With a multi-million dollar deal and the backing of Mexican company Liverpool, the historic Nordstrom family takes the reins of its iconic retail chain,
Led by their great-grandsons and brothers Erik , CEO, and Peter , president of the firm, along with their cousin Jamie , head of merchandising, and the rest of the extended family, the Nordstrom clan reached an all-cash deal valued at $6.25 billion to take the company private after more than 50 years of being publicly traded.
With closing expected in the first half of 2025, the family will have a controlling 50.1% stake in the company to guide the 381-store chain into the future.
Mexican retail giant El Puerto de Liverpool stepped in to help close the deal. It will have a 49.9% stake in the company, after making a $300 million investment in 2022 to buy a 10% stake in the company.
«For more than a century, Nordstrom has operated on the founding principle of helping customers feel and look their best. Today marks an exciting new chapter for the business,» Eric Nordstrom said in a statement.
Pete President and Chief Brand Officer added, «Since our founding in 1901, we have been committed to providing our customers with the best service possible, and improving it every day. We look forward to building on that commitment in this next phase of the company’s evolution.»
A long and bumpy road to private property
Taking the company private was a long road. In 2018, the Nordstrom family, which owned about a third of the stock at the time, made a $50-a-share offer for the company in partnership with private equity firm Leonard Green & Partners. It was a deal valued at $8.4 billion, according to Bloomberg . The board rejected that offer, calling it inadequate.
The current offer is a far cry from that, at $24.24 per share. An increase from the $23 per share offer made in September by the family and Liverpool.
Now that the deal has been approved by Nordstrom’s board and its legal and financial advisers, including Morgan Stanley , it must be approved by regulators and two-thirds of Nordstrom shareholders; but no further hurdles are expected.
Nordstrom’s fall from grace
According to Neil Saunders , managing director of GlobalData , Nordstrom is not the business it once was, owing to recent missteps in merchandising, operations and store standards, as he shared with MediaPost .
About a decade ago, the company reached a market value of nearly $15 billion and then began to decline, according to the Wall Street Journal. Revenue peaked in 2019 at $15.9 billion, when it operated 380 stores — roughly the same as today, but with a drastically different mix.
At the time, it had 116 full-price Nordstrom luxury department stores, including six in Canada. Today it has just 93 stores, plus six Nordstrom Local service centers and no Canadian stores.
The Rack retail chain reached 242 stores that year and continued to grow. By 2019, it operated Hautelook.com, Trunk Club and Jeffrey Boutiques , all of which became independent. The 2023 fiscal year ended with revenue of $14.2 billion, after falling from $15.1 billion in 2022.
Flagship retailer Nordstrom closed the year down 8% to $9.4 billion, while Rack dropped 1% to $4.8 billion.
Rack at the forefront of growth
Nordstrom closed out its most recent third quarter of 2024 with net sales up 4.6% and nine-month revenue of $10.7 billion , with expectations for the year to be flat to up 1%.
But the company’s growth came from its 280-store Nordstrom Rack chain , which is up 11% this year, while its upmarket flagship stores declined, rising 1% in the first three quarters.
Rack has become the firm’s treasure, adding 23 stores this year and 16 more planned by 2025. It generated $3.7 billion in the first three quarters, compared with $6.6 billion for Nordstrom.
While Saunders is confident the family and its partner Liverpool have the «talent and ability» to return Nordstrom to its former glory, he doesn’t expect any major changes in the company’s strategic direction and its aggressive expansion of the Rack side of the business.
Liverpool’s contribution
Founded more than 176 years ago, Mexico-based Liverpool has a diverse mix of businesses. It operates 210 department stores under the Liverpool (124 stores) and Suburbia (188 stores) brands, some 119 specialty boutiques and owns 29 shopping centers.
In addition, it has a vibrant credit card business with more than 7.6 million cardholders. And it brings a number of U.S. retail brands to its Mexican customers through licensing agreements with Gap, Banana Republic, MAC, Kiehl’s, Pottery Barn, West Elm, Williams Sonoma and others.
Nearly 90% of Liverpool’s revenue is generated in retail, about $6.1 billion through the third quarter of 2024 and up 9% this year. About 10% is from financial services and 3% from real estate. It reported $9.7 billion ($196 billion) in total revenue in fiscal 2023.
Liverpool brings operational and logistics excellence to the partnership. It operates seven omnichannel fulfillment centres , plus 35 local cross-dock centres for faster delivery. Around 25% of retail revenue comes from digital sales.
Liverpool’s deep experience in the credit card business could help Nordstrom boost that side of its business. Nordstrom generated a modest $339 million from credit cards through the third quarter. By contrast, credit cards account for 49 percent of Liverpool’s sales and 33 percent of Suburbia’s.
While Liverpool is a standout in the Mexican retail market, it lacks experience across the border, even though the Mexican-American consumer segment is growing rapidly and the Latino market overall outpaced any other ethnic group in wealth creation between 2013 and 2024, according to the Hispanic Wealth Project.
Competition in luxury
Liverpool may not have a huge say in Nordstrom’s flagship luxury business. But the company’s leaders — Eric and Pete — are freed from investor pressures and nagging quarterly reporting requirements, and can turn their attention to the luxury side of the business that really needs their help.
Now that the $2.7 billion merger of Saks Fifth Avenue and Neiman Marcus is complete , expect new competitive pressures, especially on the e-commerce side, as Saks operates its digital business separately from its stores and Amazon is a new partner in the merger.
Bloomingdale’s is also not sitting on its hands, as it is expanding its smaller Bloomie’s business.
Putting customers first
In a letter to Nordstrom customers signed by Eric, Pete and Jamie Nordstrom, they said: «Even as our ownership structure changes, we will continue to focus on improving your experience and helping you feel good and look your best.»
GlobalData ‘s Saunders is confident that the Nordstorm clan, together with its partner Liverpool, will make the right decisions to keep the brand’s loyal customers.
«While a change in ownership will not automatically remedy all of the department store’s operating problems, it will allow the family and its backers to take a long-term view of the business and make necessary investments and changes away from the short-term scrutiny of the public markets,» he said. «They will likely run the business as a retailer and not as some sort of financial plaything, which is a very positive thing for the long-term health of the brand,» the analyst concluded.
