Macy's (M) stock is spiraling Monday after the department store chain announced that it has terminated buyout discussions with Arkhouse Management and Brigade Capital Management.
Arkhouse and Brigade had offered Macy's a cash payout of $24.80 per share in May to take the retailer private, up from its offers of $24 per share in March and $21 per share in January. However, Macy's said the financing papers that were submitted with the offers were insufficient to give it confidence that a deal could be made in a reasonable period of time.
"As the Board has consistently demonstrated throughout this process, we are open-minded to exploring all paths to enhancing shareholder value," said Paul Varga, lead independent director at Macy's, in a statement. "At this time, after careful review, we have concluded that Arkhouse and Brigade's proposal lacks certainty of financing and does not deliver compelling value, notwithstanding the significant time, resources, and information shared during this process."
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After terminating talks, Macy's said it will now focus its efforts on its "A Bold New Chapter" strategy, which it first detailed in February. The strategy's three priorities consist of strengthening the Macy's nameplate by putting the customer first, accelerating luxury growth across its Bloomingdale's and Bluemercury brands and simplifying and modernizing its operations, which includes streamlining order fulfillment.
"The Board fully supports A Bold New Chapter strategy, and we believe it provides the best opportunity for value creation," Varga said.
Is Macy’s stock a buy, sell or hold?
Wall Street is sitting on the sidelines when it comes to the consumer discretionary stock. According to S&P Global Market Intelligence, the average analyst target price for M stock is $21.35, representing implied upside of more than 28% to current levels. Meanwhile, the consensus recommendation is a Hold.
Financial services firm UBS Global Research is one of the most bearish outfits on Macy's stock with a Sell rating and $10 price target.
"Macy's noted its consumer is still under pressure, driving higher credit balances and more value-oriented purchasing," UBS analyst Jay Sole said in a May 22 note. "Our view is the macro environment will continue to be tough on the consumer in the near-term and Macy's will continue to lose market share to rivals. Macy's continues to face challenges vs peers around price, product, and service, in our view. We expect earnings per share misses to continue to weaken sentiment and drive the share price lower.”
UBS' $10 price target represents a discount of nearly 40% to current levels.
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