Reports surfaced late last week that the venerable – though struggling – Macy's brand has been talking with a suitor – Hudson's Bay Co. of Canada, which owns the Saks Fifth Avenue and Lord & Taylor chains.
Speculation continued this week that the two are "talking," according to several sources, including Wall Street analysts and retail consultants.
A Macy's spokeswoman declined to comment, and calls to Hudson's Bay were not successful Thursday.
Observers say such a takeover would be akin to David acquiring Goliath. Macy's is far larger, with a market value of $13.4 billion compared with $1.4 billion (in U.S. dollars) for Hudson's Bay.
The motivation may be what Macy's sits on: prime real estate of several hundred stores. Some say Hudson's Bay could finance the deal by selling off large chunks of this valuable land, add a marquee name to its portfolio, and take out the strongest competitor to its Saks Fifth Avenue and Lord & Taylor brands.
Department stores such as Macy's have lost a lot of customers to digital shopping (Sears Holdings Corp. is closing 108 more Kmarts).
Macy's announced last month that it was closing 68 more stores this year – including four in the Philadelphia region: the Macy's at Plymouth Meeting, Moorestown, and Neshaminy Malls and the one at Voorhees Town Center. This new wave of shutterings comes on top of the 38 Macy's that closed last year.
Last year, juggernaut Amazon began selling women's fashion – long the staple of department stores.
And not least, Macy's has a debt load estimated at $7.5 billion, and announced cost-cutting measures throughout the chain last month.
"This probably has more to do with [Macy's] depressed stock price and the Canadians smelling an opportunity," said Garrick Brown, vice president, retail research of the Americas for Cushman & Wakefield. "Theoretically, consolidation would allow them to have better buying power, better negotiation power, and allow them to dump redundant jobs, which will also save money."
But consultant Jeff Green, who counsels retailers on long-term strategy, isn't convinced that the two are the right fit.
"Young folks are looking for great experiences in addition to great products," he said. "Macy's hasn't figured out how to do this, and Hudson's Bay's Saks Fifth Avenue and Lord & Taylor brands haven't been able to lure the younger customer to any great extent."
But whatever happens, Phoenix-based Green said there will be further hemorrhaging. "A huge number of Macy's closings ... may occur whether the acquisition or any acquisition takes place."
Brown at Cushman & Wakefield agrees.
"The days of dozens of retail concepts having 1,000 units or more spread across the U.S. selling the same thing in spaces that all look alike are over," Brown said. "In some cases, there will be survival plays -- two players getting together to be stronger -- and in other cases, it will be chains gobbling up other chains where they see value but think they can get a deal."
That may be Hudson's Bay's mind-set. Besides acquiring Saks Fifth Avenue and Lord & Taylor in the United States, it bought out Galeria Kaufhof in Germany.
"Hudson's Bay does have experience buying large department stores and utilizing their real estate assets," said Madeline Hurley, retail analyst for IBIS World Inc. in New York.
Hudson's Bay's MO is to use complicated financial structures and little cash in acquiring companies. When it went after Saks Fifth Avenue, it paid $2.4 billion for it in 2013, and a few years later, it took some of the Saks stores and used them in forming a real estate venture with powerhouse mall owner Simon Property Group. Simon Group, which owns King of Prussia Mall, got a 20 percent stake in the venture.
The partnership borrowed millions of dollars to pay off much of Hudson's Bay's debt from the Saks acquisition.
Many see it following the same playbook with Macy's, landing a much bigger player, and paying for it by forming a joint venture and selling off stores not worth keeping.
John Yozzo, managing director of corporate finance for FTI Consulting, said that while he is skeptical that a deal will happen, "I don't say never."
He said Macy's activist investor Starboard Value LP has been pressuring the Macy's board to monetize its real estate. And "there is always a real estate angle" to the companies Hudson's Bay buys.
The takeover talk "might grease the skids to accelerate Macy's real estate strategy," Yozzo said.
Macy's stock was trading at almost $72 a share at the end of July 2015.
On Thursday, the stock closed at $32.37. It had surged by as much as 12 percent to $34.37 last Friday when news broke. But it has hovered at around $32 since then.