A rumor has recently surfaced regarding the possibility, not the probability, but the possibility of Macy’s (M) selling itself. The story has come to the media and investors from the New York Post. The Post doesn’t name its sources other than to assign the typical media quote being “sources close to the matter”. Below is an extrapolation from the Post’s article.  

Lundgren, who had not planned to cap his tenure with a sale, has recently become open to offers from potential friendly buyers as a proactive measure to head off any attempt to mess with the board, sources familiar with the situation said.

A partner at a private equity firm told The Post that he’d been contacted about a Macy’s sale by a real estate investor — while other industry sources close to the situation say they, too, have had similar discussions.

This article aims to analyze not only the Post story but to draw out the likelihood of a sale of Macy’s. What is strange about the Post article is that it assumes or offers the catalyst for the sale to have come from Jeffery Smith of Starboard Value. I offer this to be strange because for as long as Starboard has pushed for the monetization of Macy’s real estate assets, the company has acquiesced to the demands of Starboard and even aligned its Board of Directors for this operation. So why the additional demand or stimulus now, besides the continued deterioration of the core business? If anything, Starboard should be aligning Macy’s to more appropriately adjust its core business to exhibit the underlying value of the real estate assets from its retail operations. This has been the core issue with Starboard’s investment thesis to begin with.

Starboard believed Macy’s was undervalued back in 2015 when they first invested heavily into the company and when the stock was in the high $50s. The firm then ran a multi-media campaign whereby they put forth into publication their investment thesis that was heavily levered to Macy’s real estate value. It gave minimal consideration to the core retail business. The issue Macy’s and other retailers of scale, like Target (TGT), have long since understood is that the real estate is only of value for the situational purpose of big-box retail operations. And for such an operation there is a curtailment of demand in the marketplace. To repurpose these assets for other commercial business usage devalues the properties in the eyes of a potential buyer.  Starboard valued Macy’s real estate to be worth just over $21bn in their 2016 publication.