Macy’s Might Just Be Getting A Miracle On 34th Street

Macy’s Might Just Be Getting A Miracle On 34th Street
Paul Allison, CFA

3 months ago2 mins

Mentioned in story

What’s going on here?

Shopping mall and Thanksgiving Day parade mainstay Macy’s is browsing the details of a $6 billion buyout offer, according to news out Monday.

What does this mean?

With consumers increasingly favoring clicks over bricks, department stores like Macy’s and its more-upscale sister Bloomingdale’s are left with just their perfumed entrances and a waft of nostalgia to entice shoppers through the door. But private investors aren’t known for their sentimentality, so there must be something else that’s pulled Arkhouse Management and Brigade Capital to put an offer on the table. That something might be the fact that Macy’s owns a lot of its bricks and mortar – and those real estate holdings alone are rumored to be worth almost $6 billion. Arkhouse is a real estate specialist firm, after all, and sees the world in price-per-square-feet.

Why should I care?

For markets: Inspect the stitching.

Bolt the heavy glass doors on retailers and it’s easy to figure out what they’re worth. Add up all the assets – the New York flagship Herald Square, all the other stores, unsold merchandise, and any cash in the bank. Then subtract what’s owed – debt and unpaid bills. Do that with Macy’s and you get just $4 billion – considerably less than what’s on offer. So, these private equity bidders clearly see some other opportunity riding Macy’s old wooden escalator: a more profitable retail future or some new kind of magic on 34th Street.

Macy’s stock
Source: Google Finance

The bigger picture: Shop away the blues.

Shopping was Carrie Bradshaw’s cardio, and plenty of US consumers seem to be keeping fit that way. Ecommerce accounts for just 15% of what they buy. That percentage, though, has been trending upward, suggesting there could be far tougher days ahead for physical stores. Then again, maybe not. With younger generations spending so much time on their phones doomscrolling, maybe there’s a future for good, old-fashioned, in-person retail therapy.

Ecommerce sales
Source: US Census Bureau


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