Barington Capital Group Calls on Macy’s to Make Changes to Its Capital Allocation Plan to Improve Shareholder Value
Believes Macy’s Shares are Undervalued and Do Not Reflect the Upside Potential in its Strategic Plan or the Attractiveness of its Luxury Operations and Owned Real Estate Assets
Believes Macy’s Needs to Form a Separate Real Estate Subsidiary to Optimize the Value Potential of its Real Estate Portfolio
Believes Macy’s Needs to Significantly Reduce Capital Expenditures; After a Decade of Massive Spending Has Failed to Deliver Value Creation for Stockholders
Believes Macy’s Needs to Aggressively Repurchase its Shares, as its Stock Now Represents its Best Investment
Publishes Detailed Presentation on https://barington.com/macys
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
Earlier this year, Macy’s announced a new strategic plan, called “A Bold New Chapter,” under the leadership of the Company’s recently appointed CEO, Tony Spring. We see early promise in the new plan, as it calls for the closure of a significant number of very low productivity Macy’s nameplate locations. We believe this action, coupled with further cost reductions the Company plans to enact, will result in a healthier store base that can begin to deliver consistent revenue growth and profit improvements. Investors, not surprisingly, have failed to embrace the plan with Macy’s shares down approximately
James Mitarotonda, Chairman of Barington, said, “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. However, we are concerned with Macy’s large capital expenditure programs. Since FY:14, Macy’s has spent
While Macy’s may be proud of the fact it has returned
Barington believes Macy’s should look to its department store peer, Dillard’s, for a successful model in capital allocation. Mr. Mitarotonda continued, “Dillard’s has been executing a highly successful strategic plan focused on improving operating margins, prudently managing capital expenditures and aggressively returning capital to stockholders. Since FY:18, Dillard’s has paid out
Joseph Sitt, Chairman of Thor, stated, “Macy’s owns valuable and well-located real estate assets – led by its flagship property at Herald Square in
Macy’s is a highly cash generative business and we believe it could become even more so if the Company’s strategic plan proves successful. Barington and Thor are concerned that Macy’s cash could be misallocated in the future through wasteful and ineffective capital expenditure programs. In addition, we are concerned that Macy’s board lacks the knowledge, vision and desire to extract maximum value from its real estate assets.
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
in stock over the next three years;$2 -$3 billion - 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.
Mr. Mitarotonda and Mr. Sitt concluded, “We seek to be value-added stockholders at Macy’s that can bring fresh perspectives to the Company, especially in the areas of capital allocation, merchandising and retail, and real estate. We believe that operating improvements at Macy’s, coupled with our recommendations for aggressive share repurchases and structural changes to the business, could lead to a
Barington’s presentation on Macy’s is available at https://barington.com/macys
About Barington Capital Group, L.P.
Barington Capital Group, L.P. is a fundamental, value-oriented activist investment firm established by James Mitarotonda in January 2000. Barington invests in undervalued publicly traded companies that Barington believes can appreciate significantly in value when substantive improvements are made to their operations, corporate strategy, capital allocation and corporate governance. Barington’s investment team, advisors and network of industry experts draw upon their extensive strategic, operating and boardroom experience to assist companies in designing and implementing initiatives to improve long-term shareholder value.
About Thor Equities LLC
Thor Equities LLC is a leader in the development, leasing and management of industrial, laboratory, residential, office, hotel and mixed-use assets in premier urban locations worldwide. The company operates in major cities around the globe and has a property portfolio totaling
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1 Based on S&P Capital IQ as of 12/4/24. Total return calculations include the reinvestment of dividends.
2 Based on S&P Capital IQ as of 12/4/24. Enterprise value for EBITDA multiple excludes operating leases. NTM refers to next twelve months consensus mean estimate.
3 Based on Macy’s Forms 10-K and 10-Q and earnings presentations.
4 Capital returns calculated as cumulative share repurchases, common dividends and special dividends. Total cash sources calculated as cumulative cash from operations plus asset sales.
View source version on businesswire.com: https://www.businesswire.com/news/home/20241208550109/en/
Jonathan Gasthalter/Amanda Shpiner
Gasthalter & Co.
(212) 257-4170
Christopher J. Pappano
Barington Capital Group, L.P.
(212) 974-5737
cpappano@barington.com
Shrey Patel
Thor Equities LLC
(212) 529-5055
spatel@thorequities.com
Source: Barington Capital Group, L.P.