Richard Vorisek’s Post

With the big announcement of the Saks takeover of Neiman Marcus, news that activist investors have upped their bid for Macy's flew under the radar. This week, Arkhouse and Brigade Capital Management increased their offer by around $300 million. This values the stock they don’t already own at $6.9 billion. Putting more money on the table automatically makes the bid more attractive. However, it does not necessarily make it right for the long-term health of Macy’s. Arkhouse and Brigade are focused on real estate. They want to monetize Macy’s property to generate a return. This essentially means selling off stores and then charging Macy’s rent on the shops it continues to operate. We have seen this story play out many times before, and it rarely ends happily for retailers or brands. Take Red Lobster as the latest example. After being bought by private equity, a sale of real estate generated $1.5 billion; but it ended up costing the chain $200 million a year in rent – effectively pushing it into bankruptcy. The tragedy of all this is that it comes just as Macy’s, for the first time in a long time, has recognized the problems in its retail operation and is working to remedy them. CEO Tony Spring has set out a plan for renewal and is executing with speed. There is still a lot to do, but in my view that strategy should be given the time and chance to succeed. At the end of the day, Macy’s can be run as a retailer and built up. Or it can be used as an ATM to generate some short-term cash and torn down. Only one of these paths leads Macy’s into the future.  #retail #retailnews #departmentstores #corporatedeals #realestate

Macy’s Consistent Profits Have Faded & The Iconic Department Store Is Betting On Itself. Last week, Macy’s walked away from deal talks with two #investors, leaving the iconic American department store to tackle the challenging #retail landscape alone. The deal, which would have valued the #Macys enterprise at some $9B, was squashed after Macy’s board had concerns that the #financing for the proposed deal wasn’t solid enough, sending shares in the company down more than 14% since the deal was called off one week ago. The buyout saga, which began in December, saw the bid raised twice before ultimately being abandoned. But, the potential buyers weren’t reportedly interested in “Macy’s: The Enterprise” so much as they wanted “Macy’s: The Real Estate Portfolio”. The company's #property portfolio is estimated to be worth anywhere from $5B to as much as $14B. Despite bouncing back relatively strongly from COVID-19, Macy’s once-reliable #profits have all but dried up: in the last 12 months the company has reported $13 M in net #income — a figure that was routinely over $1B in prior years. By ending talks, Macy’s execs are signaling that they will forge ahead with its #turnaround plan. That’s a bold move considering that peers such as #JCPenney and #Sears have succumbed to #bankruptcy, E-commerce continues to grow, and inflation-weary consumers are showing signs of weakness. The strategy is focused on doubling down on its top 50 outlets, closing underperforming stores, and adding new #Bloomingdales and #Bluemercury locations. Macy's is preparing to celebrate the centenary of its #Thanksgiving Day Paradethis year... its next 100 years might require some reinvention. JSesko@meridianfinance.com 818-914-9271 #tradecreditinsurance

Department Stores, which have been at the core of American cities since the mid-to-late 1800s, are one step closer to saying goodbye. For more than two decades, their cultural relevance (think Macy's #Thanksgiving Day parade and 4th of July fireworks) has been much greater than their economic relevance (in 2022, department stores accounted for less than 2% of US retail sales). The proposed $5.8 Billion acquisition of Macy's -- which, as an aside was valued at $4.8 billion before the offer, despite having a real estate portfolio "worth about $6 billion" -- is just the latest chapter. "Kohl's ... has faced pressure from activist investors and continues to struggle with sluggish sales. JCPenney filed for #bankruptcy and was rescued by mall owners. Saks Fifth Avenue and Neiman Marcus Group have been exploring a merger amid a slump in sales of luxury goods. And The Bon-Ton Stores, Inc. is a shell of its former self. Only Dillard's Inc., which is run by its founding family, has continued to thrive." (NOTE: No mention of Belk and Von Maur, two other notable dept store chains). The symptoms? A shift in consumer spending "to discount stores, fast-fashion retailers, and new entrants" as well as "buying more directly from brands," a reluctance to evolve the business model and self-cannibalize, under-investment in stores and nextgen operations and technology, all leading to "years of chronic underperformance.” https://lnkd.in/enJTq7nr

Investor Group Proposes a Whopping $5.8 Billion to Take Macy's Private An investor group has proposed a $5.8 billion bid to acquire Macy's, aiming to privatize the famed department store chain following major value loss due to intense online competition. Bold buyout: Arkhouse Management and Brigade Capital Management have proposed a $5.8 billion buyout of Macy's in a major move in the retail industry. The offer, made on December 1, aims to take Macy's private, reflecting a generous premium of approximately 32% over its previous closing stock price, which has plummeted to below $20 since its 2015 peak of $70 per share. A pivotal moment: The proposed privatization of Macy's marks a critical juncture in the evolution of traditional retail amidst ongoing industry consolidation and the rise of e-commerce. The outcome of this bid could set a precedent for how legacy retail brands adapt and survive in an increasingly digital marketplace. It reflects the growing trend of investors valuing retail giants' real estate and cultural assets as much as if not more than, their current commercial performance. As reported by CRE Daily. #commercialrealestate #macys #majorretailers #ashevillecommercialrealestate.

