Shareholders Barington Capital and Thor Equities on Monday urged the department store chain to cut capital expenditures and explore strategic alternatives for its Bloomingdale's and Bluemercury chains. The investors advocated for a reduction in capital expenditures by 1.5% to 2% of total sales from the current 4%, as well as a minimum stock repurchase of $2 billion to $3 billion over the next three years.
They are also pushing for Barington and Thor representatives to be added to Macy's board. The call was made to evaluate strategic reviews for the “higher-growth” Bloomingdale's and Bluemercury operations, as expressed in a statement. "Bloomingdale's and Bluemercury have attractive growth prospects that we believe are being stunted by the Macy's nameplate turnaround," a presentation prepared by the investors revealed.
"We believe Macy's luxury operations would trade at a valuation well in excess of Macy's current multiple levels." Furthermore, the establishment of a separate internal real estate subsidiary could help Macy's maximize the value of its physical assets. Macy's owned real estate portfolio, including Herald Square in New York City, is valued between $5 billion and $9 billion, as indicated in the presentation. "Macy's board should create a separate real estate subsidiary to collect market rents from Macy's retail operations and pursue other asset sale and redevelopment opportunities," stated Thor Chairman Joseph Sitt. These proposed changes could yield a projected return of 150% to 200% on Macy's shares over the next three years, as highlighted by the investors in their presentation.
Macy's shares climbed 2.7% on Monday. "We invested in Macy's because we believe the shares are mispriced relative to the upside potential we see in management's new strategic plan and the compelling value of the company's owned real estate assets," remarked Barington Chairman James Mitarotonda. "However, we are concerned with Macy's large capital expenditure programs." In a separate response, Macy's expressed confidence in its strategy disclosed earlier this year, stating its eagerness to engage with shareholders, including Barington and Thor. "We have consistently demonstrated open-mindedness, including with regard to regularly reviewing the company's strategy and capital allocation framework and exploring all paths to enhance value," Macy's stated..