What: Macy's faces pressure to emulate Dillard's successful operational model as activists push for aggressive changes in capital allocation and real estate strategy.

Why it is important: This development underscores how department stores must balance multiple competing priorities - operational excellence, real estate optimisation, and shareholder returns - while navigating fundamental changes in retail dynamics.

Investment firms Barington Capital Group and Thor Equities are pressing Macy's to adopt Dillard's approach to capital allocation and operational management. While both retailers face similar industry headwinds, Dillard's has achieved superior results through focused operations and disciplined capital management, delivering a 788% shareholder return since 2018 compared to Macy's 12% decline. The activists advocate for monetising Macy's real estate assets, exploring strategic alternatives for Bloomingdale's and Bluemercury, and adding their representatives to the board. However, industry experts note significant differences between the two retailers, including scale, market positioning, and governance structures. While Dillard's operates 273 locations with family control and a focused fashion assortment, Macy's manages a more complex portfolio of nearly 350 stores across multiple formats, along with its iconic cultural presence.

IADS Notes: The comparison between Dillard's and Macy's reflects broader challenges in department store transformation. While Macy's announced a three-part strategy in November 2024 focusing on store optimisation, luxury expansion, and operational modernisation, they've had to accelerate store closures to 65 locations by January 2025. The company's innovation strategy has shown some promise, with October 2024 data highlighting success in their "First 50" stores initiative. This follows their February 2024 "Bold New Chapter" strategy announcement, which included plans to close 150 stores while expanding Bloomingdale's. However, December 2024 saw new activist investors pushing for more aggressive changes, including real estate monetization. This tension between operational transformation and financial demands highlights the complex challenges facing traditional department stores, with Dillard's focused approach demonstrating how disciplined capital allocation and superior store operations can lead to better financial outcomes in a challenging retail environment.

Should Macy’s be more like Dillard’s?