To make Macy’s better Tony Spring was already working fast and now there are two new people on the board of directors for the department store. They need to decide if they should follow Tony’s plan or sell Macy’s to some investors who want big changes.
These new board members were announced this week. It ended a fight with some investors who wanted to control Macy’s. But those investors have been trying to buy Macy’s for a while, and they haven’t succeeded yet.
“It stops the problems for now,” said Neil Saunders, who studies retail. “But it could cause more problems later.”
These investors first tried to buy Macy’s in December. They offered $21 for each share, but Macy’s said no. Then they tried to get control of the company by nominating nine new board members. They also increased their offer to buy Macy’s.
Macy’s said they are still talking with these investors about their offer. They want to do what’s best for the company and its shareholders.
For Macy’s, making this agreement with the investors could stop the fight and save money. But for the investors, it could give them control of Macy’s, even though some people worry they will focus too much on property and not enough on selling things.
Both Macy’s and the investors talked nicely about each other this week. But the fight over Macy’s is not finished yet.
Flipping The Cards
Other big stores have dealt with challenges from investors recently. Even if those efforts don’t work, they can still lead to big changes.
Take Kohl’s, for instance. Their CEO, Michelle Gass, left because of a fight with investors. She went on to work for a jeans company called Levi Strauss. The CEO of Levi, Chip Bergh, said the investors at Kohl’s pushed her to leave.
Before Macy’s had to deal with these investors, Tony Spring was already facing a tough situation.
Macy’s is a famous department store with its main store in New York City and its famous parade on Thanksgiving. But over the past ten years, Macy’s has been getting smaller.
They have fewer employees, and fewer stores, and their stock price has gone down. Other stores like T.J. Maxx, Target, and online shops have been taking away Macy’s customers.
Macy’s shares have fluctuated, from a high of $72.80 in 2015 to a low of $4.81 in 2020, closing last week at $19.30, with a market value of $5.29 billion. In late February, Macy’s projected a slight decrease in yearly net sales and comparable sales.
Tony Spring took over as CEO in February, after Macy’s announced job cuts and store closures. Spring plans to close struggling Macy’s stores and focus on successful ones and other chains like Bloomingdale’s and Bluemercury.
The other two chains, Bloomingdale’s and Bluemercury have way fewer stores in comparison.
Inside Macy’s Turbulent Battle: Investors, Strategy, and the Path Forward
The attempt to take Macy’s private by Arkhouse and Brigade could completely change the company’s direction.
Arkhouse and Brigade are now examining Macy’s finances closely to understand its financial situation and potential problems.
This process wasn’t easy. The buyers wanted more information to secure funding for the deal, but Macy’s was reluctant to share. Arkhouse says Macy’s didn’t cooperate, while Macy’s says Arkhouse didn’t have the money for the takeover.
According to GlobalData’s Saunders, if Arkhouse succeeds in taking Macy’s private, it could be bad news for the company. Arkhouse is more focused on real estate than retail, and it might not invest in improving Macy’s stores.
Arkhouse claims it wants to keep Macy’s stores open and run the business, but also make money from its real estate assets.
“Our plan doesn’t involve closing stores at all. We believe Macy’s real estate is valuable because Macy’s occupies it,” Kahane stated. “We want Macy’s to thrive for years to come, potentially even for another 150 years.”
He argued that a privately owned company can better achieve this long-term goal than a publicly traded one, which often focuses too much on short-term results.Arkhouse recently increased its bid to $24 per share and has secured backing from Fortress Investment Group and One Investment Management. Saunders suggested that the settlement could give Macy’s time to implement Spring’s turnaround plan and increase the company’s value.
The two new directors joining Macy’s board, Richard Clark and Richard Markee, have extensive experience in retail and real estate. Although independent, they will serve on the board’s finance committee, responsible for evaluating acquisition bids.
Arkhouse managing partners Kahane and Blackwell stated that the new directors will ensure constructive discussions about their proposal. For Macy’s, agreeing to two new directors is a win, as it falls short of Arkhouse’s initial demands.
However, the settlement still allows Arkhouse to continue its activism, with minimal restrictions on its actions. Gadson noted that shareholder activism is performance-driven, and the company’s success or failure will ultimately determine the outcome, regardless of governance changes.
