Nordstrom Stock Surges on Report Activist Investor Ryan Cohen Has a Stake

“Nordstrom’s performance over the last decade begs for an activist role,” said analysts at William Blair, led by Dylan Carden, in a note. It has “more recently underperformed department store peers despite an arguably better brand and loyal customer base.”

Cohen plans to recommend changes to the board to enact cost cutting that will reverse the stock’s poor performance, te person said. His aim is to replace at least one director. On the current board, he may target former
Bed Bath & Beyond
(BBBY) chief executive Mark Tritton for removal.. Currently, Tritton is chair of the compensation committee at Nordstrom. In a letter written last March to Bed Bath & Beyond, Cohen emphasized his concern that executive officers were being compensated too much.

“The Company’s named executive officers were collectively awarded nearly $36 million in compensation last fiscal year—a seemingly outsized sum for a retailer with a nearly $1.6 billion market capitalization,” he wrote.

Based on Cohen’s past activist campaigns, BMO Capital Markets analyst Simeon Siegel hypothesizes that Cohen may be seeking to nudge management toward multiple changes. One possible area of focus could be Nordstrom Rack, the company’s off-price division, Siegel wrote in a research note. Rack has been underperforming Nordstrom’s banner stores lately—a surprising development given that off-price retailers have been a bright spot for the industry over the last few quarters.

“Could Cohen be viewing the Rack business as underperforming while connected to the full-price chain? Sure, seems like a reasonable hypothesis,” Siegel wrote. “Or could he be looking for an entire sale? We suppose.”

Siegel went on to add that Cohen may also be focused on Nordstrom’s private-label business given his past pushback on Bed Bath & Beyond’s private label performance.

That said, with Nordstrom family members owning nearly 30% of the shares outstanding, it may be hard for Cohen to push through aggressive changes, he added. Cohen has previously traveled to Seattle to meet with Nordstrom family members and learn about the business, the person said.

The luxury department store was hit hard by the Covid-19 pandemic and has had a tough time recovering since. Last month it said holiday sales were softer than it had hoped. At the end of January, S&P Global Ratings revised its outlook on Nordstrom to negative from stable, meaning that the agency may lower the company’s credit rating of BB+ over the next 12 months if performance deteriorates beyond expectations.

“We believe department stores are facing mounting competitive pressures,” S&P Global wrote at the time. “Apparel purchases are highly discretionary, and we expect performance will remain vulnerable to economic conditions such as the recent macroeconomic slowdown.”

Nordstrom didn’t immediately respond to a request for comment from Barron’s early on Friday. The Journal cited a spokeswoman as saying the company is open to hearing Cohen’s views and that it will continue to take actions it believes are best for the firm.

Nordstrom is next scheduled to report results on March 2.

Write to Brian Swint at [email protected]