What Happened?

Shares of department store chain Macy’s (NYSE:M) fell 7.3% in the afternoon session after the company disclosed disappointing preliminary fourth-quarter results, projecting sales to fall just below the lower end of its earlier forecast of $7.8 billion to $8.0 billion. Notably, same-store sales are expected to remain flat compared to the previous year. In addition, earnings are expected to remain within the previous range of $1.40 to $1.65. Overall, the results were underwhelming, given the some high expectations for holiday season spending. However, Macy's wasn't the only one to report weak holiday demand, as Five Below and Abercrombie & Fitch also didn't see the success that the market expected.

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What The Market Is Telling Us

Macy’s shares are quite volatile and have had 16 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 11 months ago when the stock gained 18.5% on the news that the company announced it received a revised offer from Arkhouse Management and Brigade Capital to acquire all outstanding shares for $24.00 per share in cash they don't already own. The new offer is for $24 each, or $6.6 billion, up 14.3% from the $21/share offer announced in December 2023. The new offer represents a 33.3% premium to where Macy's shares closed on March 1, 2024. 

Gavriel Kahane and Jonathon Blackwell, Arkhouse Managing Partners, highlighted "frustration with Macy's Board of Directors' delay tactics and refusal to engage with their credible buyer group. They emphasized the shareholder concern evident in the stock price selloff following recent restructuring plans and a dividend hike announced by Macy's." 

Lastly, they reiterated their commitment to executing the transaction by increasing their offer to $24.00 per share in cash, citing "confidence in Macy's long-term prospects as a private company."

Macy's is down 10.7% since the beginning of the year, and at $14.80 per share, it is trading 31.3% below its 52-week high of $21.54 from March 2024. Investors who bought $1,000 worth of Macy’s shares 5 years ago would now be looking at an investment worth $827.46.

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