Macy’s is facing calls from a pair of activist investors to make a slew of changes at the department store chain.
The activist investors, Barington Capital Group and Thor Equities, took issue with Macy’s capital allocation strategy in a Monday presentation while simultaneously arguing the department store chain should consider some “structural actions” for its real estate and two more luxurious brands.
“We seek to be value-added stockholders at Macy’s that can bring fresh perspectives to the Company, especially in the areas of capital allocation, merchandising and retail, and real estate,” Barington’s James Mitarotonda and Thor’s Joseph Sitt said in a press release.
Mitarotonda and Sitt said they “believe that operating improvements at Macy’s, coupled with our recommendations for aggressive share repurchases and structural changes to the business, could lead to a 150% to 200% total return for Macy’s stockholders over the next three years.”
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The value of Macy’s shares has gone down more than 18% in the past 12 months.
While the firms expressed optimism about Macy’s previously announced “Bold New Chapter” initiative to shutter 150 unproductive Macy’s locations by 2026’s year-end, they argued the department store chain should trim its capital expenditures down to 1.5% to 2% of its total sales.
The “Bold New Chapter” initiative that Macy’s launched also includes investing in the Macy’s locations it will maintain, as well as opening more Bloomingdale’s and Bluemercury stores and “simplyfy[ing] and moderniz[ing] end-to-end operations.”
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| M | MACY’S INC. | 16.16 | +0.18 | +1.16% |
One of the “structural actions” that Barington and Thor suggested was forming a “separate real estate subsidiary to collect market rents from Macy’s retail operations and pursue other asset sale and redevelopment opportunities,” Sitt said. The activist investors estimated the department store chain’s real estate assets have a $5-$9 billion value.
In addition to that, Macy’s should look into “strategic alternatives” for its Bloomingdale’s and Bluemercury brands, the firms said, pointing to their “higher growth.”
MACY’S TO CLOSE 150 STORES BY 2026, OPEN NEW BLOOMINGDALE’S, BLUEMERCURY LOCATIONS
Macy’s operates nearly 60 Bloomingdale’s-branded locations and 164 Bluemercury-branded stores.
Another thing that Barington and Thor said Macy’s should pursue was a $2-$3 billion stock repurchase over the next three years.
The department store chain said Monday that it was “committed to delivering sustainable, profitable growth and driving shareholder value” and has “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 added that its “Bold New Chapter” initiative “continues to gain traction across all three of its pillars.”
“We will continue to act in the best interests of the Company and all Macy’s Inc. shareholders and we look forward to engaging with our shareholders, including Barington and Thor, as we further advance our initiatives and execute toward our long-term goals.”
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Barington and Thor want a presence on Macy’s board, according to their press release.
Macy’s board currently consists of 13 members: Emilie Arel, Torrence Boone, Marie Chandoha, Naveen Chopra, Richard Clark, Deirdre Connelly, Jill Granoff, Sara Levinson, Richard Markee, Douglas Sesle, Tony Spring, Paul Varga and Tracey Zhen.
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