Nordstrom might be the next department store to spin off a segment of its business.
The retailer has just hired consulting group AlixPartners to help it navigate a potential spin off for its Nordstrom Rack business, Bloomberg reported. The move comes as other department stores like Macy’s, Kohl’s, and Neiman Marcus reportedly consider similar splits.
Macy’s Inc. is also working with AlixPartners as it considers next steps for its digital business. In a call with investors in November, Macy’s CEO Jeff Gennette said that AlixPartners will serve as an “objective third-party firm to really pressure test all of our analysis” in regards to its e-commerce business.
Saks Fifth Avenue’s parent company Hudson’s Bay Co. also worked with AlixPartners when it split the retailer’s website and stores into two separate businesses in March. This digital arm of Saks Fifth Avenue has reportedly started preparations to file for an initial public offering and is targeting a valuation of around $6 billion for an IPO in the first half of 2022.
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According to a report in the New York Post, Neiman Marcus is in talks AlixPartners to help split the company’s website, stores, and its Bergdorf Goodman business. However, the company’s CEO Geoffroy van Raemdonck said in a recent interview with WWD that the company had no intention of splitting its businesses.
Nordstrom and AlixPartners declined to comment.
In November, Nordstrom laid out a plan to improve its Rack business after reporting earnings that fell short of analysts’ expectations. Part of this plan involves rebalancing assortment and improving average selling price better to align with customer expectations. The retailer is also aiming to strengthen Rack’s brand awareness and drive traffic with a new “More Reasons to Rack” marketing campaign in September.
Erik Nordstrom, CEO of Nordstrom, Inc., said on the call that “Rack faces a unique challenge as off-price procurement of the same top brands we carry at Nordstrom is particularly difficult in an environment with production constraints and lower levels of clearance product.”
In general, activist investors have recently been pressuring retailers to split business units to free high-performing segments from weaker units.
In October, Jana Partners LLC took a stake in Macy’s and sent a letter pressuring the retailer to split its online and store businesses to capitalize on an impressive digital growth in the last few quarters. In November, Macy’s shareholders NuOrion Advisors, LLC sent an open letter to the Macy’s board chairman asking for the formation of a “Digital Special Committee” to oversee specific proposals for its digital business.