Looks like the Thanksgiving parade is still on. Any buyout talks for Macy's with Arkhouse and Brigade is over. Uncertainty around how the investment firms would finance such a takeover was enough to pull the plug on further discussions. For months, Arkhouse and Brigade dangled a high-highfalutin carrot that had shareholders chomping at the bit - acquiring Macy’s in a deal valued at $6.6 billion, or $24 per share cash. But it seems that when it came time to put the pedal to the metal, the investment firms couldn't come through. Like many private equity takeover deals involving retail, the harsh reality is the Arkhouse and Brigade's plans were based on monetizing Macy’s real estate assets for short term gain. In other words, they planned to sell off assets rather than investing in the retailer's long-term future. We saw the same issue with Kohl's as activist investors pushed the retailer to open itself to acquisition offers where the core plan was to sell off real estate holdings. In Macy's case, that would be at odds with the retailer's turnaround plans which includes pivoting to luxury sales and accelerating the expansion of its new, small-format stores. Macy's isn't out of the woods with falling sales due to inflation. The turnaround plan may be in place, but only time will tell if it works https://cnb.cx/469aYd9 #macys #retail #investment #acquisition #business #realestate

𝐌𝐚𝐜𝐲'𝐬 𝐅𝐚𝐜𝐞𝐬 $𝟔.𝟔 𝐁𝐢𝐥𝐥𝐢𝐨𝐧 𝐁𝐮𝐲𝐨𝐮𝐭 𝐀𝐦𝐢𝐝 𝐌𝐨𝐝𝐞𝐫𝐧𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐄𝐟𝐟𝐨𝐫𝐭𝐬 Macy's, under new CEO Tony Spring, is battling a $6.6 billion buyout bid from Arkhouse Management, challenging the company's revival strategy. Despite rejecting a previous $5.8 billion offer, Macy’s is reviewing Arkhouse's new proposal, aiming to modernize and focus on digital and physical retail synergy. Arkhouse criticizes Macy's incremental changes and seeks more fundamental reforms, nominating nine board candidates for a proxy battle. Macy's shares surged 13.55% following the bid announcement. #finance #news #MacysBuyout Source: https://lnkd.in/g5fJXvUc

When will the residences be ready for occupancy ?

Great insights Ken Pilot! Given the current value of the RE assets, I am not surprised by the bid. Under Terry Lundgren, Macy's massive expansion through acquisition always seemed a bridge too far. To your point, extracting value from flagship real estate would be difficult. However, opting for smaller, more curated stores (as per their latest initiatives, which have been under Jeff Gannette) while closing and selling underperforming stores in secondary and tertiary markets would likely improve the balance sheet and enhance profitability. The benefit of a PE-backed redux should allow Macy's to prune what isn't working well, focus on innovation, improve CX, while experimenting with what a next-generation department store could be... There is the added benefit of doing all of this while avoiding the pain of public market scrutiny. No doubt interesting times ahead for Macy's!

Just in time for the Holidays…Miracle on 34th $treet….Arkhouse management and Brigade Capital hope to pay less than the book value of the combined Macy's Real Estate holdings. Kinda smells like the opportunity Eddie Lampert eyed with Sears and Kmart and what Richard Baker saw as the opportunity with Saks Fifth Avenue (he paid $2.9B with the RE value of the Manhattan Flagship valued as greater). The hard part for these real estate motivated moves, buy the buildings and get the company for free, is you still have to grow the business. And we know, regardless of the potential value of the buildings (which are not easily converstable to anything other than retail) department store businesses are challenging. Give credit to Richard Baker for at least trying to realize the value of Online versus the stores and creating 2 separate companies. But, even with that approach, Saks is still fighting to pay it’s bills on time. Will Santa come for Macy’s??

🛍 Since the retailer’s establishment in 1858, Macy's has become one of the most well-known department stores in the US, if not the world. However, the legacy retailer’s journey as an independently run company may end sooner rather than later. 💬 The retail industry is buzzing with reports that Macy’s received a US$5.8 billion acquisition offer from an investor group composed of Arkhouse Management and Brigade Capital. 🤔 While this may seem like an impressive proposal amount, many experts within the retail industry feel that accepting the offer would be an ill-advised move on Macy’s part. 🖥 With insight from Marie Driscoll, CFA, Steve Dennis, and Neil Saunders, my article for Inside Retail US explores into the issue in-depth. ⬇ Click on the link below to find out more! #insideretail #retailnews #retail #departmentstore #macys #retailexperts #consumer #shopping #buisness #linkedin #webcontent #editorial