Nordstrom has written down more than half the value of Trunk Club, the online personal styling service it purchased in 2014, the company just announced.
The upscale retailer said it was taking a $197 million write-down on the service, which it bought for $350 million just two years ago.
“While this business continues to deliver outsized top-line growth, current expectations for future growth and profitability are lower than initial estimates,” the company said in its third-quarter earnings release. “To further improve the customer experience and better position Trunk Club's business for profitable growth, the Company is making a number of operational changes.”
Trunk Club customers consult with a stylist and then receive an assortment of clothing and accessories shipped to their homes. Customers keep what they want and ship back what they don’t. The service also runs six brick-and-mortar locations that customers can visit for in-person styling sessions. After starting out as a men’s service, Trunk Club expanded into women’s clothing last year.
Signs of trouble — or “operational changes” — popped up recently. Up until this fall, the service itself was free. But in October, Trunk Club starting charging a $25 “home try-on” fee for new customers. Trunk Club also recently cut its try-on period from 10 days to five.
The original acquisition amount equated to about 3.5x forward-looking revenue — a sizable multiple for an e-commerce company. The deal also included up to $100 million in additional payouts if the business hit certain goals. On the surface, the deal seemed like a forward-looking way to expand Nordstrom’s traditional styling service to e-commerce.
This article originally appeared on Recode.net.