Nordstrom Terminates Go-Private Talks; Now What?

Nordstrom, Inc. JWN announced its special committee ended discussions with the Nordstrom family attempt to take the company private, citing a lack of agreement on price.

The Analyst

Credit Suisse analyst Michael Binetti maintains a Neutral rating, but lowered his price target from $54 to $50.

The Thesis

Now that it's clear Nordstrom will remain public, Binetti continues to believe the company has long-term advantages against its department store peers as it has followed retail’s natural progression towards e-commerce.

“We continue to believe JWN has long-term advantages vs peers, and emerging EBIT drivers from its growing credit business,” Binetti said.

Nordstrom is a retail leader in omni-channel presence, with a quarter of its sales coming from e-commerce, and 33 percent coming from off-price channels. Nordstrom has limited its exposure to malls in the US, where Binetti continues to see a long term closure risk. The analyst also expects the retailer to deliver better EBIT growth from modest sales growth through 2020.

“We also see underlying EPS growth in ‘18 from reversing GM pressure and multi-year investment cycle/SG&A headwinds (like Manhattan dead rent) starting to roll off,” said Binetti.

Now that a takeover appears unlikely however, Binetti believes the stock will remain range-bound in the near term until signs of improving fundamentals materialize, leading to a lowered price target.

Price Action

Shares were down about 2.3 percent Wednesday at $48.20.

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