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All The Chatter On Macy Monetizing Its Real Estate Assets 'Hasn't Amounted To Much Action'

All The Chatter On Macy Monetizing Its Real Estate Assets 'Hasn't Amounted To Much Action'

Macy's Inc (NYSE: M) has talked a lot about monetizing its real estate assets, but according to Bloomberg Gadfly's Shelly Banjo, all the chatter "hasn't amounted to much action" at a time when its physical stores are actually more valuable than the entire retailing business.

In the most recent development, the U.S. Securities and Exchange Commission actually asked Macy's for clarification on why management continuously talks about the benefits of monetizing its real estate assets but doesn't think the gains are large enough to detail its real estate sales within its financial filings.

The SEC's letter to Macy's noted that instead of counting property sales as real estate gains in a separate line within the income statement, Macy's has been accounting for the sales by cutting its selling, general and administrative expenses.

"That could give investors the impression Macy's is reducing overhead, when it's really just selling off real estate," Banjo wrote.

Macy's responded to the SEC that it will "consider" accounting for the gains on real estate transactions "to the extent material or appropriate."

Related Link: Doing The 'Starboard Math' At Macy's: Is It Worth $125?

"In other words, the real-estate gains aren't all that big yet, and when we have something to say, we'll let you know," Banjo added. "Hmm."

Banjo further suggested Macy's is "dragging its feet" on its prior commentary of monetizing its real estate holdings.

Macy's has hired real estate experts to advise management on its options, but it has now been more than a year since activist investor Starboard Value took a stake in the department store chain and valued the stock at a whopping $125 per share if it were to effectively monetize its real estate holdings.

Meanwhile, Macy's stock has fallen 44 percent since Starboard Value got involved and the activist fund even cut its own stake by nearly 40 percent. Needless to say, investors are "growing impatient."

There is, however, some positive aspects in Macy's story. The company "pleasantly surprised" investors when it said it will close 14 percent of its store fleet, which represents 100 stores. That amounts to more locations than have been closed over the past six years combined.

"But the moves, while necessary, just scrape the surface of what the department-store chain can get for its buildings," Banjo concluded. "The clock is ticking."

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Latest Ratings for M

Feb 2021Credit SuisseMaintainsUnderperform
Feb 2021Morgan StanleyMaintainsUnderweight
Dec 2020JefferiesUpgradesHoldBuy

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