CareCredit - Women's Health April 2024

Macy’s, Nordstrom Eye Private Ownership While Adapting to Retail Market

Macy’s

The U.S. retail industry may be on the brink of a significant transformation as department store chains Nordstrom and Macy’s consider a shift toward private-equity or hedge-fund ownership.

These potential moves could have extensive implications for the retail sector, reshaping the landscape of the industry, Reuters reported Wednesday (March 20).

Over the past decade, only 7% of the total U.S. private equity deal volume was invested in retail and consumer companies, the report said, citing Dealogic data. However, recent developments with Nordstrom and Macy’s suggest a resurgence in private ownership of major U.S. retailers.

Facing the challenge of releasing quarterly performance figures while strategizing its future, Nordstrom is considering going private, according to the report. The Nordstrom founding family has expressed its desire to retain control of the chain, allowing the company to focus on long-term growth without the constant scrutiny of public markets.

Nordstrom is attempting to capture lower-income shoppers and increase its presence in off-mall shopping centers with the expansion of its discount-focused sister chain Nordstrom Rack, the report said.

The company’s expansion plans for Nordstrom Rack are contradictory to moves by competitors like Macy’s, per the report. While Macy’s is closing around 150 of its namesake stores, it plans to open at least 45 new upscale Bloomingdale’s and Bluemercury stores in the next three years.

Meanwhile, Macy’s will soon open its books to Arkhouse and Brigade Capital, signaling a potential breakthrough in their bid to take the department store operator private, according to the report.

Unlike Nordstrom’s situation, Macy’s is facing an unsolicited hostile bid, the report said. However, due to its strong operational performance and lower leverage compared to Nordstrom, financing the deal for Macy’s might be relatively easier.

This potential shift toward private ownership in the retail industry reflects the challenges faced by department store chains in the current market environment, per the report. Consumer demand has been subdued, and competition from off-price retailers like TJX and Burlington has intensified. Private ownership could provide these retailers with the flexibility and freedom to focus on long-term growth strategies without the pressure of meeting quarterly expectations.