Popular fashion retailer makes $6.25b change to compete with Walmart & Amazon

A POPULAR fashion department store chain has a major change in the works as it strives to keep up with retail giants Walmart and Amazon.

In a $6.25 billion deal, Nordstrom has agreed to be acquired and taken private by Nordstrom family members and a Mexican retail group.

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As part of the deal, the Nordstrom family will take on over $2 billion of the company’s debt.

Additionally, Nordstrom shareholders will receive $24.25 in cash for each share they own, or around $4 billion total.

The offer, announced last week, is higher than the $23-per-share bid the Nordstrom family and Mexican retail group, El Puerto de Liverpool, made in September.

Nordstrom’s board of directors unanimously approved the negotiation.

Erik and Pete Nordstrom, both members of the board and the Nordstrom family, withdrew themselves from the vote.

The deal is projected to close in the first half of next year.

Once the transaction is completed, the Nordstrom family will have a majority stake in the business.

Erik and Pete Nordstrom are fourth-generation family members, with Erik serving as CEO and Peter as president.

Nordstrom was founded in 1901 by John Nordstrom and Carl Wallin in Seattle as a shoe store.

The department store chain now has 381 US Nordstrom and Nordstrom Rack locations after opening 23 new locations in 2024.

COMPETITIVE PRESSURE

The $6.25 billion Nordstrom deal comes as department stores face high pressure in the retail landscape from discount chains and other competition.

Nordstrom, like other publicly traded retailers such as Macy’s and Kohl’s, has faced pressure to provide larger returns to investors and gain an edge over its competition.

Traditional department stores have struggled to compete with lower-cost rivals like Walmart and Target, e-commerce giant Amazon, and online fast-fashion brands.

Nordstrom has sought to turn around its sales outlook for years, with its sales revenue stagnated and not experiencing much significant growth over the past 10 years or so.

Nordstrom History

John W. Nordstrom, a Swedish immigrant, and Carl F. Wallin, a Seattle shoemaker, partnered over 100 years ago to found the Nordstrom company.

In 1901, they opened their first store, Wallin & Nordstrom, in Seattle.

By 1960, the shoe shop had become the largest shoe store in the US and Nordstrom was the largest independent shoe chain in the country.

Nordstrom then ventured into the women’s clothing market with the purchase of multiple apparel retailers, changing its name to Nordstrom Best.

The company went public in 1971 and was formally renamed Nordstrom, Inc.

In 1973, the first Nordstrom Rack opened as a clearance center in the lower level of the Seattle Nordstrom store.

The company has since expanded to operate nearly 400 Nordstrom and Nordstrom Rack locations in the US.

The company’s dismal financial situation pushed it to shutter all its Canadian stores and lay off 2,500 employees.

As Nordstrom strives to revive its operations, the Nordstrom family may have more freedom to do just that once it escapes the pressures associated with being a publicly traded company and goes private.

“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,” GlobalData analyst Neil Saunders wrote in a note to clients.

“The [Nordstrom] family have the talent and ability to enact change as does El Puerto de Liverpool. They will likely run the business as a retailer rather than as some kind of financial play thing which, in our view, is a very positive thing for the long term health of the brand,” he added.

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Other retail giants are undergoing major changes.

For example, Aldi shoppers are set to see four big changes next year as the chain catches up to rival Walmart.

Restaurant chains are also altering their operations, with Olive Garden confirming it’s bringing a popular service to all its locations.