The much-rumored deal between Nordstrom Inc. (JWN - Analyst Report) and Trunk Club has been confirmed. In an agreement entered last week, the leading fashion specialty retailer has agreed to acquire the provider of personalized clothing services for men, Trunk Club, for an undisclosed amount.
The deal is expected to close by the end of third-quarter 2014. The company plans to disclose the details of the deal in its second-quarter of 2014 earnings conference call.
Chicago-based Trunk Club was founded in 2009 by its current Chief Operating Officer (CEO) Brian Spaly. Since its establishment, the company has registered a significant growth in its business and expects revenue for 2014 to cross the $100 million mark. Trunk Club has showrooms in Chicago, Dallas and Washington and is planning to open its fourth showroom in Las Vegas. The company currently has over 500 employees of which 250 are professional stylists.
The company offers designer outfits for men as per their style, fit and size preferences. To avail this service, the customers have to become a member, which is totally free of cost. Then the company’s stylists talk to the interested members over phone to enquire about their preferences. The company then sends them a full box of items and the customers are only charged for those which they choose not to return within 10 days.
We believe that the recent acquisition strategically fits Nordstrom’s business model. It not only enhances the company’s capability of serving male customers but also expands its online clothing services for men, in which it invested two years back by acquiring Bonobos.
Though Trunk Club has been growing significantly since its inception, it suffered from the lack of an inventory of branded items. However, on joining forces with Nordstrom, it will have access to over 100 brands. Furthermore, we believe that Nordstrom’s 271 stores across 36 states and over 1,500 talented personal stylists will take Trunk Club’s business to a new high.
For the past few years, men’s clothing business has been growing tremendously, which has prompted many large retailers to enhance the segment’s square footage in stores as well as introduce luxury product lines for men. Moreover, this year witnessed the acquisition of Jos. A. Bank by The Men's Wearhouse Inc. , an important acquisition in the men’s clothing business.
Therefore, we can understand why the acquisition of Trunk Club is important for Nordstrom’s growth.
Other Stocks to Consider
Currently, Nordstrom carries a Zacks Rank #4 (Sell). However, other better-ranked stocks in the same industry are Citi Trends, Inc. (CTRN - Analyst Report) carrying a Zacks Rank #1 (Strong Buy) and Abercrombie & Fitch Co. (ANF - Analyst Report) carrying a Zacks Rank #2 (Buy).