Macy’s CEO Terry Lundgren, who will be stepping down in a few weeks, has his hands full. As per the NY Post, a board shakeup is threatening to taint his 13-year legacy and turn the largest national department store into a battlefield. In an unexpected twist, Lundgren, 65, has recently become open to potential offers from friendly buyers as a “proactive measure” to thwart the collapse of its unified board. He has also agreed to stay on as chairman. Reportedly, the contention is being stirred by Jeffrey Smith of Starboard Value, a New York hedge fund which invested in Macy’s in 2015. Smith is said to be dissatisfied with Macy’s poor performance.
Macy’s shares are down nearly 60 percent since his investment. In recent fourth quarter reports, Macy’s reported slow holiday sales, and lowered its profit targets. Starboard has said that Macy’s, which owns half of its 880 stores, has a real estate value of roughly $21 billion. The department store’s market cap is only $9 billion. Starboard is pushing the board to cash out with more sales of real estate. Smith is positioning himself to prepare for a possible proxy battle in advance of Macy’s annual meeting, in late April or May. With Jeff Gennette taking over as CEO, Lundgren is trying to assure Macy’s future, even if it means selling the company to keep it together.
“Over the past year, we have been focused and disciplined about making strategic decisions to position us to gain market share and return to growth over time,” said Lundgren. In his statement last month, he named 68 stores which will close this year. Macy’s will be cutting 10,000 jobs, and will ultimately close 100 stores. Wall Street has been excitedly speculating potential buyers for Macy’s.
A front runner for the acquisition would be Hudson’s Bay Company, the Toronto-based chain which purchased Saks Fifth Avenue and Lord & Taylor. Investors seemed to like this idea. Macy’s stock price jumped 7% higher on Friday, following The Wall Street Journal’s reported that Hudson's Bay has indeed begun preliminary discussions about acquiring Macy’s. Still, Hudson Bay’s financial limitations would require it to purchase Macy’s at a bargain price.
By: Helen Zaboulani