Eugene Gologursky for Macy’s / Getty Images
The Key Takeaways
- Barington Capital Group and Thor Equities called on Macy's to create a real estate subsidiary and limit its capital expenditures.
- Investors who are activists say that the Real Estate arm of the company could charge stores rent and sell property.
- Shares of Macy's rose more than 2% intraday Monday after the activist group presented its plans.
Macy’s shares (M) rose by more than 2 percent intraday on Monday, after activists released a plan to transform the retailer. The proposal included creating a subsidiary for real estate and reducing capital expenditures.
Barington Capital Group (an activist investment group) and Thor Equities (a real estate investing company) collaborated to create the proposal. It supported the plan of Chief Executive Officer Tony Spring, who wants to shut down many Macy’s that are underperforming. They asked the company to set up a division to handle property sales, redevelopments, as well as charging rent to Macy’s.
"Macy's owns valuable and well-located real estate assets—led by its flagship property at Herald Square in New York City—that we believe are worth between $5-$9 billion," Thor chairman Joseph Sitt said.
Activists Call for Buybacks, Potentially Spinning Off Bloomingdale's, Bluemercury
The activists also are calling for reducing capital expenditures to 1.5%-2% of sales from the current level of about 4%; buying back "a minimum of $2-$3 billion in stock over the next three years"; and potentially spinning off Macy's higher-growth Bloomingdale's and Bluemercury luxury brands. The group, which also seeks seats on Macy's board, claimed its plan could bolster returns by 150% to 200% over the next three years.
Macy's leaders released a statement expressing confidence in its plans and committed to engaging with Barington, Thor, and other shareholders.
"The Macy's, Inc. Board of Directors and management team are committed to delivering sustainable, profitable growth and driving shareholder value," the company said.
Barington & Thor say Macy’s stock, down 16% in this year alone, has lost value significantly over the past 10 years as the department store industry struggled, and Macy’s embarked upon ambitious capital project. Macy’s caught the interest of activists, such as Arkhouse Management or Brigade Capital Management. Both companies unsuccessfully made an attempt to acquire it in early this year.
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