Macy’s rallies after activists provide shareholder value recommendations

Barington Capital and Thor Equities, who are shareholders of Macy’s (M), earlier today published a presentation recommending that Macy’s make changes to its capital allocation strategy and consider other structural actions to improve shareholder value. “Due to long-term challenges in the department store sector and previous management missteps, Macy’s valuation has suffered markedly over the past decade with its shares down approximately 70%. Despite numerous attempts at implementing strategic plans under multiple leadership teams to overhaul Macy’s value proposition, the one constant of all these ineffective actions has been Macy’s reliance on spending enormous amounts of the Company’s cash flows on capital expenditure projects…Barington and Thor propose that Macy’s consider the following recommendations to improve shareholder value: Reduce capital expenditures to 1.5%-2% of total sales from ~4% currently; Repurchase a minimum of $2-$3 billion in stock over the next three years; Create a separate internal real estate subsidiary to optimize the return potential of the Company’s valuable owned real estate assets; Evaluate strategic alternatives for the Company’s higher growth Bloomingdale’s and Bluemercury luxury operations; and add Barington and Thor representatives to the Macy’s board.” Shares of Macy’s are up 4% to $17.09 in early trading.