The Macy’s company logo is seen at the Macy’s store in Herald Square on January 19, 2024 in New York City. Department store chain Macy’s has announced that it will lay off about 2,350 employees which is about 3.5% of its workforce. The company says it will also close five stores in order to adapt to the online shopping era. (Photo by Michael M. Santiago/Getty Images)
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department store Macy’s said Monday its board unanimously decided to end negotiations with the activist group seeking to take the retailer private for about $6.9 billion, saying in a statement that issues over financing and the premium were insurmountable.
“We have concluded that Arkhouse and Brigade’s proposal lacks funding certainty and does not offer compelling value,” said Macy’s lead independent director Paul Varga. a press release.
Arkhouse and Brigade have been trying to acquire the high-profile retailer for months. Earlier this month, the bidders raised their offer to $24.80 a share, the latest in a series of price hikes since they first launched their takeover bid last year.
Macy’s said the company had gone “well beyond what is normally required” in a due diligence period, offering the bidder group information on store-by-store profits and losses and leases for each location. The company also noted that Arkhouse and Brigade were able to share this confidential information with more than a dozen “credible funding sources.”
Arkhouse, after its initial efforts were rebuffed, said earlier this year that it intended to mount a proxy fight for control of Macy’s. The two sides were able to reach an agreement in April, adding two independent directors to Macy’s board.
Arkhouse did not immediately return a request for comment. Shares of Macy’s were down about 14% early Monday.
Macy’s is in the midst of a turnaround effort led by CEO Tony Spring, who was promoted to the top job in February. The department store operator announced earlier this year that it would close about 150 of its namesake stores and open new locations of Bloomingdale’s and Bluemercury, its two strongest-performing brands. It’s also opening smaller Macy’s locations in busy suburban malls.
But the veteran department store operator’s efforts to boost sales have been hampered by high inflation as consumers become more selective about spending on discretionary items. Macy’s has also had to fight to stay relevant as younger shoppers turn to online players like Shein, big-box stores like Target and off-price chains such as TJ Maxx instead of department stores.
For the fiscal year, Macy’s expects net sales to range between $22.3 billion and $22.9 billion, which would be down from $23.09 billion in 2023. It expects comparable sales, which strip out the impact of store openings and closings, to range from about a 1% decline to a 1.5% gain on an owned plus licenses basis and including sales in third-party markets.
In an earnings call in late May, Spring said Macy’s is in the “early stages” of revitalizing its namesake stores. But he pointed to better sales results in the first 50 stores where Macy’s had invested in more staff, sharper merchandise displays and special events.
Before Monday’s losses, Macy’s shares were down about 5% so far in 2024 for a market value of about $5 billion, trailing the S&P 500’s gain of about 18% over the same period.
Arkhouse is a well-known property investment company led by Gavriel Kahane and Jonathon Blackwell. While not a conventional activist investment firm, it has made a handful of unsolicited offers for REITs in recent years. Brigade Capital Management focuses on retail companies and has previously invested in names such as Sears and Neiman Marcus.
Together, the bid team sought to unlock what it saw as trapped value in Macy’s real estate holdings while simultaneously overhauling the company’s operations. Other department store names have been targeted by activists in the recent past for similar reasons: In 2022, activist fund Macellum urged of Kol to sell himself.
