Macy's Stock Surges as Activist Investors Push for Real Estate Spin-Off
Activist investors urge Macy's to establish a real estate subsidiary, reduce capital expenditures, and explore strategic buybacks and brand spin-offs to enhance shareholder value.
Highlights
- Activist groups Barington Capital Group and Thor Equities propose Macy's form a dedicated real estate subsidiary and cut capital spending.
- The suggested real estate unit would manage property leases to stores and explore asset sales and redevelopment opportunities.
- Macy's shares climbed over 2% intraday following the announcement of these strategic recommendations.
Shares of Macy's (M) experienced a notable intraday increase exceeding 2% on Monday after activist investors unveiled a comprehensive plan aimed at revitalizing the retailer. Central to their proposal is the formation of a real estate subsidiary coupled with a reduction in capital expenditures.
Barington Capital Group, an activist investment firm, and Thor Equities, specializing in real estate investments, jointly presented the initiative supporting CEO Tony Spring's strategy to shutter underperforming Macy's locations. Their plan emphasizes leveraging Macy's valuable real estate portfolio by establishing a real estate arm tasked with property sales, redevelopment, and charging rent to Macy's stores.
"Macy's holds prime real estate assets, including its iconic Herald Square flagship in New York City, valued between $5 billion and $9 billion," stated Joseph Sitt, Chairman of Thor Equities.
Calls for Stock Buybacks and Potential Spin-Offs of Bloomingdale’s and Bluemercury
The activists also recommend slashing capital expenditures to between 1.5% and 2% of sales from the current approximate 4%, initiating stock repurchases totaling $2-$3 billion over three years, and contemplating spin-offs of Macy’s faster-growing luxury brands Bloomingdale’s and Bluemercury. They anticipate these measures could boost shareholder returns by 150% to 200% within three years.
Macy's management responded with confidence in their ongoing strategies and expressed willingness to collaborate with Barington, Thor, and other investors.
"The Board of Directors and management at Macy’s, Inc. remain dedicated to sustainable, profitable growth and enhancing shareholder value," the company affirmed.
Despite a more than 16% decline in shares this year and a decade-long struggle amid shifting retail landscapes and costly capital projects, Macy’s continues to attract activist investor attention. Notably, Arkhouse Management and Brigade Capital Management previously sought to acquire the company without success.
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