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 announced it will lay off approximately 2,350 employees, representing about 3.5% of its workforce. The company says it will also close five stores to adapt to the era of online shopping. (Photo by Michael M. Santiago/Getty Images)
Michael M. Santiago | Getty Images News | Getty Images
department store Macy's said Monday that its board of directors unanimously decided to end negotiations with the activist group that had been 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 the Arkhouse and Brigade proposal lacks financing certainty and does not offer compelling value,” Macy's lead independent director Paul Varga said in a news release.
Arkhouse and Brigade have been trying to buy the historic retail chain for months. Earlier this month, the bidders raised their offer to $24.80 a share, the latest in a series of price increases since they launched their first takeover deal last year.
Macy's said the company had gone “well beyond what is routinely required” in a due diligence period, offering the bidding group information on each store's profits and losses and each location's rents. The company also noted that Arkhouse and Brigade had been allowed to share that 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 launch a fight for control of Macy's. The two sides managed to reach an agreement in April, adding two independent directors to Macy's board.
Arkhouse did not immediately respond to a request for comment. Macy's shares fell about 14% in early trading Monday.
Macy’s is in the midst of a turnaround effort led by Chief Executive Tony Spring, who took over 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 best-performing brands. It is also opening smaller Macy’s locations in busy suburban malls.
But the traditional department store operator's efforts to boost sales have been hampered by high inflation as consumers became more selective about spending on discretionary items. Macy's has also had to fight to stay relevant as younger shoppers turn to online companies like Shein, big box stores like Aim and discount chains such as TJ Maxx Instead of department stores.
For the fiscal year, Macy's expects net sales to be between $22.3 billion and $22.9 billion, down from $23.09 billion in 2023. Comparable sales, which strip out the impact of store openings and closures, are expected to range from a decline of about 1% to a gain of 1.5% on a company-owned plus licensed store basis and including sales in third-party markets.
On an earnings call in late May, Spring said Macy's is in the “early stages” of revitalizing its namesake stores. But he pointed to improved sales results at the first 50 stores where Macy's had invested in more staff, more upscale product displays and special events.
Before Monday's losses, Macy's shares had fallen about 5% so far in 2024, for a market value of about $5 billion, lagging the S&P 500's gain of about 18% over the same period.
Arkhouse is a well-known real estate investment firm run by Gavriel Kahane and Jonathon Blackwell. While it is not a conventional activist investment firm, it has made a few unsolicited offerings 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 group of bidders sought to unlock what it saw as trapped value within Macy's real estate holdings, while also overhauling the company's operations. Other department store names have been targets of activists in the recent past for similar reasons: In 2022, activist fund Macellum urged Kohl's sell yourself.
