What Happened:
Shares of luxury department store chain Nordstrom (NYSE:JWN) jumped 5.3% in the morning session after retail stocks soared in solidarity with Macy's. Reuters reported that Arkhouse Management and Brigade Capital, an investor group, made a $5.8 billion offer to take Macy's private. The proposal, submitted on December 1, 2023, values Macy's at $21 per share, representing a 20% premium from the company's closing price of over $17/share on Friday, December 8, 2023. The offer, if accepted, would involve acquiring the Macy's stock that the investor group does not already own.
The potential acquisition of Macy's is instilling confidence that struggling retailers in general and department stores in particular still hold value, whether it's because of their brand, real estate footprint, or business model. After the initial pop the shares cooled down to $17.04, up 4.2% from previous close.
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What is the market telling us:
Nordstrom's shares are very volatile and over the last year have had 25 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 20 days ago, when the stock dropped 8.8% on the news that the company reported third quarter results with revenue missing analysts' expectations, while its gross merchandise volume ("GMV") fell by 7.1%. Management highlighted "continued uncertainty and softening consumer spend," and the wind-down of Canadian operations also affected sales metrics. Despite operating income and earnings per share (EPS) surpassing expectations, the negative free cash flow, which was below analyst forecasts, contributed to an overall weaker quarter for the company. To add insult to injury, this weak performance comes in light of some impressive performance in retail. There have been department store peers like M (Macy's), specialty retailers like GPS (The Gap), and off-price concepts such as ROST (Ross Stores) that reported impressive results in the previous two weeks.
Nordstrom is up 8% since the beginning of the year, but at $17.04 per share it is still trading 35.4% below its 52-week high of $26.38 from February 2023. Investors who bought $1,000 worth of Nordstrom's shares 5 years ago would now be looking at an investment worth $347.17.
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