What Nordstrom’s pill says about the state of US department stores

It’s open season on America’s struggling department stores.

Nordstrom this week adopted a “poison pill” measure that allows the retailer to fend off the possibility of a hostile takeover — a common fear among struggling retailers that become attractive targets for investors when their stock prices fall.

The Seattle-based chain had reason to be paranoid, with the move coming just days after Mexican department store chain Liverpool bought a 9.9 percent stake in the retailer worth about $294 million, effectively becoming its second-largest shareholder after seven and Nordstrom. .

Liverpool said the purchase was the result of additional cash and a desire to “geographically diversify assets”.

However, such a large part of the company requires a certain level of protection from management. The shareholder poison pill plan allows Nordstrom to issue new shares at a 50 percent discount to other major shareholders if an outside party acquires 10 percent or more of Nordstrom’s stock without board approval.

This makes it more difficult to initiate a takeover because if other shareholders buy additional shares at a significant discount, the pursuer’s stake will be diluted.

“At the end of the day, when a company uses a poison pill, the headache and costs increase significantly for a potential hostile takeover,” said Simeon Siegel, retail analyst at BMO Capital Markets.

Nordstrom said the plan, which expires next September, was not in response to “any specific takeover bid” or other acquisition proposals. The measure also “is not intended to deter offers that are fair and otherwise in the best interests of all Nordstrom shareholders,” the company said in a press release.

A successful hostile takeover would be particularly painful for the Nordstrom family, which has tried and failed to take the company private twice, in 2017 and 2018.

Nordstrom’s cold war with Liverpool isn’t the only ongoing battle for control of a major US department store chain.

On Thursday, investment firm Ancora Holdings sent a letter to the board of Kohl’s urging the company to replace its chief executive, Michelle Gass, and chairman, Peter Boneparte. Kohl’s, which faces stiff competition from Amazon and big box stores for the wallets of middle-class consumers, has drawn a lot of unwanted attention this year.

In February, Kohl adopted a poison pill plan to fend off activist investors in Acacia Research Corp., an entity backed by hedge fund Starboard Value, which offered to buy the department store a month ago. Kohl’s also received an offer from private equity firm Sycamore Partners, according to market reports. The department store then said, without naming specific suitors, that the offers were undervalued by its business.

While the poison pill has stalled acquisition talks at Nordstrom and Kohl’s, it hasn’t stopped speculation about the future of both companies. Both will need to prove to the market that their turnaround plans can work; otherwise, shareholders may decide that a private placement or even a partial sale is the best option.

It’s not like these companies were asleep at the wheel. Prior to Covid-19, Nordstrom introduced new store formats, including Nordstrom Local, a fleet of small stores that do not sell any merchandise but are designed for online pickup and other services. Kohl’s is trying to increase traffic by accepting Amazon returns and opening a Sephora shop-in-shop.

More realignments may be needed, though it’s doubtful that Liverpool, Starboard or Anchorage have any better ideas.

Nordstrom is struggling to restore sales to pre-pandemic levels. In 2021, its revenue was $14.4 billion, up from $15.1 billion in 2019. In its latest quarterly earnings report, Nordstrom lowered its full-year 2022 forecast, citing weaker consumer demand and pressure on margins from excess inventory. The stock has fallen about 20 percent this year, roughly in line with the S&P 500 index.

Kohl’s also lowered its outlook for the rest of the year in its second-quarter earnings report, citing similar factors as Nordstrom. In the first half of 2022, Kohl’s revenue was lower than in 2021 and also in 2019. Last year, net sales were $18.5 billion, down from $18.9 billion in 2019. In 2022, its shares fell by 45 percent.

Both companies are sure to argue that they just need more time to show that their strategies are working. Recent events indicate that they may not have it.



Ralph Lauren sees faster price growth and new customers. New York Garment Company focus on revenue growth in the mid- and high-single digits in each of the next three fiscal years, including the current one, it said in a statement released Monday ahead of a presentation to investors.

Italy’s market authority approves bid to take Tod’s private. The Della Valle brothers said last month that their holding company would an offer to buy shares of Tod’s at €40 each, valuing the company at €1.32 billion ($1.3 billion).

Gap Cuts 500 Corporate Jobs Amid Profitability Crisis. The roles are eliminated are primarily based in Gap offices in San Francisco and New York, as well as in Asia, the company said Tuesday.

Hedge fund Ancora is seeking the ouster of Kohl’s CEO, Chairman. Ancora Holdings is now seeking the ouster of the US retailer’s chief executive and chairman, according to a letter sent to the company on Thursday. The move marks the start of a new round of shareholder unrest for Kohl’s.

PVH Joins $250 Million Fashion Climate Fund. The initiative was launched in June by the nonprofit Apparel Impact Institute to fund, scale and de-risk promising solutions that can reduce the industry’s carbon footprint in the coming years.

JD Sports to pay former chief executive £5.5m after leaving. Former chief executive Peter Cowgill appears as part of the deal were not allowed to work for or advise competitors of the British sports network and it cannot harass any of its employees, according to a statement on Wednesday.

Set a goal to hire 100,000 workers over the holidays and offer deals early. The a major retailer hired 100,000 workers for last year’s holiday season, which was marked by tight labor supply. In 2019 and 2020, it hired about 130,000 seasonal workers.

JD Sports is cautious on forecasts as cost pressures weigh. Company comments are coming amidst a burst of energy and other spending in Britain, while fashion retailers Primark and Asos are warning about profits.

Target invites Kiko Vargas, Sergio Hudson and La Lina to collaborate. Brand collections for mass retailers from Minnesota are there scheduled for October 9with over 100 accessories and clothing items ranging in price from $8 to $70.


L'Oréal said it will acquire US skin care startup Skinbetter Science.

L’Oréal acquires Skinbetter Science. L’Oréal said it would purchase Skinbetter Sciencea Phoenix, Arizona-based skin care startup that distributes its line through dermatologists and cosmetic surgeons.

India’s Reliance Retail is in talks for Sephora’s cosmetics retail rights. Sephora is owned by LVMH operations will be transferred from Arvind Fashions Ltd to Reliance Retail if an agreement is reached, the report said.


Harris Reid

Harris Reid has appointed Nina Ricci as creative director. There will be reeds join the company effective immediately. His first collection will be shown in Paris in early 2023. Edwin Bodson, most recently JW Anderson’s Global Commercial Director, will lead the business as CEO.

Burberry’s chief financial officer and chief operating officer, Julie Brown, will leave the company next year. Browne will step down from her role at the end of the fiscal year on April 1, 2023. Browne is leaving to pursue opportunities “outside the luxury industry,” Burberry said in a statement, adding that a search for her successor is underway.

Mike Ashley will step down from the Frasers board next month. Ashley will available as an advisor and provide the company that owns Sports Direct with an additional 100 million pounds ($114 million) in financing on the same terms as the loans.

Brian Yambao named Editor-in-Chief Perfect. Blogger and an influencer best known by his online moniker BryanBoy, was previously the international editorial director at the company.

Media chief David Pemsel has been appointed as the new chairman of the BFC. Former CEO of Guardian Media Group and founder of communications agency ScienceMagic.Inc will be will replace Stephanie Fair as chairman of the British Fashion Council.

Compiled by Darcy Sergison.

https://www.businessoffashion.com/briefings/retail/what-nordstroms-poison-pill-says-about-the-state-of-us-department-stores/ What Nordstrom’s pill says about the state of US department stores

Back to top button