But even a company like Nordstrom—a company which celebrates more than a century in the very fickle department store industry—struggles when the paradigm changes. And anticipating that change would be necessary, the Seattle-based company had been looking for a potential buyer. In a time when many retailers are looking at a sale as a last ditch effort to solve bankruptcy and closure issues, the industry stalwart tried to stay ahead of the game with talks of a potential sale.
This week, though, Nordstrom has taken a step back and put that on hold.
And with, shares of Nordstrom stock fell more than 5 percent—to reach its lowest value in more than a year—before bouncing back about 50 percent. Fortunately, the iconic retailer is not alone as many other department stores saw a drop this week: Macy’s fell about 2 percent; Dillard’s dropped 3 percent.
Davidowitz & Associates chairman of retail consulting and investment banking, Howard Davidowitz, comments, “Investors are finally starting to understand the risks associated with this sector. They’re realizing that financing another loony private-equity deal with billions in debt is a terrible idea.”
He also goes on to say, “Not having to worry about quarterly earnings means you can take some chances and make changes without being in the public eye. But at the same time, taking on billions of dollars of debt at a time like this — well, that could very well put Nordstrom at risk.”
For now, analysts say, Nordstrom’s will focus on optimizing performance during the next few months: a crucial season in the retail industry, of course.
Indeed, Columbia Business School director of retail studies Mark Cohen comments, “In the short term, this means one thing: They have to have a successful holiday season.” Also a former chief executive with Sears Canada, Cohen continues, “That’s crucial if their going-private strategy is going to come off the shelf again.”
Now, it is important to recognize that more than 300 retailers have filed bankruptcy in the past year, alone, as traditional brick-and-mortar chains continue to face surmounting struggles in the face of cheaper online and foreign competition.
Davidowitz concludes: “So far, Nordstrom has been successful in almost everything they’ve done, but there’s no guarantee that will continue when you pile on the debt.”