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Macy’s needs to rekindle its creativity by introducing more exciting products in stores and organizing engaging events for attract younger generations, according to activist investor Barington Capital.
These are just two of the changes the activist investor says are needed to turn around Macy’s, which once established itself as a top department store but has struggled to keep up with rapid changes and industry competition.
Jim Mitarotonda, the chief executive of Barington Capital Group, made it clear that he has confidence in Macy’s executive leadership, saying there is “no reason” why the company should not be able to improve the execution of its business. While Macy’s CEO Tony Spring and CFO Adrian Mitchell “have a good understanding of the retail industry,” Mitarotonda told FOX Business that “the thinking has to change.”
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Barington Capital, Thor Equities LLC and their respective affiliates, which are shareholders of Macy’s, recommended that the retailer make changes to its capital allocation strategy and consider other structural actions to enhance shareholder value.
Mitarotonda said the company needs to bring together “excellent traders”. Spring wasn’t on the merchandising side when she was running Bloomingdales, so it’s important that she brings in a very creative team with people with great merchandising and fashion skills, according to Mitarotonda.
A man holds a Macy’s bag in Manhattan, New York on July 5, 2024. (Beata Zawrzel/Nur Photo via Getty Images/Getty Images)
“If the product isn’t exciting, (customers) won’t go to the store or even to the Macy’s website. It’s just not going to happen. So it’s really about the product and creating exciting events to drive people into the store Mitarotonda said.
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The company must also boost its digital marketing strategy, including leveraging influencers. Appealing to younger consumers is critical to helping the company tap into the vast array of retail options available to the American consumer today, according to Mitarotonda.
“Young people will go to TikTok. They’ll go to Instagram, they’ll go to Threads, they’ll go to all these other things that older people don’t just gravitate to,” he said. “They (Macy’s) have to think about it. They have to re-create the excitement that existed a long, long time ago.”
People cross the street in front of Macy’s Herald Square store on December 17, 2023 in New York City. (Kena Betancur/VIEWpress) / Getty Images)
The head of Barington Capital praised Dillard’s, another major department store, for its strong performance, highlighting its success in both merchandising and improving business execution, which led to a significant increase in margins.
Over the past year, Macy’s stock has fallen more than 16%. During that same time, Dillard’s stock has risen more than 11%.
Shoppers leave a Macy’s department store in Las Vegas, Nevada on November 7, 2021. (Bridget Bennett/Bloomberg via Getty Images/Getty Images)
Mitarotonda also suggested that Macy’s should separate its operating company from its real estate business, meaning that Macy’s should create a separate real estate company that owns the property, with the operating business paying rent to the real estate company .
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This will not “harm the retail business at all,” Mitarotonda said. On the contrary, he said it would “make them even better.”
Mitarotonda said this would create more transparency, allowing shareholders and the financial community to clearly see the income and expenses of each part of the company. Additionally, by having a real estate professional manage the property, rather than a retailer, the company believes it would help maximize the value of the property.
The firm also suggested spinning off the company’s luxury brands, Bloomingdale’s and Bluemercury, which continue to generate positive store sales.
A shopper buys shoes at the Macy’s store in Herald Square on December 23, 2023 in New York City. (Jeenah Moon/Getty Images/Getty Images)
Mitarotonda said that if Bloomingdales and Bluemercury traded independently of Macy’s, they would trade at a higher multiple than their parent company.
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“It is imperative that the board of directors and the management team look at how to maximize the value of the company’s owners to their shareholders as well,” he said.
