Macy’s is facing off with an activist investor for the fourth time in a decade. Activist investment firm Barington Capital and private equity firm Thor Equities say the company needs to cut spending, expand luxury brands and leverage its real estate portfolio.

The investors say the real estate Macy’s sits on is worth as much as $9 billion, nearly twice the company’s current valuation. They suggest Macy’s create a subsidiary that would charge rent to its parent company. That subsidiary could also sell space to hotel, apartment or office developers.

“They may be the ones in the room that are being the most truthful with Macy’s,” said Doug Stephens, founder and president of Retail Prophet. “Because the fact of the matter is, I don’t really think that Macy’s has had a retail strategy in decades.”

Macy’s real estate has often been a topic of discussion. In 2021, Macy’s unveiled a proposal to build a 900-foot skyscraper on top of its iconic Herald Square location in New York City. 

“I think that these activist investors have simply called that out and said, ‘Look, if you guys aren’t a retailer and you have these real estate holdings, then you need to start taking those holdings seriously and begin leveraging that,’” Stephens said. “You can only do so many stock buybacks and leverage your real estate holdings so many times before the floor sort of falls out of that.”

In response to the deck presented by Barington and Thor, Macy’s said it will work with the investors.

“We will continue to act in the best interests of the Company and all Macy’s, Inc. shareholders and we look forward to engaging with our shareholders, including Barington and Thor, as we further advance our initiatives and execute toward our long-term goals,” Macy’s said in a statement Monday, Dec. 10. 

Macy’s has 720 stores, including Bloomingdale’s and Bluemercury locations. The department store closed more than 100 locations over the last 10 years, according to data provided by Barington. 

Macy’s struggles continued this year. The company’s sales fell 2.4% in the third quarter. That earnings report was delayed as Macy’s dealt with the fallout of an employee hiding up to $154 million in expenses. 

According to Barington, department stores have been decimated as e-commerce takes a growing chunk of retail sales. Meanwhile, off-price retailers like TJ Maxx and Ross are also taking a big bite out of business. Since the turn of the millennium, department stores have seen their sales cut roughly in half. 

“I still hold onto the belief that there is a place for the department store, but we have to stop calling them department stores,” Stephens said.

Macy’s valuation fell by $15 billion over the last decade while the stock sank by 70%. The struggles have put Macy’s in the crosshairs of four activist investors over the last 10 years, according to CNBC. It also received a buyout offer in December 2023. 

Watch the interview in the video above for what Stephens says Macy’s should do with its retail stores.