Macy's, the iconic US department store, experienced a significant surge in its stock prices following reports of a potential $5.8 billion buyout deal. An investor group, including Brigade Capital Management and Arkhouse Management, has reportedly offered $21 per share for the retailer, a substantial increase over the closing price of $17.39 on the Friday before the news broke.
The 165-year-old company, known for its New York City Thanksgiving Day parade, operates over 720 stores across the United States, including Bloomingdale's and Bluemercury. This buyout proposal marks a pivotal moment for Macy's, as the company has grappled with challenges such as shifting consumer preferences away from shopping malls and intense competition from low-cost rivals.
Macy's declined to comment on the reports, while Brigade Capital Management, one of the firms reportedly involved in the bid, also remained silent. Arkhouse Management did not respond to requests for comments.
Analysts have noted that Arkhouse, known for its focus on real estate investments, might be particularly interested in Macy's extensive physical store footprint. The investor group, already holding a stake in Macy's, has witnessed the retailer's share price fluctuate drastically, dipping to below $11 at one point this year.
Following the news of the potential acquisition, Macy's shares opened significantly higher at around $20 per share. The reports positively influenced the stock market, benefiting other department store rivals like Kohl's and Nordstrom.
Macy's originated from a 2005 megamerger, consolidating regional department store brands such as Hecht's and Filene's. Despite its storied history, Macy's has faced a decline in sales, exacerbated by the pandemic's impact on retail, particularly clothing purchases. In June, the company revised its annual profit and sales forecasts, reflecting ongoing challenges.
The hedge funds' interest in Macy's is primarily centered around the company's real estate assets. Analysts estimate Macy's real estate value at around $8.5 billion, or $31 per share, with the Herald Square store alone valued at an estimated $3 billion. Macy's expansive portfolio includes nearly 500 stores under its flagship brand and approximately 30 Bloomingdale's locations, along with several smaller outlets.
Arkhouse and Brigade Capital have reportedly met with Macy's board of directors to discuss the buyout proposal, but the board has yet to indicate its stance on the offer. Macy's stock reached its peak in 2015 at $70 per share but has since struggled to compete with the rise of online retailers. In 2017, Hudson's Bay Company considered taking over Macy's, but no formal offer materialized.
As per the Wall Street Journal, Macy's generated $1.2 billion in profit from $24.4 billion in revenue in 2022, slightly down from the previous year's revenue. Arkhouse and Brigade Capital reportedly view Macy's as undervalued at its current share price and are open to increasing their offer if necessary. The potential acquisition signals a significant shift in the retail landscape, emphasizing the evolving dynamics of traditional department stores in the digital age.
