Nordstrom May Be Going Private: Time to Buy?

At first glance, it looks like Nordstrom Inc. (JWN) may be making a comeback. Shares are rallying 10% on news that the Nordstrom family is considering taking the department store chain private. Could this be enough to jumpstart Nordstrom in an otherwise brutal retail climate? Let’s find out.

As a refresher, Nordstrom is one of the largest upscale department store chains in the country, with over 100 years in the business. The company operates 349 stores, including 122 full-line Nordstrom department stores and 216 Nordstrom Rack stores. JWN went public in 1978, so going private would be a big undertaking.

Clearly, investors are hoping that the Nordstrom family succeeds. Going private would make it easier for Nordstrom to restructure its business and adapt to changing trends. It’s no secret that the e-commerce feud between Amazon.com (AMZN) and Wal-Mart (WMT) is crowding out brick-and-mortar retailers, including Nordstrom.

Recently, Nordstrom reported that same-store sales fell 0.8% in the first quarter. This was worse than expected; analysts were expecting a 0.1% decline. The good news was that online sales made up 24% of total net sales. Sales at Nordstrom.com rose 11%, while sales at Nordstromrack.com jumped 19%. So Nordstrom clearly is being supported by its online business.

Looking ahead, Nordstrom is expected to post negative earnings for the next several quarters. Meanwhile, sales growth is expected to remain stuck in the low single-digits. Given these anemic forecasts, Nordstrom has a C-rating in Portfolio Grader.

Now, if it can turn itself around and improve those sales and earnings numbers, the stock may get upgraded to a buy. In the meantime, though, I don’t recommend jumping on the JWN bandwagon. It’s too soon to tell whether this privatization speculation will go anywhere, and the company isn’t quite strong enough to warrant a recommendation from me.

Sincerely,

Louis Navellier

Louis Navellier

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