Saks Fifth Avenue and Lord & Taylor parent Hudson’s Bay has approached Macy’s about a possible takeover, according to a report from The Wall Street Journal.
Talks between the companies are preliminary and there is no guarantee they will lead to a deal, the report said. Neither retailer has commented on a potential merger.
Shares of Macy’s, which had a market value of about $9.4 billion as of market close on Feb. 2, surged more than 10% in morning trading in response to the report.
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The two companies also are exploring other ways to cooperate outside of a merger, including Hudson’s Bay taking on some of Macy’s real estate portfolio, which activist investor Starboard Value says could be worth as much as $21 billion.
Macy’s would be a challenge for Hudson’s Bay to absorb. While Macy’s market capitalization is nearly $10 billion, Hudson’s Bay’s is only a fraction of that at $1.7 billion. Additionally, Macy’s carries debt of approximately $7.5 billion.
Macy’s has been the poster child for the poor performances that have plagued department stores: shrinking sales and diminished foot traffic due to competition from e-Commerce players and the growth of nimbler omnichannel specialty apparel brands. Macy’s had been the hardest hit, announcing in January that it was cutting 10,000 jobs and closing 68 stores. These moves are estimated to generate annual expense savings of approximately $550 million beginning in 2017.
The closures follow a rough holiday season for the department store. In January, Macy’s slashed its earnings forecast after reporting that comparable sales fell 2.1% in the holiday period of November and December 2016.
