A reported overture by Saks Fifth Avenue’s parent to take over Macy’s Inc underscores how further consolidation might be needed to revive the US department store sector amid drastic changes in the retail landscape and consumer behavior.
Macy’s shares soared in trading on Friday, after being temporarily halted on the New York Stock Exchange on a news report that Saks’ owner has approached the department store chain about a takeover.
The article, posted on the Wall Street Journal’s Web site, reported that Canadian chain Hudson’s Bay Co, which operates stores under Saks Fifth Avenue and Lord & Taylor as well its namesake, is in preliminary stages of discussion with Macy’s that also include a possible deal for the department store’s real estate. The report cites people familiar with the matter.
The potential deal would come as Hudson’s Bay has been on an acquisition binge for the past several years. However, Macy’s has been shuttering stores as it tries to become more nimble and compete better with online rivals such as online leader Amazon.com Inc.
It said earlier last month that it would close 68 stores after shuttering about 100 last year.
It has also been under pressure to sell some of its valuable real estate.
The reported talks come as Macy’s faces pressure to turn its business around after struggling with a string of quarters of sluggish sales amid stiffer competition and shoppers’ shift away from buying clothing and investing more into experiences such as spas and sprucing up their homes. It seems that Macy’s efforts to offer more exclusive merchandise, boost online investment and test new concepts such as an off-price chain have not been enough to turn around its business.
Both Macy’s and Hudson’s Bay declined to comment.
Macy’s had been a stellar performer after the 2008 financial crisis, but has seen sales growth slow in the past two years as it and other traditional department store chains face competition from online and off-price rivals. Both J.C. Penney and Kohl’s are also trying to reinvent themselves.
Mortimer Singer, CEO of Traub, a retail consulting firm, said that a consolidation would help give both operators more staying power and leverage with their own brands, which are increasingly gaining more control as they open their own stores and sell their products online.
This year, there will be a lot of “musical chairs” in the industry, he said.
Macy’s shares rose more than 6 percent, or US$1.89, to US$32.61 on Friday.
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