Nordstrom suspends plans for buyout

Shoppers exit Nordstrom’s flagship store in downtown Seattle in September. The department store chain said Monday it is temporarily halting its plan to take the company private.
Shoppers exit Nordstrom’s flagship store in downtown Seattle in September. The department store chain said Monday it is temporarily halting its plan to take the company private.

Nordstrom Inc. is suspending efforts to take the company private after struggling to get financing with favorable terms, another sign that the department-store industry has lost favor with both customers and investors.

The controlling members of the Nordstrom family will renew a review of its operations after the Christmas season, the company announced on Monday. In scrubbing the deal for now, the Seattle-based company cited "the difficulty of obtaining debt financing in the current retail environment."

The buyout deal was meant to help the department-store chain continue its turnaround efforts outside the glare of market scrutiny. But even Nordstrom's prestige -- the upscale retailer is seen as a stronger company than the likes of Macy's Inc., J.C. Penney Co. and Sears Holdings Corp. -- couldn't sway enough potential lenders.

"In the meantime, the company and its employees will remain focused on running the business and delivering the best shopping experience for customers," Nordstrom said on Monday.

The announcement sent the shares down as much as 6 percent in New York trading. The shares fell $2.25, or 5.3 percent, to close Monday at $40.40. The stock was already down 11 percent this year through the end of last week.

Nordstrom embarked on the buyout plan in June, sending the stock on its biggest rally in more than eight years. Relatives formed a group to evaluate a possible deal, which would involve acquiring 100 percent of the outstanding shares. The board also created a special committee in connection with the idea.

Together, the Nordstrom family owns about 30 percent of the company's shares. Gordon Haskett analyst Chuck Grom estimated they needed to raise between $5.65 billion and $8.19 billion to acquire the remainder of the retailer.

But department stores are a tough sell. While credit generally has been free-flowing for companies amid a global hunt for yield, it's been a different story for an industry that has increasingly come under distress.

Borrowing costs in a Bank of America Merrill Lynch index of junk-rated retailers climbed 1.3 percentage points during the past year to 8.31 percent. For junk issuers more broadly, the measure dropped about a half percentage point to 6 percent, the index data show.

The entire department-store industry has been scrambling to overhaul operations after years of slowing sales. Macy's, J.C. Penney and Sears are closing hundreds of locations and trying to beef up their online sites.

Nordstrom hasn't been hit as hard by that downturn. In August, the company reported a quarterly same-store sales gain of 1.7 percent. Analysts had predicted a drop of 0.5 percent.

Still, the company has been looking for new ideas in a bid to freshen its image. Last month, Nordstrom announced a smaller store concept called a "neighborhood hub" that won't carry inventory on site. Instead, customers try on clothing and have it delivered.

Information for this article was contributed by Emma Orr and Lisa Lee of Bloomberg News.

Business on 10/17/2017

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