Department Store Nordstrom Warns Off Takeover Bids With Poison Pill

Department store group NordstromJWN
Inc. has adopted a so-called “poison pill” to prevent investors from amassing 10% or more of its shares.

The company announced the move yesterday, just a few days after high-flying Mexican retailer Liverpool confirmed it had built its stake in the luxury department store chain.

Nordstrom said the shareholder rights plan, which will expire on September 19 next year, has not been adopted in response to any specific takeover bid and is not intended to deter buyout offers.

However, such strategies are typically employed when a company believes that it may attract bids that it feels will under-value the business.

Last week, Mexican department store chain Liverpool disclosed that it had accumulated a 9.9% ‘passive stake’ in Nordstrom, in what it said represented a move designed to diversify its geographic foothold.

Liverpool is currently the second-biggest shareholder in Nordstrom, behind only former chair Bruce Nordstrom with a near 16% holding.

Other members of Nordstrom’s founding family, including CEO Erik Nordstrom and president Peter Nordstrom, are also among its top shareholders, while Bruce’s sister Anne Gittinger has the second largest family stake, with 9.68% of shares.

Nordstrom’s Poison Pill

Last week, Liverpool affirmed in a statement that it had bought nearly $295 million worth of stock in the Seattle-based firm and indicated that it had held the 9.9% stake from September 8.

Nordstrom’s poison pill response is designed to make a takeover more expensive or challenging by allowing existing shareholders to buy shares at a discount, diluting any suitor’s ownership stake.

“The rights plan also helps ensure that the board has sufficient time to make informed, deliberate decisions that are in the best interests of the company and all Nordstrom shareholders,” the company said in a statement.

“The rights plan has not been adopted in response to any specific takeover bid or other proposal to acquire control of the company, and is not intended to deter offers that are fair and otherwise in the best interests of all Nordstrom shareholders.”

Nordstrom has seen the value of its shares down by nearly 20% since the start of this year, as a soaring cost of living burden prompted its U.S. customers to cut spending on apparel and discretionary products.

By contrast, Liverpool’s shares have risen 5% since the start of 2022 and the Mexican firm reported double-digit revenue growth in the second quarter, which it attributed to good inventory management, an improved mix of products and higher sales prices.

Nordstrom, Macy’s, Kohl’s Cut Forecasts

Nordstrom last month joined its department store peers Macy’s Inc. and Kohl’sKSS
Corp. in slashing its annual earnings forecast, as it reeled under a glut of excess inventory that has forced many retailers to offer deep discounts amid a slump in consumer demand.

Nordstrom did beat Q2 expectations in August, with net sales up 12% year on year and digital sales increasing by 6.3%. However, the company also lowered its outlook based on lower footfall and demand at its off-price brand Rack, anticipating a full-year sales increase between 5% to 7%, down slightly from its previous forecast range of 6% to 8%.

Neither is the poison pill move new for the industry. In February, rival Kohl’s adopted a poison pill strategy after receiving two unsolicited acquisition bids.

Following an independent review of the takeover bids, the Kohl’s board concluded that neither “adequately reflect the company’s value in light of its future growth and cash flow generation”.

Acacia ResearchACTG
, owned by activist firm Starboard Value, offered $64 per share for Kohl’s, and private equity firm Sycamore Partners was also rumored to be another suitor at the time, with an undisclosed offer.