Activist Investor Pushes Macy's To Create Real Estate Subsidiary As Stock Falters
Macy’s is being pushed to create a real estate division within the company amid other changes designed to pull its stock out of a slump.
Activist investor Barington Capital Group teamed with property owner Thor Equities to urge changes designed to improve shareholder value, The Wall Street Journal reported.
The investors said Macy’s real estate holdings are worth more than the company’s present market value. Creating a specialized subsidiary could increase the value of the company’s real estate holdings beyond the current estimate of between $5B and $9B, according to the investors’ presentation to Macy’s shareholders published Monday.
“Macy’s owns valuable and well-located real estate assets — led by its flagship property at Herald Square in New York City,” Thor Chairman Joseph Sitt said in a statement. “In our opinion, Macy’s board should create a separate real estate subsidiary to collect market rents from Macy’s retail operations and pursue other asset sale and redevelopment opportunities.”
Sitt has extensive experience in the retail sector and has worked with Barington Chairman James Mitarotonda on different ventures since the 1980s. The size of the investors’ stake in the company wasn’t disclosed, but Barington and Thor are also seeking representation on Macy’s board.
Macy’s stock has dropped around 70% over the last decade. It was at $16.43 Friday, down 18% for the year. Following the investors’ announcement Monday, Macy’s shares rose to $16.70 as of 1:30 p.m. ET. The company’s market value is around $4.6B.
The investors also said Macy’s-owned luxury chains Bloomingdale’s and Bluemercury could fare better on the stock exchange on their own.
While Macy’s capital expenditures are around 4%, Barington and Thor recommended cutting that back to between 1.5% and 2% of total sales and buying back up to $3B in stock by the end of 2027.
“We see an opportunity here where there is significant hidden value in the business,” Thor Equities senior investment analyst Shrey Patel told Bisnow. “We think [Macy's] management is doing some interesting things, and we are optimistic. But we are also mindful that there is potential for wasteful capital spending that we want to ensure is not going to happen as shareholders. We want to leverage our expertise to help maximize that value.”
All that could help elevate Macy’s stock up to 200% in that time frame, according to the presentation.
Macy’s officials told the WSJ that they are confident in the company’s strategy but look forward to working with their shareholders, including Barington and Thor.
The department store giant added two new directors to its board earlier this year as it evaded a takeover bid that would have taken the company private. Arkhouse Management and Brigade Capital Management made an offer of around $6.9B to buy the company, but Macy’s ultimately ended talks with the companies in July.
The retailer announced a plan earlier this year to close 150 stores nationwide over the next three years to improve its bottom line. In January, the company said it would shrink its workforce by 3.5%, laying off 2,350 employees.
