What happened
Shares of giant department store retailer Macy's (M 0.16%) had a good week, rising as much as 18.5% at one point, according to data from S&P Global Market Intelligence. It didn't hold on to all of that advance, however it was still higher by about 12% at the open of trading on Jan. 28. There was no news out of the company that would have precipitated the move, but there were some interesting developments around peer Kohl's (KSS 4.53%) and the positive mood there spread.
So what
At the start of the week news leaked that Kohl's had received two separate takeover offers. One offer was from an entity backed by hedge fund Starboard Value that valued Kohl's at $9 billion. The second offer was reportedly from private equity company Sycamore Partners, but the news leak here didn't include pricing. Regardless, it looks like Kohl's is "in play," as they say on Wall Street. This isn't the only news surrounding Kohl's recently, either, as it has been dealing with shareholder activists looking to boost near-term returns. The to-do lists offered by the dissidents invariably included selling the company. With a rumored offer now on the table, the stock moved sharply higher.
Image source: Getty Images.
And so did the shares of other struggling department store retailers, including Macy's. Investors often take one piece of information and try to find similar themes elsewhere. In this case it's pretty logical to conclude that if people are interested in taking Kohl's private, they might be interested in doing the same thing with an even more iconic retailer like Macy's, which owns its namesake brand as well as Bloomingdale's. Management has been trying for years to handle the shift toward online shopping, which has generally meant closing stores while building a digital business. That's a difficult process when you have to answer to shareholders every quarter, since the transition to a so-called omni-channel approach invariably involves a trade-off between current profits and potential future ones. Being able to work outside the scrutiny of Wall Street would probably be a welcome relief.
Now what
At this point all of this is just conjecture with regard to Macy's. In fact, even the Kohl's drama may end up being nothing in the end. Basically, investors should take the Kohl's news and what it may or may not mean for Macy's with a very big grain of salt. All in, for most investors, acquisition rumors aren't a good enough reason to buy Macy's.
