Activist investor Ryan Cohen amassed a stake in Nordstrom, according to news reports Friday. The move came shortly after the Seattle-based retailer had to cut its quarterly outlook because of slow holiday sales.
It was unclear immediately how much Nordstrom stake Cohen, reportedly one of Nordstrom’s top non-insider investors, has taken because he hasn’t filed a disclosure form with the U.S. Securities and Exchange Commission. Investors are only required to do so if they buy more than 5% of shares in a company.
The news of Cohen’s purchase, first reported by The Wall Street Journal, drove Nordstrom shares up nearly 25% on Friday, before plummeting 8.34% on Monday.
Nordstrom did not respond to questions about the size of the purchase. Cohen, chairman of GameStop and co-founder of online pet product retailer Chewy, could not be reached for comment.
Cohen has cashed out millions from trading meme stocks — stocks that garner social media interest that, in turn, could influence share price. Last year, Cohen made nearly $60 million from selling his stake in Bed Bath & Beyond after holding it for just a few months, adding to the woes of the struggling retailer.
In the Nordstrom purchase, Cohen could not have bought shares that would have made his total ownership exceed 9.9% of the company because of an anti-takeover plan, known as “poison pill,” approved by Nordstrom’s board in September.
A Nordstrom spokesperson said in a statement Friday that Cohen hasn’t sought discussions with Nordstrom in years. “We will continue to take actions that we believe are in the best interests of the company and our shareholders.”
Cohen was on the board of Bed Bath & Beyond, now on the verge of bankruptcy, from March until August last year. There, he advocated for cutting costs and for the exit of then-CEO Mark Tritton, who left the company in June. Tritton is now on the board of Nordstrom as chair of the compensation committee, which has triggered questions regarding whether Cohen would seek his removal.
But it is unlikely Cohen could succeed, said Morningstar analyst David Swartz in an interview, because he may only hold up to 9.9% of the company.
Nordstrom has been struggling with lackluster sales, especially with its lower-cost Rack division. In total, full-price and Rack sales fell 3.5% during the holidays — the season that typically brings some of the highest sales volumes of the year. Nordstrom is on track to miss the fourth quarter revenue forecast, Swartz wrote in a research note.
The retailer that has more than 350 stores reported that higher discounts at both its full-price department stores and Rack hurt its profitability in the third quarter, which ended on October 29. Fourth-quarter earnings that cover the holiday season will be released March 2.
While the supposition might be that Cohen plans to cut costs, one of the top problems Nordstrom is facing is the inability to make sales grow, Swartz said.
“It’s not the cost issue, it’s the revenue,” Swartz said. “You can’t really cut your way to prosperity. Cutting costs does not make your sales go up.”
Instead, Cohen can advocate for Nordstrom to split its full-price and Rack businesses, as well as its brick-and-mortar and online retail businesses, and sell real estate, Swartz said.
Nordstrom considered breaking up Rack and full-price in December 2021 but decided against it. And the Nordstrom family, which owns 30% of the company, sees real estate as an asset and is unlikely to sell properties, Swartz said.
This isn’t the first time investors have taken significant stakes in Nordstrom. In September, the board of directors approved an anti-takeover plan after Mexican retailer Liverpool took a 9.9% stake in the company valued at $293.8 million.
In 2018, the Nordstrom family group entered a $8.4 billion bid to take the company private with a cash offer of $50 a share. The offer was rejected by a special committee with independent directors.
It would not be surprising if Cohen’s intentions stray from fixing Nordstrom’s problems based on his record with GameStop and Bed Bath & Beyond, which are struggling to stay afloat, Swartz said.
“I don’t know what he could do that’s going to have a huge long-term impact on Nordstrom,” Swartz said.
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