Members of the Nordstrom family are in the early stages of crafting a proposal to boost their stake in the company, from approximately 31% of shares to more than 50%, according to a report from The Wall Street Journal.
It isn’t clear how the family would increase its stake — one possibility is through a share buyback at a premium, a WSJ source said — and there is no guarantee it will follow through.
The potential proposal is causing tension between the founding family and the Nordstrom board of directors, similar to when the family sought to take the company private in 2017. Some of the independent directors are wary of allowing the family to take advantage of a stock price drop to increase its ownership stake, particularly when these directors blame the family’s management for the decline, the report said.
The original go-private offer was approximately $8 billion, or $50 per share, when the company was trading at nearly $40 per share. But a special committee of the board rejected the offer as too low and ended the talks, leading the family to abandon the effort early in 2018.
While Nordstrom has generally outperformed its department store peers in recent years and has taken strides to experiment with new store formats, the company had a poor start to 2019 and still struggles with adapting to consumer preferences, particularly those of younger shoppers. Nordstrom’s sales dropped 3.5% in Q1, with revenue falling 5.1% at its roughly 140 full-price stores and less than 1% at its 240+ discount Nordstrom Rack outlets.
The board has sought to bring in an outsider to replace brothers Peter Nordstrom and Erik Nordstrom, the two great-grandsons of Co-Founder John W. Nordstrom, who have been serving as the department store’s Co-Presidents, the report noted. The brothers have served on the Nordstrom board since 2015, alongside eldest brother Blake Nordstrom, before he died unexpectedly in January at the age of 58, shortly after revealing he had been diagnosed with cancer.
The Co-Presidents jointly run Nordstrom but focus on different divisions within the department store. While Peter oversees the merchandising and designer sides of Nordstrom, Erik is in charge of e-Commerce and Nordstrom Rack.