Macy’s may need to reconsider its buyout options, as its stores continue to fall out of favor with shoppers.
Data from retail insights firm Pass_by showed that foot traffic to Macy’s stores fell 2.49% in 2023 compared to the year before. More worryingly, during the biggest shopping season — Black Friday week and December — the drop was even sharper.
During Black Friday week, Macy’s foot traffic decreased 5.24% year over year; in December, the traffic was down 6.82%.
Last week, the company laid off over 2,300 workers, or 3.5% of its workforce, likely reflecting that the holiday season and 2024 outlook aren’t very strong, Morningstar analyst David Swartz told Yahoo Finance over the phone.
This comes just days after Macy’s rejected a $5.8 billion buyout offer from one of its shareholders, Arkhouse, and its partner Brigade Capital Management. The original proposal, made on Dec.1, would see the company go private for $21.00 per share, a 32% premium to Macy’s share price then.
Now, another bidder may have entered the conversation. Shares of Macy's ended Thursday's trading session up nearly 4% after the New York Post reported that private equity firm Sycamore Partners, which largely specializes in retail and consumer investments, has been in talks to take the 165-year-old department store private.
Macy's declined to comment to Yahoo Finance on the latest offer, while Sycamore Partners did not respond to a request for comment.
Arkhouse isn't giving up though. The investment firm has said it would be willing to share more about its financing or up its offer if Macy’s would sign a non-disclosure agreement and give the firm access to due diligence information.
Despite its flagging business, Macy’s valuable portfolio of stores has made it a target for buyouts.
Its real estate alone could be worth $8.5 billion, according to veteran executive and retail expert Jan Kniffen. Others told Yahoo Finance in December it could be worth even more.
"What [Arkhouse has] done no matter what [is] drawn a lot of attention to Macy's, and kind of forced everyone to analyze ... how the real estate's quite valuable," TD Cowen managing director Oliver Chen told Yahoo Finance, adding even more suitors could come knocking given the newfound realization.
So, will Macy's be the next Sears, or is there potential for a comeback story?
Aron Bohlig, ComCap managing partner, told Yahoo Finance that going private could help Macy’s accelerate its turnaround, as it allows them to reset outside of the microscope of the public markets.
In the online shopping age, “there's really no room for people in the middle, you've either got to be one of the top kind of two or three players," said Bohlig.
"If you imagine a landscape with a Walmart, a Target, and a Nordstrom, each of them have a very clear demographic they serve. Macy's is a little bit stuck in the middle. They need to be going more Nordstrom, less Target," he added.
While Macy's rejected the first bid, Bohlig said the team may want to think twice now.
"The board really should be looking at this very seriously and considering this as a great opportunity to leverage their existing strengths, but build in some great new DNA with one of these outside partners," he said. "There's a very good chance this will go private."
There’s also the risk of a missed opportunity. In 2018, Nordstrom rejected a buyout offer from the Nordstrom family that valued the company at $50 per share, which was below its trading price at the time.
Its stock is now trading at less than $20. As of Thursday, Macy’s shares are still down over 25% compared to five years ago, while rival Kohl's is down more than 50%.
"They don't want to be in a situation where two years from now people are regretting that they didn't take an offer, or not necessarily take it, at least consider it," said Swartz of Arkhouse’s bid.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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