Activist hedge fund Starboard exits Macy’s board

Its exist underscores the growing challenges facing the U.S. retail industry with consumers preferring to shop online as opposed to visiting a brick-and-mortar store.

 

Sources familiar with the matter at hand have disclosed that activist hedge fund Starboard Value LP, which had pressured Macy’s Inc to separate its retail business from its real estate business, has sold its stake in the company.

The move will provide Macy’s incoming CEO, Jeff Gennette, more space to execute a turnaround plan. The development also comes in the wake of Hudson’s Bay Co failing to provide Macy with a concrete takeover offer.

While Macy’s did not immediately respond to requests for comment, Starboard declined to comment.

Sources preferred the cover of anonymity since is the matter is yet to be made public.

Earlier Macy’s had dragged its feet in heeding Starboard’s call to separate its retail business from its real estate, including its trophy asset Herald Square department store, because it views the rent from sale leasebacks as just another form of debt.

Nevertheless, Macy’s has made moves to monetize its real estate assets, which includes a joint venture with Brookfield Asset Management Inc which covers almost 50% of Macy’s locations. Furthermore, it is also closing some of its underperforming stores.

Macy’s, the owner of Bloomingdale’s is currently undergoing a period of transition with CEO Terry Lundgren set to become its executive chairman on March 23. He will be succeeded by Gennette, the company’s president.

As of December 31, the value of Starboard’s approximately 3 million of Macy’s shares were worth nearly $107.8 million. However, Macy’s shares have since then slumped by almost 60% since Starboard took a position in the company in July 2015.

Starboard’s retreat underscores the mounting challenges facing the U.S. retail industry with consumers increasingly focussing on internet sales for their shopping needs which has resulted in many companies to bleed cash with some even filing for bankruptcy.

Admitting a mistake in strategic buying, Starboard CEO Jeffrey Smith stated his fund had invested in Macy’s too early.

“Sometimes you don’t get the timing right,” said Smith.

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