Macy’s experienced a significant surge of over 17% in its stock value early on Monday, driven by a Wall Street Journal report (via CNN Business) suggesting that the longstanding 165-year-old retailer, closely associated with the holiday season, may be the target of a potential acquisition. According to the report, Arkhouse Management, a real estate-focused investment firm, and Brigade Capital Management, a global asset manager, have proposed an offer that would provide shareholders with a 32% premium above Friday’s closing stock price.
The bidders have reportedly engaged in discussions with Macy’s about the proposal. The retailer’s response to the offer remains uncertain, with no official comments from Macy’s or Arkhouse. Brigade Capital Management has yet to respond to requests for comment. Macy’s, with 722 store locations across 43 states, Washington, DC, Puerto Rico, and Guam, operates a diverse portfolio, including 500 Macy’s branded stores, 55 Bloomingdale’s branded stores, and 160 Bluemercury beauty and skincare chain locations acquired in 2015. Industry analysts, such as Neil Saunders from GlobalData, speculate that Arkhouse may see potential value in Macy’s real estate. However, Saunders warns that a strategy focused on selling off real estate and potentially spinning off the e-commerce business could harm Macy’s as a retailer in the long run unless profits are reinvested to revitalize the core retail business.
Macy’s, along with other traditional department stores, has faced ongoing challenges, grappling with competition from online giants like Amazon and major retailers like Walmart and Target. The company has responded to these challenges by closing stores to cut costs, resulting in a 74% decrease in net income in the first three quarters of the current fiscal year compared to the previous year. Despite Macy’s attempts to support its declining stock price through share repurchases, the share price has fallen significantly from its peak of $73 per share in June 2015. The proposed $5.8 billion offer, while a 32% increase from the previous closing valuation, reflects a 75% decrease from the 2015 peak. Macy’s CEO, Jeff Gennette, who has led the retailer for the past seven years, announced plans to retire in 2024. The challenging retail landscape has prompted investor groups, including private equity funds and hedge funds, to consider acquiring struggling retailers. However, such interventions have not always led to successful turnarounds, often resulting in closures, as seen with notable examples like Lord & Taylor, Toys R Us, and Sears Holdings.