People walk past Macy’s Herald Square flagship store on November 29, 2024 in New York City.
David Dee Delgado | Getty Images
Activist investor Barrington Capital disclosed on Monday that it holds a position. Macy’s They are asking the company to cut spending, consider selling its luxury brands and take a hard look at its real estate portfolio.
This is the fourth such effort by activists at the struggling department store in the past decade.
Macy’s stock rose about 3% in premarket trading on the news. According to Barrington’s presentation, the activist is partnering with private equity firm Thor Equities in the push. The two investors did not disclose their investment amounts.
The activist said he believed Macy’s could reduce inventory and merchandising costs, according to slide decks provided by the company. Barrington said in his presentation that while the business continues to generate cash, management has chosen to spend nearly $10 billion on capital expenditures, ignoring stock buybacks and dividends.
Macy’s stock has underperformed the S&P 500 and the Retail Select Index over the past decade.
In a statement Monday, Macy’s backed its plan to close the struggling namesake store and invest in stronger parts of its business.
“We remain confident in our bold new chapter strategy,” Macy’s said in a statement. “We look forward to engaging with our shareholders, including Mr. Barrington and Mr. So.”
In February, the department store operator announced that it would close about 150 stores, or about one-third of its stores with the same name, by early 2027. The company plans to invest in its remaining 350 stores, as well as a more powerful chain of luxury department stores. Bloomingdale’s and beauty retailer Bluemercury.
Mr. Barrington has called on Macy’s to step up stock buybacks and consider selling its Bluemercury and Bloomingdale’s brands.
Barrington, like other activists before him, believes Macy’s should reevaluate its real estate portfolio. Barrington pegs the value at $5 billion to $9 billion, similar to analyzes conducted by other activist investors. Barrington said Macy’s should form a separate subsidiary, which could potentially charge rent to Macy’s parent company while the subsidiary’s management evaluates how to maximize value from these assets. He said there is.
Barrington pointed to small department store owners. Dillard’swhere he also criticized management as an example of effective capital allocation. Dillard’s has a market capitalization of more than $7 billion and operates 273 stores in the United States.
Macy’s is once again the target of activists as sales at its namesake stores decline and it continues to close many of its mall anchors.
Macy’s said its sales for the most recent quarter ended Nov. 2 fell 2.4% to $4.74 billion. Like-for-like sales for proprietary and licensed businesses and online marketplaces decreased 1.3%.
Macy’s has postponed reporting its full results for the quarter as it faces scrutiny for other reasons. The company announced that it is investigating after discovering that an employee intentionally hid up to $154 million in shipping costs in its accounting books over a period of about three years. The company said it plans to share complete results and outlook by Dec. 11.
Selling real estate as Macy’s stores close could free up cash that can be used for operations. Macy’s owns many anchor stores in malls, but it has not disclosed which stores sold the products. The company announced in late November that gains on asset sales totaled $66 million in the most recent quarter, exceeding expectations.
In recent quarters, Macy’s has begun reporting sales results for stores that remain open after closing the latest round of namesake stores. This will exclude some struggling mall stores. For Macy’s stores that remain open beyond the beginning of 2027, comparable sales on an owned-plus-license basis, including third-party markets, decreased 0.9%.
Mr. Barrington has also developed campaigns for other major consumer companies, including Mattel, The Children’s Place, Hanes and Steve Madden. Thor Equities is a retail-focused private equity firm that was part of the buyout group that acquired Hurley several years ago.
Correction: A previous version of this article misspelled the name of the private equity firm with which Barington Capital is affiliated. This is Thor Equity.
