly 90% of Liverpool revenues are generated in retail, some $6.1 billion (MXN 122 billion) through the third quarter 2024 and up 9% this year. Roughly 10% is in financial services and 3% in real estate. In fiscal 2023 it reported $9.7 billion (MXN 196 billion) in total income.
Liverpool brings operational and logistical excellence to the partnership. It operates seven centralized omnichannel fulfillment centers, plus 35 “cross-dock” local centers for faster delivery. Some 25% of retail revenue is generated from digital sales.
Liverpool’s deep experience in the credit card business could help Nordstrom boost that side of its business. Nordstrom generated a modest $339 million on the credit card side through the third quarter. By contrast, credit cards account for 49% of banner Liverpool sales and 33% of Suburbia’s.
While Liverpool excels in the Mexican retail market, it doesn’t have experience across the border, though the Mexican-American consumer segment is rapidly growing here and the Latino market overall has outpaced any other ethnic group in wealth creation between 2013 and 2024, according to the Hispanic Wealth Project.
Pressure On The Luxury Side
That said, Liverpool probably doesn’t bring much to turning around the flagship luxury Nordstrom business. However, with company leaders Eric and Pete freed from the pressures of investors and persistent quarterly reporting requirements, they can turn their attention to the luxury side of the business that really needs their help.
And now that the $2.7 billion Saks Fifth Avenue and Neiman Marcus merger has gone through, it can expect new competitive pressures, most especially on the e-commerce side of the business as Saks operates its digital business separate from its stores and Amazon is a new partner in the merger.
Plus Bloomingdale’s isn’t sitting idly by either as it expands its smaller-format Bloomie’s business.
Putting The Customers First
In a letter to Nordstrom customers penned by Eric, Pete and Jamie Nordstrom, they wrote, “While our ownership structure may be changing, we will continue to focus on enhancing your experience and helping you feel good and look your best.”
GlobalData’s Saunders has confidence that the Nordstorm clan with partner Liverpool will do the right thing for Nordstrom’s loyal customers.
“While a change in ownership does not automatically remedy all of the problems with the department store operation, it will allow the family and their backers to take a long-term view of the business and make necessary investments and changes away from the short-term scrutiny of public markets,” he said.
“They will likely run the business as a retailer rather than as some kind of financial plaything which, in our view, is a very positive thing for the long-term health of the brand,” he concluded.
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