Why Did Nordstrom (JWN) Stock Sink Today?

Shares of Nordstrom JWN sunk on Monday after the department store chain announced that its plan to go private has been put on hold until after the holiday season, at the earliest.

The Nordstrom family told a special committee of Nordstrom’s board—which was appointed to oversee any possible sale—that they have paused their search for a private equity partner to take the business private. The family, who own roughly 31% of the company, said they will resume their efforts to take the company private after the holiday season.

“The Special Committee, which is committed to protecting the interests of the Company [Nordstrom] and all its shareholders, is prepared to thoroughly evaluate such a proposal from the Group at that time, if one is made… No assurances can be given regarding the terms and details of any transaction,” a Nordstrom company release stated.

The Nordstrom family announced during the summer that they were in the process of trying to take the company private amid a quickly changing retail environment. Over the last several months, talk surrounding Nordstrom’s possible buyout has included KKR KKR, Apollo APO, and Leonard Green & Partners.

In the potential deal, Leonard Green or other firms would supply roughly $1 billion to the Nordstrom family to help fund a deal to go private. However, the news has always been relatively speculative, causing the company’s stock price to fluctuate wildly.

The possibility of a deal being reached has been hampered because the family and potential private equity partners have found it hard to raise enough debt at reasonable rates in order to completely fund a buyout of the $6.67 billion company.

Banks are worried that they would have trouble selling Nordstrom’s debt before the holiday shopping season ends and would then be forced to wait until next year. This could leave banks vulnerable if Nordstrom’s sales falter during its holiday quarter, which would make offloading its debt much harder.

Banks, along with many investors, are concerned that shifting retail trends, including a slump in mall foot traffic and the rise of e-commerce powers such as Amazon AMZN, will hurt the high-end retailer even further.

Nordstrom shares fell over 6% Monday morning. Shares of the historic U.S. department store now sit just above its 52-week low heading into the most important season of the retail year.

Other Department Stores

Shares of Nordstrom’s biggest retail peers dipped on Monday after the news. Macy’s M saw its stock price fall 2.80%, while Dillard’s DDS sunk over 3.50%. J.C. Penny JCP fell only slightly.

The SPDR S&P Retail ETF XRT saw its stock price drop 0.83%, while shares of the Direxion Daily Retail Bull 2x Shares ETF RETL tanked 2.27%.

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Nordstrom, Inc. (JWN) : Free Stock Analysis Report
 
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