Dive Brief:

• Investment firm Starboard Value Wednesday said it has taken a major stake in Macy’s and is advocating for a spin-off of the department store’s real estate, similar to moves made by Sears Holdings Corp. and Saks Fifth Avenue parent Hudson Bay Co.

• Sears and Hudson Bay both recently spun real estate into an investment trust, or REIT, and leased back stores they wanted to occupy, thereby extracting cash value.

• Macy’s stock rose on the news of Starboard’s activity 7.9% Wednesday. 

Dive Insight:

Macy’s has previously resisted calls to take major steps to extract value from its real estate portfolio. “We like having control of our real estate,” Macy’s CFO Karen Hoguet said at a March conference with investors. 

An activist investor like Starboard could really throw its weight around, however; it’s the firm behind the push to merge Staples and Office Depot. And Carl Icahn, another activist investor, pushed for an eBay /PayPal split for months despite the companies’ resistance, and finally got his way.

But Macy’s could pay a price with a REIT. It’s true that it would extract dollars, and the value of the real estate vs. the retail operations would be made clear. But it could hurt the retailer’s flexibility and it’s ability to close or remodel underperforming stores, writes Miriam Gottfried in the Wall Street Journal. According to Gottfried, a REIT would also force Macy's to spend money on lease payments that it might rather use to improve its retail business. 

The push could be a distraction from Macy’s core business, something that it’s still struggling to master in the new consumer-driven, omnichannel universe.