New York—With the news that it will be closing stores, cutting jobs and lowering its forecast, Macy’s Inc.’s stock had been taking a beating.
Today, it rose as much as 5.6% in early trading upon the news that Greenlight Capital took a stake in the retailer. The news continued with speculation that a private equity firm might work with a real estate investment trust to acquire the retailer.
While Macy’s Inc. had rejected the notion of turning into a REIT last year, some now say that plan may be more viable since the stock declined.
In a letter to investors, David Einhorn of Greenlight said: “While it’s unlikely that management will reverse course on its own, it wouldn’t surprise us if a private equity firm teamed up with a REIT to buy the company and unlock the value privately, Even if this doesn’t happen, the shares are cheap.”
The stock rose as high as $40.01 on the announcement, reaching their highest level since Nov. 30. Macy’s shares lost 47% of their value last year as has been the case with many department store retailers.
Rethinking Value Opportunities
Einhorn echoes remarks from activist investor Starboard Value, which has been pushing for Macy’s to tap its properties since July. The retailer’s real estate, including its Herald Square store in Manhattan, is worth $21 billion, according to Starboard’s analysis. That’s more than the company’s current enterprise value.
Macy’s Inc said last November it wouldn’t pursue a REIT, an effort Starboard endorsed. Instead, the company is considering selling portions of its flagship Manhattan, San Francisco, Chicago and Minneapolis stores, as well as mall-based properties. Tishman Speyer is interested in taking stakes in the locations, Macy’s said. The company is searching for a real estate executive who could oversee the effort, including any partnerships or joint ventures.
In an interview with CNBC’s “Squawk Box,” Macy’s CEO Terry Lundgren said he has spoken to Starboard CEO Jeff Smith and some good ideas have come out of those conversations that the company is pursuing.
“I’m all about trying to get value for our company, and if I can do that without disrupting our business, without leveraging up the company and staying investment grade, I mean, we’re all over those ideas,” Lundgren said, noting Macy’s plans to hire an in-house real estate adviser who can look out to the long term and “help the company rethink the value opportunities in its property holdings and make its big box stores more productive.”