24/7 Wall St. Insights

• The owners want to take retailer Nordstrom Inc. (NYSE: JWN) private.
• Shareholders don’t think the offer is rich enough but may want to think again.
• Also: 2 Dividend Legends to Hold Forever.

The Nordstrom family wants to take the retailer private, which means the family is in the fight of its life. Shareholders don’t think the offer is rich enough. Investors might want to take the money. Nordstrom Inc. (NYSE: JWN) is in deep trouble, and its future is uncertain.

The family has offered $3.8 billion, about $23 a share, for the retailer founded in 1901. CEO Erik Nordstrom and his brother Pete have helped drive the retailer into the ground. In their favor is the fact that competitors, including Macy’s, have not done much better.

One challenge to the detail is that the offer is a very modest premium. Shares have already jumped significantly after they rose on the news that the deal might be coming. No wonder investors feel cheated.

Nordstrom’s same-store sales rose only 1.9% in the most recent quarter. Revenue rose 3.4% to $3.8 billion, but margins were extremely small. Net income was $122 million, down a fraction from a year ago. Anyone following the economy knows a recession could start next year, and the net income margin could disappear.

Store count did rise from 351 a year ago to 370. However, management only expects same-store sales to rise 2% for the fiscal year, and revenue is expected to be flat for the same period.

Like other retailers its size that serve a middle-class of buyers, Nordstrom’s best years are behind it. Shareholders should cash in.

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