Shares of Macy's, Inc. M sharply declined 11.7% during the trading session on Jul 15, 2024, following the announcement of the termination of discussions with Arkhouse Management Co. LP and Brigade Capital Management, LP, regarding a potential acquisition. The seven-month engagement and thorough due diligence process revealed that the proposal lacked financing certainty and did not offer sufficient value.
Macy's had been in discussions with Arkhouse and Brigade since December 2023. A confidentiality agreement was signed in March 2024 to facilitate due diligence after an initial proposal of $21 per share was increased to $24 per share, with the potential for an increase. Macy’s invested significant time and resources, addressing extensive diligence requests from Arkhouse and Brigade, including providing detailed financial documents and allowing contact with financing sources.
In May 2024, Macy’s and the interested parties agreed on a timetable for delivering a fully financed and actionable proposal by Jun 25, 2024. However, on Jun 26, 2024, Arkhouse and Brigade submitted a "check in" letter with a proposal of $24.80 per share, which Macy’s board did not find compelling.
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Focus on "A Bold New Chapter" Strategy
The Macy’s board unanimously decided to terminate discussions, citing significant uncertainty in financing, less compelling value and the distraction from executing the company’s strategic plan. M will now focus on its "A Bold New Chapter" strategy, aimed at enhancing shareholder value through strengthening the Macy’s brand, accelerating luxury growth and modernizing operations. The strategy has shown early signs of success, particularly in the First 50 Macy’s nameplate stores.
Bank of America Securities and Wells Fargo Securities are acting as financial advisors, and Wachtell, Lipton, Rosen & Katz is serving as Macy’s legal advisor. M, which currently flaunts Zacks Rank #1 (Strong Buy), will continue to update stakeholders on the progress of its strategic initiatives in its second-quarter 2024 earnings report.
Estimate Trend
The positive sentiment surrounding Macy's is reflected in the upward revisions of the Zacks Consensus Estimate for earnings per share. Over the past 30 days, analysts have increased earnings estimates for the current fiscal year by 24 cents. The consensus estimate is pegged at $2.79 per share. The estimate for the next fiscal year has also been raised by 24 cents to $2.80 per share.
The company has seen its shares rise 5.8% in the past year compared with the Retail – Regional Department Stores industry’s 10.8% growth.
Three Other Solid Picks
Some other top-ranked stocks in the retail space are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Urban Outfitters Inc. URBN.
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s fiscal 2024 earnings and sales indicates growth of 21.7% and 0.2%, respectively, from the fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last reported quarter.
The consensus estimate for Abercrombie’s fiscal 2024 earnings and sales indicates growth of 47.3% and 10.4%, respectively, from the fiscal 2023 reported levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor, and gift products. It currently has a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2024 earnings and sales indicates growth of 9.9% and 5.8%, respectively, from the year-ago actual. URBN has a trailing four-quarter average earnings surprise of 16.9%.
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Macy's, Inc. (M) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
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