Macy’s New Activist Wants Retailer to Create Real Estate Arm

Another activist investor is urging Macy’s Inc. to take drastic steps to boost its stock price.

Barington Capital Group is calling on Macy’s to cut its capital expenditures, form a separate real estate group and consider strategic alternatives for the Bloomingdale’s and Bluemercury chains in order to drive share gains, according to a presentation that was published on its website.

While Barington sees “early promise” in the chain’s plan to shut underperforming stores, the activist investors want additional cost reductions “for a healthier store base that can begin to deliver consistent revenue growth and profit improvements,” the group, which includes Thor Equities LLC, wrote in a statement.

Through Friday, Macy’s shares had fallen nearly 15 percent since the department store retailer announced its turnaround plan in February. The stock climbed 3.9 percent on Monday.

Barington didn’t disclose the size of its stake.

Macy’s said in a statement that its board and management remain confident in its strategy, which “continues to gain traction.” The department store chain looks “forward to engaging” with the investors.

The retailer has been challenged by the shift to e-commerce, which has pulled shoppers away from malls and physical department stores. It aims to close 150 Macy’s locations through 2026, while expanding its higher end Bloomingdale’s and Bluemercury stores, among other steps.

The company also disclosed in November that it is investigating a plot in which a worker hid millions in expenses. The discovery led Macy’s to delay reporting its quarterly earnings, which the company says it will announce by Dec. 11.

In its presentation, Barington said Macy’s should form a real estate subsidiary, which would include all of the company’s owned and leased properties, including its stores and distribution centers. The retailer would then pay rent to the subsidiary.

The group said it estimates that Macy’s real estate, including its flagship property at Herald Square in Manhattan, is worth between $5 billion and $9 billion.

Barington is urging Macy’s to cut its spending to between 1.5 percent and 2 percent of sales, down from 4 percent currently, and buy back as much as $3 billion in stock over the next three years.

Macy’s and its new chief executive officer, Tony Spring, faced an activist challenge earlier this year. Macy’s ended talks with Arkhouse Management Co. and Brigade Capital Management in July and pledged to execute its own turnaround plan.

By Gowri Gurumurthy and Will Kubzansky.

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