Should Kohl’s go private and Macy’s sell its real estate?
Recent times, it’s been well documented, have been tough for chains in the department store sector. Company boards and activist investors have grown increasingly concerned and are looking for ways to wring returns on investments that have little to nothing to do with improving traffic and driving sales.
The Wall Street Journal recently reported that Kohl’s board is considering taking the company private because its share price has fallen 40 percent from a high established last April. The chain has seen its stock take a hit despite posting recent same-store sale gains.
Back in July, Jeffrey Smith, co-founder and CEO of the Starboard Value hedge fund, proposed that Macy’s sell off real estate holdings worth billions of dollars.
Following a disappointing holiday season, Macy’s announced plans last week to close up to 40 stores and eliminate more than 4,500 positions. While Mr. Smith supported the action, he once again has recommended the retailer pursue real estate joint ventures (JVs) to generate returns for itself and its investors.
“We believe that a JV, or series of JVs, can crystallize the value of Macy’s real estate while bringing in a partner with substantial capital and real estate expertise that will enable the JVs to grow and diversify their real estate holdings,” Mr. Smith wrote in a letter to Macy’s board, according to Reuters.
For its part, Macy’s maintained that Mr. Smith’s recommendation is something the company was already considering, although management has not made a decision on the matter. As far back as last May, Macy’s CFO Karen Hoguet had said the company was researching the merit of pursuing a REIT.
- Kohl’s Weighs Next Steps, as Woes Mount – The Wall Street Journal (sub. required)
- Starboard urges Macy’s to strike real-estate deals – Reuters
- Should Macy’s sell its stores and lease them back? – RetailWire
Why do you think retailers such as Kohl’s and Macy’s are looking for ways to generate revenue opportunities that have nothing to do with selling more goods in stores and on websites? Do you agree that Kohl’s would benefit from going private? Should Macy’s spin off some or all of its real estate holdings?