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An activist hedge fund has called on Macy’s to hive off real estate properties including its Manhattan flagship store and take other measures to revive the flagging share price of the US department store chain.
The broadside from Barington Capital Group and real estate investment partner Thor Equities is the latest activist involvement at Macy’s, a 194-year-old company. The two firms did not disclose the size of their stakes in Macy’s, which had a market value of $4.5bn as of Friday.
Estimating that Macy’s real estate assets are worth between $5bn and $9bn, the investor group urged Macy’s board to create a separate subsidiary to collect rent from Macy’s retail operations and sell or redevelop some properties.
They also asked Macy’s to cut capital spending, buy back more stock, explore the sale of its Bloomingdale’s and Bluemercury store banners and appoint representatives of Barington and Thor to the company’s board.
“We invested in Macy’s because we believe the shares are mispriced relative to the upside potential we see in management’s new strategic plan and the compelling value of the company’s owned real estate assets,” said James Mitarotonda, Barington’s chair. “However, we are concerned with Macy’s large capital expenditure programmes.”
Macy’s sales have faltered as big-box stores such as Walmart and ecommerce grab business from mall-based department stores. The company’s shares have risen about 6 per cent over the past five years, while the broader US stock market has nearly doubled. They gained 4 per cent in New York trading after Barington and Thor disclosed their campaign on Monday.
Last month, Macy’s delayed the release of its full quarterly results after revealing that an employee had hidden as much as $154mn in expenses related to customer deliveries. The company has said it intends to provide the results by this Wednesday.
The company hired Tony Spring as a new chief executive in February. He has undertaken a plan that includes closing 150 underperforming Macy’s stores, investing in 350 others, expanding the footprint of its luxury Bloomingdale’s and Bluemercury stores and accelerating efficiency measures.
In July, Macy’s ended discussions with investors Arkhouse Management and Brigade Capital Management over a proposal to take the company private. Activist investor Starboard Value in 2016 called on the retailer to spin off its real estate portfolio, while Jana Partners in 2021 urged a spin-off of its digital commerce business.
As of the beginning of its fiscal year, Macy’s had 718 stores, of which 286 were wholly owned by the company — including its mammoth department store on Herald Square in New York City, which also serves as company headquarters.
“We have consistently demonstrated open-mindedness, including with respect to regularly reviewing the company’s strategy and capital allocation framework and exploring all paths to enhance value,” Macy’s said on Monday.
Additional reporting by Maria Heeter
