Affiliates of Barington Capital Group and Thor Equities, who hold stakes in Macy's, have issued a comprehensive proposal urging the retail giant to revamp its financial strategies and explore structural changes to enhance value for its shareholders.
In a detailed presentation, Barington and Thor said that Macy's market valuation has significantly declined since 2014, with stock prices dropping 70%. This is attributed to enduring difficulties within the industry and misjudgements by the company's leadership.
The shareholders contend that the current market price of Macy’s stock fails to capture the potential benefits of its recent strategic initiatives or the value inherent in its luxury divisions and real estate holdings.
In early 2024 under new CEO Tony Spring, Macy's unveiled an ambitious strategy dubbed "A Bold New Chapter". The plan includes shutting down numerous low-performance stores under the Macy's brand.
The company anticipates that these closures, along with planned cost-cutting measures, will lead to a more robust store portfolio capable of achieving steady sales growth and enhanced profitability.
The investing parties argue that Macy's must drastically curtail its capital spending following a decade of hefty investments that have not yielded expected returns for shareholders.
Since the fiscal year 2014, Macy's has invested a cumulative $9.7bn in capital expenditures, which includes $6.7bn on physical properties and equipment and $3.0bn on technological advancements. During the period, Macy’s market capitalisation has diminished by $15bn.
Barington chairman James Mitarotonda pointed to Dillard’s as an exemplar for Macy’s in terms of efficient capital management.
To bolster investor value, Barington and Thor suggest that Macy’s should consider a scale-back of capital expenditure to between 1.5% and 2% of total sales from the current rate of approximately 4%, and a share buyback programme worth $2bn to $3bn up to 2027.
Their recommendations also include the formation of an internal subsidiary dedicated to maximising returns from Macy’s substantial owned real estate assets, exploring strategic options for its high-growth luxury segments Bloomingdale’s and Bluemercury, and appointing representatives from Barington and Thor to the Macy’s board.
The shareholders insist that an assertive share repurchase strategy is imperative as they consider the company's stock to be its most valuable investment opportunity at present.
In September 2024, the department store chain announced plans to appoint more than 31,500 employees for the 2024 holiday season in the US.
