What: The struggle between retail transformation and real estate monetisation intensifies as department stores like Macy's face activist pressure to unlock property value, while HBC's Richard Baker demonstrates how real estate assets can finance acquisitions but rarely produce retail success stories.

Why it is important: This tension exemplifies the broader challenges facing department stores as they balance the immediate financial gains from real estate monetisation against the need for sustainable retail transformation and long-term viability.

Department stores' valuable real estate holdings have become both an asset and a liability in their transformation efforts. Activist investors Barington Capital and Thor Equities are pressuring Macy's to create a separate real estate subsidiary to monetise properties valued at over $9 billion, while simultaneously pursuing store closures and stock buybacks. Meanwhile, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions, including the recent $2.65 billion Neiman Marcus deal backed by $2 billion in junk bonds. However, historical examples like Lord & Taylor and Sears demonstrate that real estate monetisation alone doesn't ensure retail success. The sale of Lord & Taylor's Manhattan flagship to WeWork for $850 million in 2017 preceded the chain's eventual closure, highlighting the risks of prioritizing property value over retail operations.

IADS Notes: While Macy's faces pressure from activists to monetise its $9 billion property portfolio, HBC's Richard Baker has successfully leveraged real estate assets to finance acquisitions like Neiman Marcus. However, as seen in cases like Lord & Taylor and Sears, focusing solely on real estate monetisation often fails to address fundamental retail challenges, highlighting the need for balanced transformation strategies.

US department stores’ real estate strategies reveal divergent approaches