Macy’s Stock Rises on Sale Speculation

Macy's
Macy's store in Rancho Cucamonga, Calif.
Courtesy of company

Could Macy’s be the next major retailer on the selling block?

The New York Post reported Wednesday that Macy’s Inc. chairman and CEO Terry Lundgren is “open to offers from potential friendly buyers,” citing statements from private equity partners who have been approached by real estate firms.

As a result of the sale talk, Macy’s stock price has jumped more than 5 percent in trading today, hitting a high of $31.05 just before noon.

Though Macy’s representatives are remaining mum on the possibility, the signs are there that the company could pursue a sale.

In early January, the New York-based department store cut 10,100 jobs among management and store associates. That followed an announcement in August to close 100 of 730 Macy’s stores over the next few years and shift more resources online. As a result of all those streamlining efforts, Macy’s said that it expects to save $550 million, starting this year.

In a statement announcing the job cuts, Lundgren said, “We are closing locations that are unproductive or are no longer robust shopping destinations due to changes in the local retail shopping landscape, as well as monetizing locations with highly valued real estate. These are never easy decisions, and we are committed to treating associates affected by these closings with respect and transparency.”

In addition, the company has begun divesting nonessential operations. Earlier this week, Macy’s sold its Frango chocolate brand to Chicago-based Garrett Brands LLC for an undisclosed amount. Macy’s had assumed ownership of Frango through its merger with Marshall Field’s in 2005 and distributed the confections in stores and online.

Macy’s is just one of many retailers suffering from a barrage of market challenges, such as sluggish consumer spending, pressure from e-commerce competitors and mounting brick-and-mortar costs. Payless ShoeSource Inc. recently laid off 2 percent of its workforce to address its mounting debt. And off course, the bankruptcy of Sports Authority last year continues to impact the rest of the industry.

And not even e-tailers are immune to the current difficulties. In a surprise move this week, Shoes.com abruptly shuttered its operations and could begin bankruptcy proceedings soon.

However, Macy’s shouldn’t be in danger of Chapter 11. The company still has a significant real estate portfolio that can be monetized through sales and leaseback negotiations. And potential buyers would likely see that as an enticement.

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