What: Macy's is undergoing another restructuring effort under new CEO Tony Spring amidst challenges from activist investors and declining relevance in the retail market.

Why it is important: The retailer's struggle to appeal to consumers, especially younger ones, and to differentiate itself in a competitive landscape highlights the broader challenges facing traditional department stores in adapting to changing consumer behaviors and the digital marketplace.

Tony Spring, the new CEO of Macy's, faces significant challenges as he steps into his role, including pressure from activist investors like Arkhouse Management, which has launched a proxy fight following Macy's rejection of a USD 5.8 billion take-private offer. Despite Macy's storied history and once-dominant position in the retail sector, the company has seen a decline in relevance, with revenue 15% lower than a decade ago and one of its lowest full-year net incomes in two decades.

Spring's restructuring plan, "A Bold New Chapter," aims to close 150 Macy's stores, expand the Bloomingdale's and Bluemercury chains, invest in smaller format stores, and sell off real estate holdings. However, critics argue that the plan lacks originality and fails to address the core issues of product appeal and competitive positioning. Macy's is caught between luxury retailers and discount chains, with leading brands increasingly selling directly to consumers. Additionally, its lucrative credit card business faces potential challenges from rising delinquency rates and regulatory changes.

The interest from potential buyers in Macy's is largely driven by the value of its real estate holdings, rather than a desire to revitalize its retail operations. Analysts estimate the value of Macy's property portfolio to be significantly higher than its market valuation, with the flagship Herald Square store being particularly valuable. However, selling real estate to go private could expose Macy's to rising rent payments and limit its ability to invest in its core business, as seen in the case of Sears' bankruptcy.

In summary, while Macy's rejection of the take-private offer may be justified, the new CEO has yet to present a convincing strategy to shareholders that addresses the fundamental challenges facing the retailer.

Macy's turnaround efforts: a challenging path ahead