NEW YORK — At the National Retail Federation’s annual Big Show conference this week, Macy’s Inc. pushed back against the idea of spinning off Bloomingdale’s and beauty retailer Bluemercury, which, unlike the namesake banner, are in growth mode.
Barington Capital Group and Thor Equities last month called on the conglomerate to explore strategic alternatives for its upscale department store and beauty businesses.
The firms also held up Dillard’s as an example for Macy’s to follow, at least when it comes to capital allocation, saying Macy’s should aim for capital expenditures to be 1.5% to 2% of sales. They also proposed the repurchase of at least $2 billion in shares in the next three years, an “internal real estate subsidiary” and the addition of their own representatives to its board.
At the time, Macy’s Inc. didn’t directly address the demand to look into options for its better-performing businesses, except to say that its board has “consistently demonstrated open-mindedness” and would continue to act in the company’s and its shareholders’ best interests. But on Sunday, CEO Tony Spring told an NRF audience that the company as a “portfolio business that speaks to 40 million-plus active customers” is underappreciated.
“There are synergies that are leveraged between the three brands, between warehousing, legal, finance, back-end operations, joint brand negotiation. There's just so much opportunity for us to leverage the scale of the portfolio,” he said.
In its most recent quarter, Macy’s Inc. net sales fell 2.4% year over year to $4.7 billion, with comps — including owned, licensed and marketplace sales — down 1.3%. By banner, Macy’s net sales fell 3.1%, with comps down 3%; Bloomingdale’s rose 1.4%, with comps up 1%; and Bluemercury rose 3.2%, with comps up 3.3%.
On Monday, the company provided preliminary same-store results for its holiday quarter, as well, reporting that Macy’s Inc. comparable sales “were roughly flat quarter-to-date.”
Macy’s stores outside of its top 50 locations, including stores slated for closure, performed below expectations and posted negative comps, according to a company press release. By contrast, its go-forward business, including Macy’s top 50 stores, Bloomingdale’s, Bluemercury and e-commerce, “achieved quarter-to-date comparable sales growth,” the company said.
While Macy’s Inc. stands to benefit from its status as a multibrand portfolio, each individual proposition must be distinct, according to Spring.
“As you look at other companies deciding they don't want to be in the public market, or they want to join together with others because they need to be bigger to be successful — we also need that strength of combined value,” he said. “But we also will distinguish and make sure that [none] of these brands becomes one another. The key is for the customer to find something special, something different at Macy's, Bloomingdale's and Bluemercury, and at the same time for us to continue to try to make the case to the public markets that this three-brand portfolio has more value than we are showing today.”
