Have you ever posted one of your prized possessions on eBay and got only low bids? Macy’s (M) feels your pain. The venerable department store has ended talks with an investor group led by Arkhouse Management and Brigade Capital regarding a potential $6.9 billion buyout. Investors were also sad, tanking Macy’s stock by 15% following the announcement of the ditched deal. Why did the company pull out? They cited insufficient value and uncertain financing as reasons for rejecting the proposal.
The investor group had revised their offer to $24.80 per share, up from an initial $24, valuing Macy's at $6.86 billion. Macy's granted the investors access to its books and board representation for four months but claimed no actionable proposal emerged.
Why Is Macy's Struggling?
Traditional brick-and-mortar department stores have had a rough ride in the changing retail landscape. The growth of online sales, the pandemic, rising prices, supply chain issues, and high inflation have all taken their toll. Macy's 2023 net sales of $23.1 billion were its lowest in nearly two decades (excluding 2020), down from a peak of $28.11 billion in 2014. For struggling department stores, the risk of a hostile takeover is real. Its competitor Nordstrom was also recently a takeover target.
Under new CEO Tony Spring, Macy’s will continue to focus on a turnaround plan called “A Bold New Chapter.” Earlier this year, Macy’s announced plans to cut jobs and close 150 stores through 2026. It also plans to open 15 new Bloomingdale's and 30 new Bluemercury stores to modernize its operations and boost luxury brand performance.
What Does It All Mean?
The company hopes that its new strategy, which includes strengthening the Macy's brand, will enhance shareholder value and enable it to compete in the current economic environment. There are already some signs of success, especially in its operations-enhanced First 50 locations. Despite raising its annual profit forecast in May, Macy's faces ongoing challenges with sluggish demand and the need to execute its new strategy effectively. Wall Street seems to be “cautiously optimistic,” with a consensus Moderate Buy rating and a price target of $18.86. Shares are currently trading at $16.89, up .27%.
Neither Julie Stoller nor Stocks.News have positions in this company.
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Contributing Writer
As a professional writer since 2012, Julie Stoller has covered many industries, from healthcare and technology to consumer products and industrials. She has written about IPOs, spinoffs, ETFs, stock splits, commodities, legislative actions impacting investors, and macroeconomic issues. While keeping up with the latest meme stocks and trends, Julie's special interests are discovering ...