Nordstrom drops effort to take company private

Department stores struggling to attract customers, investors.

Nordstrom 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 holiday season, the company announced Monday.

In scrubbing the deal for now, the chain cited “the difficulty of obtaining debt financing in the current retail environment.”

The buyout deal was meant to help the company continue its turnaround efforts outside the glare of market scrutiny. But even Nordstrom’s prestige — the upscale retailer is seen as a stronger business than the likes of Macy’s, J.C. Penney and Sears — couldn’t sway enough potential lenders.

“Nordstom is a high-quality retailer, but it is still an apparel retailer, and that becomes difficult to finance,” said Tom Shandell, CEO of Marble Point Credit Management.

The department store industry is being “painted with one brush,” Shandell said.

Nordstrom embarked on the buyout plan in June, sending the stock on its biggest rally in more than eight years.

Family members 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, which was founded as a Seattle shoe store in 1901. Gordon Haskett analyst Chuck Grom estimated that they needed to raise between $5.65 billion and $8.19 billion to acquire the remainder of the retailer.

But brick-and-mortar retail is a tough sell. While credit generally has been free-flowing for companies amid a global hunt for yield, it has been a different story for an industry that has increasingly come under duress.

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 doesn’t carry inventory on site. Instead, customers try on clothing and have it delivered.

Leveraged buyouts have been a risky gambit for many retailers. Toys “R” Us was pushed into bankruptcy last month, more than a decade after a take-private deal with Bain Capital, KKR & Co. and Vornado Realty Trust loaded it with debt.

TED S. WARREN / AP Shoppers walk though an elevated walkway at Nordstrom’s flagship store in downtown Seattle. Nordstrom said it is temporarily halting an exploration into taking the company private. Several members of the Nordstrom family might resume trying later.