Macy’s A 2017 Takeout Target?

Could Macy’s be a takeout target this year?

One analyst, writing for theStreet.com, thinks so. Headed into the end of the year, Brian Sozzi wrote that Macy’s could indeed prove tempting to none other than off-price retail firm Ross Stores. The tie-up might have once been “unthinkable,” he said, but may indeed be plausible. And the deal would bring Ross and the Macy’s and Bloomingdale marquee names under one umbrella.

Part of the lure may rest with Macy’s locations in major U.S. cities. Macy’s has also struggled, with its stock showing relative underperformance last year, while conversely Ross Stores shares were up 25 percent, far more than the mid-teen percentage gains of the broader markets. The market cap and capita structure for Ross are also relatively stronger (and healthier) for Ross than for Macy’s. Sozzi noted that Ross carries relatively little debt, which should help digest an acquisition.

Strategically speaking, said Sozzi, the deal might make sense. Macy’s has been relatively a late entrant into the off-price retail arena with its Backstage locations, which debuted only last year. The tie up, he continued, would mean that Macy’s could also gain entrée to the more than 1,300 stores operating across 36 U.S. states.