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Macy’s Makeover: Activists Call for Real Estate Spin-Off and Bold Overhaul

Activist investors are shaking up Macy’s (M), pushing for a real estate unit and strategic pivots to unlock billions in value.

Author

Evelio Silvera
December 10, 2024

Why it Matters

Activist investors are shaking up Macy’s (M), pushing for a real estate unit and strategic pivots to unlock billions in value. For investors, this could signal a major shift in the retail giant’s trajectory—if the board takes the bait.

Zoom Out

Macy’s has had a rough year, with shares tumbling 12% year-to-date and a new earnings delay due to an internal accounting misstep. But activist investor Barington Capital Group and real estate heavyweight Thor Equities see untapped potential.

Their proposal: spin off Macy’s flagship real estate into a subsidiary to collect market rents and monetize high-value properties, like the Herald Square flagship valued between $5 billion and $9 billion. The plan also calls for slashing capital expenditures and repurchasing up to $3 billion in stock over three years.

The upside? Barington claims these changes could yield a 150%-200% total return for shareholders. But Macy’s history of resisting buyout offers and activist pressure suggests a tough road ahead.

Key Deep Dive Insights

  • Real Estate Play: A separate real estate unit could unlock value trapped in underutilized assets. Similar moves by peers have proven lucrative.

  • Cost Cuts: Reducing capital spending to 2% of sales from 4% could free up cash for growth and shareholder returns.

  • Share Buybacks: A robust repurchase program could lift earnings per share and attract bullish momentum.

Market Pulse

"We see Macy’s as a hidden gem with underappreciated assets and significant upside for proactive shareholders," said Joseph Sitt, chairman of Thor Equities.

The Bull’s Take

Macy’s transformation won’t happen overnight, but activist pressure is a bullish catalyst for change. The real estate spin-off could set the stage for a revival, making Macy’s a high-reward play for value hunters.

Keep an eye on Macy’s earnings call this week. If the board signals openness to activist proposals, consider a long position while shares trade near multi-year lows.