- Activist investors Barington Capital and Thor Equities want Macy’s to create a real estate subsidiary to manage its owned and leased properties, estimating its value at $9B.
- Proposals to drive efficiency include reducing capital expenditures, selling higher-end chains like Bloomingdale’s and Bluemercury, and introducing rent payments for flagship properties.
- Macy’s executives face pressure to balance real estate opportunities with maintaining a discount-focused brand that resonates with core customers.
Barington Capital Group and Thor Equities LLC are urging Macy’s (M) to unlock untapped real estate value by forming a subsidiary to manage its commercial properties.
This unit would oversee stores, distribution centers, and other holdings, with Macy’s paying rent to the entity, according to Bloomberg.
From The Horse’s Mouth
Thor’s chairman, Joseph Sitt, argues that this structure would improve space use, particularly for flagship locations like Macy’s Herald Square in Manhattan.
“They don’t need a building that big,” Sitt said, suggesting Macy’s could benefit financially by renting portions of the property.
Spending Cuts And Spinoffs
The activist group also recommends:
- Cutting capital expenditures from 4% of sales to 1.5–2%.
- Spinning off higher-end brands Bloomingdale’s and Bluemercury, have outperformed the Macy’s nameplate in recent quarters.
- Executing a $3B stock buyback over the next 3 years.
Barington Capital Chairman James Mitarotonda criticized Macy’s historical spending, noting that $9.7B in capital expenditures since 2014 has failed to deliver real value, with Macy’s market capitalization plummeting by $15B in the same period.
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Compared to Dillard
Barington and Thor pointed to Dillard’s Inc. (DDS) as a model for strategic transformation. However, analysts warn that Macy’s broader scale and reliance on promotions present challenges in replicating Dillard’s high-margin, low-discount approach.
“Why customers love Macy’s is because of the promotions,” said Bloomberg Intelligence analyst Mary Ross Gilbert. Pivoting away from discounts could risk alienating core customers.
Turnaround Strategy
Macy’s CEO Tony Spring, who took over in February, has focused on a turnaround strategy that includes closing underperforming stores, expanding high-end brands, and cutting costs.
According to a statement, the company remains confident in its approach and committed to “delivering sustainable, profitable growth and driving shareholder value. “
Broader Challenges
Macy’s faces additional hurdles, including an investigation into a scheme involving hidden expenses, which delayed its quarterly earnings report.
While its shares rose 1.3% Monday following activist interest, they remain down nearly 15% since the February turnaround announcement.
As the struggling retailer navigates pressure from activists and market challenges, its ability to balance operational adjustments with unlocking real estate value will be critical in driving future growth and shareholder returns.
