Activist investment firm Barington Capital and private equity firm Thor Equities have proposed a radical restructuring of Macy's, arguing that the company would be more financially valuable if it ceased operations and liquidated its assets. This assertion is based on their belief that Macy's real estate holdings are worth more than the company itself, a situation they deem unsustainable as it obscures the true worth of Macy's. They contend that Macy's stock has become so unappealing due to the company's struggles that its market value is less than the value of its individual components. The proposed solution is to dismantle the company and unlock the value of its assets.

"Macy's possesses significant real estate assets," Barington stated in an online presentation. "The market is suggesting that Macy's retail operations have virtually no value." The investors estimate that Macy's real estate, including its landmark store at Herald Square in New York City, could be worth as much as $9 billion on the open market, which is nearly double the company's closing market value of $4.7 billion on Monday. They propose that Macy's could extract additional value from its real estate by leasing properties to a subsidiary that controls the assets or by selling space to developers for construction projects such as hotels, apartments, or office buildings.

Macy's, which owns 720 stores including the luxury department store Bloomingdale's and the beauty chain Bluemercury, has long been recognized for the real estate value tied up in its retail locations. Investors and developers have been interested in developing on top of Macy's Herald Square location, and Macy's has even proposed an office tower above the store. In response to the investors' proposal, Macy's stated on Monday that it is dedicated to "achieving sustainable, profitable growth and enhancing shareholder value." The company expressed confidence in its strategy, which involves closing poorly performing stores and investing in its top 50 stores with improved staffing and new product offerings.

Investor groups, such as private equity funds and hedge funds, have often acquired struggling or underperforming retailers in recent years with the intention of privatizing them, turning them around, and selling them for a profit. However, this approach has often resulted in closures rather than revivals for companies like Sears and Toys "R" Us. Mark Cohen, who recently retired as the director of retail studies at Columbia Business School, advised Macy's to reject the investor proposal, stating, "The investors are not concerned with the long-term viability of the business. If left unchecked, these investors would suffocate the company."

The strategy outlined by Barington and Thor is reminiscent of the path taken by hedge fund operator Eddie Lampert after he gained control of Sears and Kmart. He proceeded to sell off or develop much of their real estate and dispose of several valuable brands associated with Sears, including Craftsman tools. Additionally, he spent over $6 billion repurchasing shares of Sears Holdings, the company he established to manage the two chains, in an unsuccessful attempt to bolster its plummeting stock price. The outcome was detrimental, with stores closing when they could no longer afford to pay rent to the separate entity that controlled their real estate, and sales plummeting as the company was deprived of the necessary funds to invest in stores and make them appealing to customers. In 2018, after years of closing hundreds of stores, the company filed for bankruptcy. Although it emerged from bankruptcy in early 2019, it has continued to struggle and has closed most of its remaining stores, leaving only a few Sears locations and no full-size Kmarts on the mainland United States.

Sears and Kmart are not the only once-prominent retail brands to collapse after being taken over by private equity investors and hedge funds. Retailers ranging from the upscale department store chain Lord & Taylor to RadioShack to Toys "R" Us to Payless Shoes and Sports Authority have all shut their doors in the last decade. Macy's and other department stores such as Kohl's, Nordstrom, and JCPenney have been outcompeted in recent years by online retailers like Amazon, large box retailers that sell groceries and a variety of consumer goods like Walmart and Target, and discount clothing chains such as TJ Maxx and Marshalls. Macy's stock has plummeted approximately 70% over the past decade.

This is the second time this year that activist investors have attempted to pressure Macy's. In July, Macy's management terminated discussions with private investors who were attempting to take control of the company. The investors planned to privatize Macy's and consider spinning off its real estate assets or separating its online operations from its physical stores. Macy's board of directors unanimously voted to end discussions with Arkhouse Management and Brigade Capital Management regarding the investors' offers to acquire the chain. Macy's stated that it was unclear whether the investors could finance a deal and that it was not in the best interests of shareholders. The new proposal also comes just weeks after Macy's revealed that an employee had intentionally concealed up to $154 million in expenses over nearly three years. Macy's was compelled to delay its quarterly earnings report due to the accounting issue. The company is set to report its quarterly earnings on Wednesday.