Nordstrom Won't Go Private. Now What?
The narrow-moat retailer remains a best-in-class firm in the sector and can achieve low-single-digit average annual revenue growth over the next five years with an operating margin in the 6% range.
Nordstrom (JWN) shares declined about 2% after the company announced that the Board was terminating discussions with the Nordstrom family regarding a privatization transaction. The company disclosed that the sticking point was negotiating an acceptable price, which we find unsurprising, given that we view the current share price as fair and agree that a value north of this could be construed by the family as overpaying.
Our $53 fair value estimate has always been based on the intrinsic value of the company, independent of a deal. Therefore, we see no change to our valuation following this news. We still believe that Nordstrom is a best-in-class firm in the department store sector, possessing a narrow economic moat, given its brand strength. We remain confident that the company can achieve low-single-digit average annual revenue growth over the next five years while maintaining an operating margin in the 6% range as it capitalizes on its full- and off-price models, superior customer service, and curated product offering. Therefore, we still see shares as fairly valued.
Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.
Bridget Weishaar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.