Nordstrom reportedly set to restart go-private talks

Dive Brief:

The Nordstrom family group that has explored taking the retailer private will likely soon resume that effort, CNBC reports, citing unnamed sources. A spokesperson for the group, however, told Retail Dive that there is "no update" on the plans.
One possible plan that surfaced in late September included the Nordstrom family's 31% stake (or $2.5 billion as of Aug. 1) and $1 billion in equity from private equity firm Leonard Green & Partners, leaving $6.5 billion to be financed by banks.
In October, ongoing talks regarding financing through a deal with Leonard Green were said to be "in deep trouble." Later that month the group suspended the effort, but did say in a note to a special committee of the department store's board that they were planning to resume exploration of such a transaction after the holiday season wrapped up.

Dive Insight:

Going private would afford the company time and space, which both can be difficult to come by as investors clamor for growth on a quarterly basis. The move makes a lot of sense for Nordstrom, but overall challenges in retail, especially at malls, have clouded these talks.

Some of the unease may be dissipated by the relatively robust holiday sales in general and Nordstrom's fairly healthy season (when net sales rose 2.5%) in particular. Retail's troubles, a source of potential bank-rollers' jitters, are hardly going to be swept away by the strong end-of-year push, however. While the abrupt Toys R Us bankruptcy was said to complicate the Nordstrom deal-making, other such news may be on the horizon, with Bon-Ton's senior creditors already "pushing" the discount department store chain to file for bankruptcy.

Still, Nordstrom itself does seem to be in a good position to go private. The Seattle-based department store isn't suffering from a bloated brick-and-mortar footprint, and has stayed relatively above the fray, thanks to strong merchandising and its stellar customer service. It's been willing to experiment on the cutting edge of retail through efforts like Trunk Club, its merchandise-free store and investments like Shoes of Prey. The company's Nordstrom Rack off-price unit, founded years ago, operates in one of the strongest areas of retail.

"How do you get value for the Nordstrom shareholders as long as Nordstrom Rack is buried?" Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates, told Retail Dive last year. "If you want to spin off — Rack might be valued more than the whole Nordstrom — one reason to go private and do a restructuring is you can't do these things when you're a public company because there's too much criticism. You don't have to worry about earnings and you don't have to impress anybody. You do what you have to do and come back."

It's a viable option for a company with funds available and light at the end of the tunnel, Michael Brown, a partner in the retail practice of global strategy and management consulting firm A.T. Kearney, told Retail Dive in an email.. "All retailers are under pressure from a number of fronts," he said. "On-line price transparency, consumers' desire for off-price goods, millennials' affinity to spend on experiences as opposed to goods and a decreased number of shoppers in their prime spending years, as baby boomers age out of the market and millennials have not hit their peak spending years. These are macro factors affecting everyone."