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Nordstrom in for Rocky Ride This Year?

Ryan Cohen apparently has a new target in view after the activist investor’s meddling with Bed Bath & Beyond last year may have contributed to the untimely demise of the struggling home goods chain‘s former finance chief.

Word surfaced Thursday that Cohen has built a significant stake in Nordstrom—he is said to be one of the retailer’s top-five non-family shareholders—and wants to oust at least one board member, Mark Tritton, who was dismissed as Bed Bath & Beyond’s CEO last summer.

Reports suggest that Cohen doesn’t think Tritton, who worked for Nordstrom from 2009 to 2016, should be on the board’s compensation committee and making decisions on pay for executives who were once his colleagues. CEO Erik Nordstrom and his brother Peter, president and chief brand officer, are both company directors.

Cohen will have to move quickly if he wants to get his way, Proxy materials suggest he has until mid-February to submit board nominees, allowing about seven weeks to send out notices and solicit shareholder votes and proxies ahead of Nordstrom’s annual meeting in early April.

Known as the meme-stock king, Cohen is usually interested in creating viral popularity among traders based on social sentiment—and that attention can rock and roll company shares. Nordstrom’s shares initially surged 27.9 percent in pre-market trading Friday on the news, which was first reported in the Wall Street Journal.

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Nordstrom executives could not be reached for comment by press time.

Cohen’s no stranger to retail, and he and Tritton have crossed paths before. Last year, he took a massive stake in Bed Bath & Beyond through his investment firm RC Ventures, and pushed for changes while the company was under Tritton’s leadership. In March 2022, Cohen reached a cooperation agreement with the now near-bankrupt chain that added three new independent directors to the board. A disastrous first quarter sent Tritton packing.

Bed Bath & Beyond this week defaulted on $1 billion in debt when it failed to make a critical Feb. 1 payment. While it has a 30-day grace period to make good, the company has few options left to avoid a complete collapse.

Cohen abandoned his Bed Bath & Beyond stake in August and RC Ventures collected a cool $60 million in the process. A purported class-action lawsuit against the home retailer, Cohen and RC Ventures filed on Aug. 23 alleged they concocted a “pump-and-dump” scheme to “artificially inflate” the company’s share price, also naming the chain’s then-chief financial officer Gustavo Arnal as a defendant. Just days later he plunged to his death from a 57-story Tribeca tower, after telling investors that the retailer was downsizing stores and jobs to stabilize the troubled business.

As for Cohen’s latest target, retail has been the sector favorite in recent years since the pandemic disrupted the industry, leaving retail shares at historically low prices. Activists buy up the shares, and then pressure their targets to make changes that favor shareholder value. Board change is just one idea. Breaking companies into separate store and e-commerce business is another, which is what Saks Fifth Avenue opted to do but that Macy’s deemed too risky.

Nordstrom was ripe for activist attention. The retailer last month reported a net sales decline of 3.5 percent for the nine-week holiday period ended Dec. 31, and its off-price Nordstrom Rack business, which saw sales tumble 7.6 percent in the same period, has been struggling for some time.

Fitch Ratings last week downgraded Nordstrom’s long-term default rating to BB-plus from BBB-minus, a move that puts it below investment grade and into “junk” territory. The downgrade reflects the retailer’s weakening operating profile, which includes its extended turnaround efforts at its off-price Rack business. Fitch says it has a “stable” outlook for the company.

Corporate boards usually aren’t keen when activists come calling. That’s mostly because boards don’t always agree on what activist investors want from them. But some of that might have to do with board constituencies and how open-minded they are to fostering change. And sometimes change can be good, although not always evident at first blush. In the case of Kohl’s, activist investor Macellum Advisors agitated for board change in February 2021. A settlement in April 2021 saw the addition of three new board members. Tom Kinsbury, one of those board members who also was the former CEO and executive chairman of Burlington Stores Inc., on Thursday became the retailer’s new permanent CEO.