Macy’s faces yet another activist push

Macy’s Inc (NYSE: M) is pushing to the upside this morning after another activist investor revealed a stake in the embattled chain of department stores.

Barington Capital has teamed up with a private equity company – Thor Equities to push for cost cuts at Macy’s.

The activist investor also wants the retailer to consider unloading its luxury brands and thoroughly review its real estate portfolio as well.

Macy’s stock is currently down more than 20% versus its year-to-date high in March.

Activist attacks Macy’s for excessive capital expenditures

Barington criticised the retail company today for excessive capital expenditures that continue to stand in the way of it executing buybacks and paying a dividend.  

The investment firm see significant potential to lower inventory as well as sales and administrative costs at Macy’s that, it’s convinced, will enable the department store chain to focus on capital returns.

Barington wants the New York listed firm to consider a sale of Bluemercury and Bloomingdale’s as well. It did not, however, reveal the size of its stake in Macy’s on Monday.

The hedge fund is the fourth activist to have targeted Macy’s over the past ten years. The retail stock has been cut in half since late 2021.

Barington wants Macy’s to reevaluate is real estate portfolio

Barington Capital is pushing for Macy’s to reassess its real estate portfolio as well that it valued at up to $9.0 billion on Monday.

The retailer should consider setting up a separate subsidiary for its real estate assets to which the parent company pays rent until its management figures out a plan to maximise returns from that portfolio, the investment firm argued in its presentation today.

Barington’s move arrives months after Macy’s committed to closing more than 30% of its namesake stores to invest in its outperforming locations and higher-end brands like Bluemercury and Bloomingdale’s.

Macy’s is scheduled to share the results of an investigation related to an employee managing to hide up to $154 million in delivery expenses over three years on December 11^th.

Is Macy’s stock worth buying on another activist push?

Macy’s reported a 2.4% annualised decline in its preliminary sales for its latest reported quarter in November. That’s part of the reason why Wall Street currently has a consensus “hold” rating only on $M.

In fact, analysts at Evercore ISI see downside in its share price to $16 that indicates potential for about a 7.0% decline from current levels.

Investors will closely watch how Macy’s performs over the holiday quarter that historically is the strongest period for the retailers before deciding the future of its stock price.

Meanwhile, Macy’s stock does not pay a dividend to appear any more attractive for the income investors. Shares of the retail firm, nonetheless, are up some 25% versus early September at writing.