People walk past the Macy's Herald Square flagship store on November 29, 2024 in New York City.
David Dee Delgado | Getty Images
Activist investor Barington Capital announced on Monday that it had a position in Macy's and wanted the company to make cuts, consider selling its luxury brands and review its real estate portfolio.
It is the fourth action by activists against the troubled department store in the past ten years.
Shares of Macy's rose about 3% after the news in premarket trading. According to a presentation by Barington, the activist is working with private equity firm Thor Equities. The dissidents have not disclosed the extent of their stake.
The activist believes that Macy's can save more on inventory, sales and administrative costs. Barington said in his presentation that while the company continues to generate cash, management has chosen to spend nearly $10 billion on capital expenditures while neglecting buybacks or dividends.
Macy's stock has underperformed the S&P 500 and Retail Select indexes over the past decade. Barington pointed to smaller department store operator Dillard's, which also faced management challenges, as an example of effective capital allocation. Dillard's has a market capitalization of more than $7 billion and operates 273 stores in the U.S.
“We remain confident in our Bold New Chapter strategy,” Macy's said in a statement. “We look forward to engaging with our shareholders, including Barington and Thor.”
Barington wants Macy's to step up its buyback activity and assess whether it should sell its better-performing Bluemercury and Bloomingdale's brands.
Barington, like other activists who came before her, believes that Macy's needs to take a fresh look at its real estate portfolio. Barington estimates this at somewhere between $5 billion and $9 billion, echoing analyzes from other activist investors. Barington said Macy's would have to create a separate subsidiary, which could in turn charge rent to Macy's parent company while the subsidiary's management would assess how to maximize value from those assets.
Macy's has again become a target of activists as sales at the company's namesake stores decline and many malls continue to close.
The department store operator announced in February that it would close about 150 – or almost a third – of its namesake stores by early 2027. It plans to invest in the approximately 350 locations that remain and invest in its stronger chain, higher-end department store stores. store Bloomingdale's and beauty store Bluemercury.
In its most recent quarter, which ended Nov. 2, Macy's said the company's revenue fell 2.4% to $4.74 billion. Comparable sales for the company's own and licensed businesses, plus the online marketplace, decreased by 1.3%.
Macy's has delayed announcing its full results for the quarter as it is under scrutiny for another reason. The company said it is investigating after discovering that an employee deliberately hid up to $154 million in delivery fees in his books for nearly three years. It said it plans to share full results and guidance by December 11.
Selling real estate as Macy's closes stores could free up cash for the company. Macy's owns many of its shopping centers but has not said which locations it has sold. In late November, the company said profits from asset sales in the most recent quarter totaled $66 million and exceeded expectations.
In recent quarters, Macy's has begun reporting the sales performance of stores that will remain open once it closes the latest round of namesake locations. That will help a number of shopping centers that are struggling. At Macy's stores that will remain open beyond early 2027, comparable sales declined 0.9% on an owned-plus-licensed basis, including the third-party marketplace.
Barington has launched campaigns with other major consumer names, including toymaker Mattel, The Children's Place, Hanes and Steve Madden. Thor Equities is a retail-focused private equity firm and was part of the buyout group that acquired Hurley several years ago.
Correction: An earlier version of this article misstated the private equity firm Barington Capital works with. They're Thor shares.
