Macy’s (M) is looking to turn over a new leaf, but a battle to take it private is growing and doubts linger on whether it can engineer a comeback with its current plans.

Tony Spring, freshly minted as CEO a month ago, acknowledges that the business needs to change.

"We are not going to leave Macy's as it is today. It's foolhardy to think that leaving the business as it exists today is a recipe for success in the future," Spring told Yahoo Finance.

Spring said the brand will "evolve," adjust its product offering, and integrate its physical and digital presence "thoughtfully," but do so "with the appropriate action, ... time, and support of our organization.”

One of its activist shareholders, private equity firm Arkhouse Management, isn't waiting for the results. After Macy's rejected its $5.8 billion bid with Brigade Capital Management in late January, the firm announced a new $6.6 billion bid on Sunday.

“We remain frustrated by the delay tactics adopted by Macy’s Board of Directors and its continued refusal to engage with our credible buyer group. Nonetheless, we are steadfast in our commitment to execute this transaction," Arkhouse said in the release.

Part of Arkhouse's continued pursuit of Macy's traces back to its belief that the company needs more fundamental changes to save its business.

A week ago, Macy's announced a growth strategy, dubbed “A Bold New Chapter,” which includes closing 150 underperforming locations to reinvest in the remaining 350 stores.

"A good number" of the closing stores are owned by the company, per Spring, which will allow Macy’s to tap into their real estate value. The strategy also includes improving its tech platform and opening a modest number of Bloomingdale’s, Bluemercury, and small-format Macy’s stores.

That plan does not go far enough, Arkhouse's managing partner Gavriel Kahane told Yahoo Finance.

“Incremental changes related to digital display systems, merchandising, or even store closures have been tried before and are unlikely to deliver any material value to shareholders,” Kahane said.

“They have their eye on marginal improvements. While they're focused there, their company is melting away,” added Kahane, who opined that Macy’s has "an executive team and board that is focused on, you know, the sprinkles and the cherry, as opposed to the bowl of ice cream, is a problem."

Arkhouse's new all-cash offer values Macy's at $24 per share, a 14.3% increase from its original proposal of $21 per share, and a 51.3% premium to Macy’s share price on Nov. 30, 2023. It's also a 33.3% premium to where Macy's shares closed on Friday after market close, at $18.01.

Macy's confirmed in a release that it received the proposal and will review it.

As of Friday's close, Macy’s stock has dropped 17% in the past year, compared to S&P 500’s 27% gain. It reported declines in both digital and same-store sales for Q4 in its latest earnings report. After the new bid announcement, Macy's shares shot up over 13.5% Monday.

Growing battle for Macy's future

Prior to the second offer, Kahane told Yahoo Finance the company had repeatedly engaged Macy's management on its first offer, which became public in early December. The firm discussed its financing sources in detail, and provided a letter and call with investment bank Jefferies to Macy's advisers.

But Arkhouse alleged that Macy's dragged its feet throughout the process, eventually leading it to put out a statement on Jan. 21 urging management to act. An hour later, Macy's publicly rejected its offer, citing concerns with Arkhouse’s financing.

Kahane claimed that Macy’s had said it didn’t have more questions regarding Arkhouse’s financing in the Jefferies call weeks prior to the rejection.

Spring, who has commented little on the unsolicited bids, said Macy’s team talked to over 60,000 customers to form its new strategy, and went through a seven-month review to determine which stores to close.

“I think the fact that we are focused on the customer, that we are focused on our colleagues, that we are making sure that we have the right content, and we are unlocking real estate value and we are increasing our dividends. I think that's what creates a much more compelling story about Macy's Inc.,” he said.

Kahane suggests its focus is to give shareholders a premium — via a buyout — then lean into the "iconic" retail brand and real estate.

Arkhouse has also started a proxy battle by nominating nine candidates to Macy's board of directors. The shareholder meeting date has yet to be announced.

Wall Street is in wait-and-see mode

Currently, Macy’s analyst ratings shake out to three Buys, nine Holds, and two Sells.

Citi analyst Paul Lejuez maintained his Neutral rating, but wrote in a note to clients that the new bid shows Arkhouse's conviction and that Macy's "is likely to more seriously consider the offer."

Others on the Street aren't sold on Macy's management's vision.

"There's a lot of skepticism around Macy's capability to deliver [on the growth plan] ... Without seeing it in physical, cold, hard evidence, I think the jury's still out as to whether Macy's actually is going to make all these changes and whether they're going to be successful," GlobalData’s managing director of retail Neil Saunders told Yahoo Finance over the phone.

UBS analyst Jay Sole reiterated his Sell rating as he expects losses to continue.

In a recent note to clients, he wrote, “We are not yet convinced this new plan will solve challenges versus peers around price, product, and service."

Morningstar analyst David Swartz holds a Buy rating on shares but acknowledges there are issues with the business.

"There has to be some concern, though, that the company just keeps getting smaller, the revenues going lower every year, closing 150 stores runs the risk of losing customers that may never come back. So it's unclear that there's really any growth plan in Macy's at all," said Swartz.

Yet there is "real value at Macy's" as the country’s largest department store chain, with major brands like Ralph Lauren, Tommy Hilfiger, and Calvin Klein that rely on the retailer and are invested in its success, added Swartz.

Macy’s will need to hustle more quickly in the face of e-commerce dominance by Amazon (AMZN) and Walmart (WMT).

Spring aims to make it "easier to shop digitally and physically" at Macy's, but Forrester analyst Sucharita Kodali told Yahoo Finance Live that declining digital sales, down 4% year over year in Q4, suggest the company is losing market share in that segment.

However, both Spring and Kahane insist that Macy’s isn’t heading the way of Sears.

“This is not a franchise that is distressed. It's a franchise that just needs to be modernized,” said Spring, who highlighted that Macy’s has “over a billion dollars of cash on the balance sheet with some of the best stores in the country.”

Kahane said Arkhouse isn’t just in it for the real estate, even though department store retail is “a troubled space.”

“But it should be growing market share in that troubled space,” he said. “There are a lot of companies that thrive in industries [or] sectors that have secular headwinds in them.”

—

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance