28/09/2022

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Nordstrom hires AlixPartners to advise on potential Rack spinoff

Nordstrom has tapped consulting firm AlixPartners to advise on a potential spinoff of Nordstrom Rack, the department store’s off-price retail brand, according to a Bloomberg report.

Nordstrom has been dissatisfied with Rack’s performance during the 2021 economic recovery. Rack’s third quarter sales totaled $1.19 billion – up 35% from the same period in 2020 but down 8% from 2019. Nordstrom’s main business, meanwhile, had Q3 2021 sales growth of 3% over Q3 2019.

CEO Erik Nordstrom said in a November earnings call that the company had hired consultants to help improve Rack’s performance and profitability. “We are not satisfied at all with our Rack business as clearly our recovery is lagging what we think it should be,” Nordstrom said.

Nordstrom hires AlixPartners to advise on potential Rack spinoff

According to a Bloomberg report from December 20, the department store has now tapped AlixPartners to review the possibility of spinning off Nordstrom Rack into a separate company. The consultancy is also advising on whether the separation would entail two management teams and individual public reporting, anonymous sources told Bloomberg.

Nordstrom shares have increased from $20.10 when the Bloomberg report broke on December 20 to $22.82 on December 31. The December 31 share price represents a 27% decrease year-over-year.

The news arrives as other American retailers examine their operations amid e-commerce acceleration in the pandemic environment. Several retail brands have been pressured by activist investors to split off their e-commerce operations from their bricks-and-mortar divisions – as pure-play e-commerce retailers tend to reach much higher valuations on Wall Street.

AlixPartners last year advised on Saks Fifth Avenue’s spinoff of its e-commerce division, while Macy’s also hired the New York-based consultancy to advise on a possible spinoff of its digital arm. Kohl’s is mulling a similar bifurcation.

AlixPartners’ 2,000 global consultants advise on turnaround and restructuring, performance improvement, M&A, economics, investigations and disputes, technology and digital, and leadership.

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