Hedge fund Starboard Value is urging Macy's to strike real estate deals to increase cash flow from its real estate assets. Bobbi Rebell reports.
Macy's may be having a hard time competing with online-only rivals like Amazon, but activist investor Starboard Value thinks the retailer's brick and mortar assets are worth a lot more. The hedge fund, which owns about one percent of the company, wants Macy's to squeeze more value from its substantial real estate holdings by entering into joint ventures for its stores. The idea is to bring in a partner that would take a minority stake and add to the retailer's cash reserves. Shares of Macy's, which have lost about a quarter of their value in the last three months, rose on the news. Most of Macy's more than $11 billion dollar market value comes from its real estate asset holdings. Starboard has estimated that the New York City Herald Square store alone is worth nearly $4 billion. Morningstar retail analyst Bridget Weishaar says that creating joint ventures is only a short term solution. SOUNDBITE: BRIDGET WEISHAAR, RETAIL ANALYST, MORNINGSTAR (ENGLISH) SAYING: "We think they need to adjust their omnichannel capabilities to better compete in this e-commerce environment. And we really think that they need to find a way to competitively differentiate themselves that is not simply just offering lower discounts all of the time." In an e-mail on Monday Macy's said: "The viewpoint expressed by Starboard is consistent with actions already under way at Macy's ... to explore joint venture and other potential relationships related to the company's real estate and to improve our profitability from operations," Macy's says it had already hired advisors to study the idea. It reported disappointing holiday sales last week and said it plans to eliminate more than 2,000 jobs.