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Analysts Dissect Reports Of Nordstrom Family's Play For Majority Stake In Retailer

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Analysts Dissect Reports Of Nordstrom Family's Play For Majority Stake In Retailer

The Wall Street Journal reported Wednesday that the Nordstrom family is looking to gain a majority stake in Nordstrom, Inc. (NYSE: JWN), the high-end fashion retailer that bears the family's name. Here's how the Street reacted. 

The Analysts

Credit Suisse's Michael Binetti maintains a Neutral rating on Nordstrom's stock with an unchanged $36 price target.

KeyBanc Capital Markets' Edward Yruma maintains at Overweight, unchanged $52 price target.

Tigress Financial Partners' Ivan Feinseth.

Credit Suisse's FAQ

The Nordstrom family is looking to increase its stake in the namesake company from around 31% today to north of 50%, according to the WSJ. 

The five main questions investors are likely looking for answers  to include the following, Binetti said in a Wednesday note. 

1. How could the family increase its ownership? The Nordstrom family could buy shares in the open market at a premium cost or increase its debt leverage to buy back stock and by default boost its ownership stake.

2. Will outside capital be needed? The Nordstrom family's net worth is unknown, and $250 million in outside capital won't be enough to gain a majority stake.

3. Where do the family and board not see eye-to-eye? Nordstrom's mostly independent board is reportedly looking to oust members of the Nordstrom family who serve as co-presidents. The research firm said it doesn't have any way of validating the claim.

4. What about activist investors? The Nordstrom family would be able to help block any potential activist campaigns against the company if it brings its ownership level notably north of the 33% threshold.

5. Is this a good idea? Simply put, "we don't think it is a good idea" for the Nordstrom family to buy its way to a higher ownership stake, Binetti said. Trends continue to deteriorate, and there is no indication fundamentals will turn positive any time soon, he said. 

Board Composition

Nordstrom's board includes two members of the Nordstrom family and nine outsiders, KeyBanc's Yruma said in a Wednesday note.

"Externally facing leader" and co-president Erik Nordstrom is showcasing an impressive strategic view, with an openness to re-examine multiple components of the business, the analyst said. 

Upside Potential

The Nordstrom family attempted to lead a buyout in 2018 at $50 per share, but the board viewed the offer as too low, Feinseth said in his daily newsletter.

The renewed interest from the family comes at a time when the company is focusing on unique product offerings, including new retail concepts and more personalized shopping services, he said. 

"I believe there is potential upside into the low-to-mid-$40s on a potential increase in the equity stake, as the Nordstrom family would have to offer some premium to purchase an additional 17% of the company," Feinseth said. 

Price Action

Nordstrom shares were trading down by 6.86% at $30.82 at the time of publication Thursday. 

Related Links:

Wedbush Favors Off-Price Retail, Says Nordstrom's Search Interest 'Took A Nose Dive'

Nordstrom's Outlook Is 'Deteriorating,' UBS Says In Downgrade

Public domain photo via Wikimedia

Latest Ratings for JWN

DateFirmActionFromTo
Aug 2019MaintainsEqual-Weight
Aug 2019ReiteratesUnderperform
Aug 2019MaintainsOverweight

View More Analyst Ratings for JWN
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Posted-In: Apparel Credit Suisse Edward YrumaAnalyst Color Price Target Reiteration Analyst Ratings Media Best of Benzinga

 

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