Macy’s snubs a $5.8 billion takeover offer as it cuts costs and jobs. Learn how the iconic department store is coping with the retail industry downturn and e-commerce growth.
Macy’s snubs a $5.8 billion deal from investors
Macy’s has spurned a $5.8 billion deal to go private as the iconic department store faces challenges in the retail industry.
The deal, which was proposed last month by investment firm Arkhouse Management and its partner Brigade Capital Management, would have paid $21.00 for each share of the company. The investors were eyeing the legendary retailer, which owns a multibillion-dollar real estate portfolio, as a bargain in the stock market, an analyst told CBS MoneyWatch.
However, Macy’s board members rejected the offer, saying it “did not offer sufficient value,” the apparel giant stated Sunday. The company also expressed doubts about the investors’ “capacity to fund their proposed transaction.”
Macy’s faces an industry-wide downturn amid a $5.8 billion bid.
The bid and its refusal come amid Macy’s struggle to overcome an industrywide downturn caused by rising competition from online retailers. The company reported a profit of $1.2 billion on revenue of $24.4 billion in the last fiscal year, down from a profit of $1.6 billion on revenue of $24.5 billion in 2021.
More generally, department store sales dropped 1.5% in the first seven months of 2023, compared to the same period a year ago, trade publication Modern Retail reported, citing U.S. Census data.
The retail industry keeps facing difficulties as consumers prefer online shopping over malls, leading to the closure of stores such as Payless and Toys R Us and tens of thousands of layoffs.
In the last 18 months, 2,000 retail stores have closed, with brands like Foot Locker and Walmart closing locations to save money. That stream is expected to become a deluge in the next five years, according to Wall Street analysts.
Years of persistent underperformance have dragged down Macy’s shares, making the company a relatively tempting takeover target.
Macy’s cuts costs and jobs after its $5.8 billion offer
Macy’s is pursuing various strategies to increase its valuation without a deal. The retailer announced it would lay off 3.5% of its employees this week, or about 2,350 workers, in addition to closing five of its stores. The cost-cutting measures are meant to help the retailer “implement a new strategy to meet the needs of an ever-changing consumer and marketplace,” the company told the AP last week.
Macy’s changes strategy in response to the $5.8 billion bid
The strategy change comes as the popularity of department stores and other brick-and-mortar retailers declines as consumers embrace online shopping. In 2020, e-commerce sales rose by $244.2 billion, or 43%, from the previous year, according to the Annual Retail Trade Survey (ARTS) from the U.S. Census Bureau.
Macy’s adapts to e-commerce growth after a $5.8 billion offer
The growth of e-commerce poses a threat to Macy’s traditional business model but also an opportunity to adapt and innovate. Macy’s is ramping up its expansion of its small-format stores, which offer a curated selection of products and services, to more locations. Macy’s is also investing in its online platform, enhancing its mobile app, and partnering with third-party vendors to offer more choices and convenience to its customers.
Macys hopes that these initiatives will help it regain its relevance and competitiveness in the changing retail landscape. Macys hopes that these initiatives will help it regain its relevance and competitiveness in the changing retail landscape, allowing it to thrive in the digital age.