Norstrom Exploring Potential Spinoff Of Its Off-Price Business

Nordstrom has hired consulting group Alix Partners to review a potential spinoff of its Nordstrom Rack Business as it looks to improve profitability and streamline its business.

The company’s decision to explore the option comes at a time when activist investors are pressuring department store chains to spin off their profitable eCommerce operations from their traditional store businesses.

Just last month, Macy’s also tapped Alix Partners to explore a spinoff of its online business as it is being pressured by Jana Partners to separate its eCommerce business from its physical store business. Similarly, Kohl’s is being pressured by Engine Capital to spin off its online business.

Activist investors’ pressure on these department store chains is aimed at helping them fetch a higher valuation — a strategy that was proven successful when Hudson Bay Company chose to spin off Saks.com as a separate entity from the department store’s physical retail business. The department store’s online business is now planning to go public in 2022.

Nordstrom’s move comes at a time when it is struggling to regain sales it has lost over the course of the pandemic. Nordstrom Rack’s sales in the quarter ending October 30 were down 8% from 2019. Meanwhile, its revenue rose by just 3% on a two-year basis, CNBC reported.

“We are not satisfied at all with our Rack business as clearly our recovery is lagging what we think it should be,” the company’s CEO Erik Nordstrom said during an earnings call last month.

Originally published at https://retailbum.com on December 22, 2021.