NEW YORK • United States department store operator Nordstrom said on Thursday that some members of the Nordstrom family were considering taking the company private as it struggles with an industry-wide sales slowdown.
Going private, which would involve raising debt, would be a risky but potentially profitable bet by Nordstrom's founding family and largest shareholder bloc that the company can reshape itself and emerge from the retail meltdown stronger.
Shares of the Seattle-based clothing and accessories retailer ended 10.3 per cent higher after surging as much as 18 per cent in their biggest intra-day percentage gain since February 2009. The company has a market value of about US$7.4 billion (S$10.24 billion).
Malls in the United States have been struggling with slowing customer traffic and anchors like Nordstrom and Macy's are trying to revive sales. Nordstrom in May reported first-quarter same-store sales that fell short of estimates, triggering a drop in its shares.
Once it goes private, Nordstrom may be able to restructure its business, which is more difficult as a public company, said Mr Erich Joachimsthaler, chief executive of Vivaldi, a consulting firm that works with retail brands.
"It's the right move," he said.
Mr Chuck Grom, analyst with Gordon Haskett, said that at a share price of US$46, the retailer would need to raise US$5.45 billion to US$8.19 billion of additional debt to fund the takeout. Such a move would come amid a wave of store closures and bankruptcies in the retail industry.
High-end department store chain Neiman Marcus, which went private in 2005, said in March that it was exploring options as it sought relief from its swelling debt pile.
Analysts and consultants were divided on how successful Nordstrom could be in going private.
UBS Group analysts said in a report that they were cautious about Nordstrom's ability to secure financing, given problems in the retail sector.
They also flagged a bid by the founder of electronics retailer Best Buy to take the company private that failed in 2013 when he was unable to raise US$2.5 billion to US$3 billion in debt.
Other analysts said going private may be slightly easier for Nordstrom.
"Nordstrom is not highly levered, they have quite a bit in their way of real estate assets so is it probably easier for them to actually get this transaction done," said Mr Jan Rogers Kniffen, chief executive of retail consultancy J. Rogers Kniffen WWE.
Founded in 1901 as a shoe store in Seattle, Nordstrom went public in 1971. The retailer, known for its high-end department stores and customer service, sells designer items including Jimmy Choo stilettos and Burberry trench coats.
Nordstrom operates 354 stores in 40 US states. The company also operates stores in Canada and Puerto Rico.
REUTERS
