As struggles continue for the department store chain, members of the controlling Nordstrom family are asking the company to consider going private.
Although a formal proposal has not yet been submitted, pressure is coming from the group, which comprises Chairman Emeritus Bruce Nordstrom, his sister Anne Gittinger, President of Stores James Nordstrom and co-Presidents Blake, Peter and Erik Nordstrom. Together this group owns 31.2% of the company and would ultimately own 100%.
Going private would be great for investors, putting a premium on their investment, according to Greg Portell, lead partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm.
But from Nordstrom’s standpoint, there’s no doubt that the store would feel a dramatic transformation.
“Given the types of changes that retailers have to go through, the ability to take a company private and get out of the limelight of the public market has a lot of appeal—it’s very difficult to do in a publicly traded environment,” Portell told FierceRetail. “So what Nordstrom is doing is taking a business that is profitable now and for the foreseeable future, and putting themselves in an environment where they can make the changes and types of investments that are needed to be successful five years or seven years out.”
Nordstrom is not unique, as many department stores are struggling in the current retail environment. Portell notes that while the retailer already has a good reputation for superb customer service, the brand still holds the challenge of applying that service reputation online.
“Converting that from brick and mortar to online takes some different muscles. It will be good to see them make this happen,” Portell said. “This will require some experimentation—the luxury to make bets that may or may not work. That concept that no one likes to talk about—fail fast—is a lot easier to execute under the private eyes than in the public glare. I would expect them to experiment more, to take more mobile and digital risks than they probably would in a public environment, to play more with their in-store retail concept, knowing it may not work.”
In fact, Portell says this transition to private could serve as a model for other struggling department store chains, which receive pressure to grow not only profits but topline revenue by mid-single digits. When you put a management team into a situation where they have to manage quarter by quarter while still making these dramatic changes, it’s a tall order to ask of them.
Nordstrom’s board has formed a special committee to evaluate any transactions that could be made by the group. The committee has retained Centerview Partners LLC to serve as its financial advisor and Sidley Austin LLP to serve as its legal counsel. Currently, the committee has put the family in a standstill position that bars it from making certain actions until Jan. 31, 2019.
But it’s the “family” aspect that Portell suspects would help make privately owned Nordstrom a success, based on the family’s commitment to the brand.
“It’s that the family connection is going to maintain the focus on the differentiation—as opposed a family that’s going to reinvent or change or reimagine the brand,” he said. “They’re not doing that. They’re trying to extend and deepen something, which is very different.”