Shares of Macy’s (M) gained in trading on Monday as activist investors Barington Capital and Thor Equities called on Macy’s to reevaluate its strategy. These investors have urged the retailer to create a real estate unit and explore options for its Bloomingdale’s and Bluemercury chains. The group recently built a stake in the retailer but has not disclosed its size. This news was first reported by The Wall Street Journal on Monday.
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Activist Investors Recommend Macy’s to Capitalize on Real Estate Assets
According to the investors, Macy’s board lacks the “knowledge, vision, and desire” to fully capitalize on its real estate assets, estimated to be worth between $5 billion and $9 billion. They also urged the company to halve its capital expenditure and proposed adding their representatives to the board.
The group attributed Macy’s declining valuation over the past decade to “management missteps” and sector challenges. However, they noted promising sales at the retailer’s high-end Bloomingdale’s and Bluemercury stores compared to Macy’s core brand, suggesting untapped growth potential.
Additionally, the investors recommended that Macy’s “aggressively” repurchase up to $3 billion worth of stock over the next three years.
The investors also expressed optimism about the company’s CEO Tony Spring’s turnaround plan. Since taking charge earlier this year, Spring has outlined a strategy to save $100 million in costs this year by closing about 150 stores by 2026, while opening between 15 and 30 Bloomingdale’s and Bluemercury stores.
Macy’s Responds to the Activist Investors
In response, Macy’s stated it remains “open-minded” to strategic reviews and is willing to engage with the activist group. Earlier this year, Macy’s ended talks with Arkhouse Management and Brigade Capital Management regarding a potential take-private bid from the investor group.
Shares of the retailer fell more than 10% over the past year as the company delayed its Q3 results to December 11 amid an accounting scandal.
Is Macy’s Stock a Buy or Sell?
Analysts remain sidelined about Macy’s stock, with a Hold consensus rating based on one Buy and seven Holds. The average M price target of $17.33 implies an upside potential of around 1.5% from current levels.
