Macy’s (M) looks set to embark on an entirely new journey in the near term

Shares of Macy’s, Inc. (NYSE: M) soared over 15% on Monday, after the company received a higher offer from the investor group looking for a buyout. The department store chain saw its sales decline during its most recent quarter, and it has announced a new strategy to turn around its business, which it has termed A Bold New Chapter.

Take-private bid

Macy’s has received an updated offer from investors Arkhouse Management and Brigade Capital Management to acquire all the outstanding shares of the company for $24 per share in cash. The new offer values the department store chain at approx. $6.6 billion. Macy’s said it will carefully review and evaluate the latest proposal. The retailer had reportedly rejected the investor group’s previous offer of $21 per share, considering it to be too low.

A Bold New Chapter

Alongside its most recent quarterly results, Macy’s announced a new strategy termed A Bold New Chapter to improve its business performance and drive growth. This strategy focuses on three strategic priorities which are to strengthen the Macy’s nameplate, accelerate luxury growth, and simplify and modernize end-to-end operations.

The new plan involves revivifying the assortment, providing the customer with a frictionless shopping experience, and focusing resources on more productive locations. As part of its efforts to refocus its resources, Macy’s plans to close around 150 unproductive locations by the end of 2026 and shift its investments to its remaining 350 locations. The company plans to close around 50 locations by the end of fiscal year 2024.

Macy’s also plans to open more small-format stores. It had 12 small-format Macy’s stores at the end of FY2023 and it plans to open 30 more over the next two years. This includes 12 stores in FY2024. The retailer is also looking to open a total of 15 small-format Bloomingdale’s stores, or Bloomies, and outlets in new and existing markets over the next three years.

Starting from 2025, Macy’s expects low-single-digit annual comparable Owned + Licensed + Marketplace sales growth, and annual adjusted EBITDA dollar growth in the mid-single digit range. It also expects capital spend to be below 2024 levels and free cash flow to return to pre-pandemic levels.

Q4 2023 performance

In the fourth quarter of 2023, Macy’s’ net sales fell 1.7% year-over-year to $8.1 billion. Comparable sales on an owned-plus-licensed basis were down 4.2%. Adjusted EPS rose 30% to $2.45. Gross margin rose to 37.5% in the quarter from 34.1% in the year-ago period.

2024 outlook

For fiscal year 2024, Macy’s expects net sales of $22.2-22.9 billion. Owned-plus-licensed-plus-marketplace comparable sales are expected to be down approx. 1.5% to up approx. 1.5%. Adjusted EPS is expected to be $2.45-2.85. Gross margin is estimated to be 39.2-39.5%.

For the first quarter of 2024, net sales are expected to be $4.72-4.87 billion and adjusted EPS is expected to be $0.10-0.16.