Macy’s signs asset deal with Brookfield, raises sales guidance: Reuters

Macy’s Inc said it formed a partnership with Canada’s Brookfield Asset Management to look at ways it can cash in on the value of its real estate and raised its full-year sales guidance, helping to send its shares up about 7 percent in early trading.

The U.S. department store operator said on Thursday that Brookfield would have exclusive rights to create a “pre-development plan” for about 50 Macy’s real estate assets, including owned and leased stores and associated land.

The partnership, which is for up to two years, is the latest move by Macy’s to squeeze more value from its vast real estate holdings across the United States.

The company, under pressure from activist investor Starboard Value LP, is already exploring options for its flagship stores, including its famous Herald Square store in New York.

Macy’s has also said it plans to close about 100 stores, or about 14 percent of the total, representing annual net sales volume of about US$1 billion.

U.S. department store operators such as such as Macy’s and Kohl’s Corp, which also reported on Thursday, have been struggling to grow in the face of intense competition from online retailers, especially Inc.

Macy’s net sales fell 4.2 percent in the latest quarter, while Kohl’s sales dropped 2.3 percent.

Macy’s same-store sales on an owned plus licensed basis fell 2.7 percent, but that was better than the 3.4 percent fall expected by analysts polled by consultancy Consensus Metrix.

Kohl’s same-store fell 1.7 percent, more than the 1.4 percent analysts had expected.

But while Macy’s net profit fell 85 percent, mainly due to a pension-related charge, Kohl’s profit rose 21.7 percent.

Kohl’s shares were up 13 percent in early trading.

Both retailers have been closing stores and looking for other ways to cut costs as shoppers spend more on pricey things such as holidays and home improvement items and less on apparel, which accounts for most of their sales.

Macy’s sales have also been hit by a strong dollar, which has affected tourist spending at the company’s U.S. stores, which include Bloomingdale’s.

Unlike Kohl’s, Macy’s have been focusing on its huge real estate holdings as a way to shore up its business.

Since the beginning of 2015, the retailer has announced or completed asset sales with anticipated proceeds of more than US$800-million.

In its latest deals, Macy’s said on Thursday it had signed a contract to sell its Union Square Men’s building in San Francisco for US$250 million and its downtown Portland, Oregon store for US$54 million.

Macy’s said it now expected full-year comparable sales on an owned plus licensed basis to decrease by 2.5-3.0 percent this year, an improvement from its previous forecast for a fall of 3-4 percent.

Up to Wednesday’s close of US$38.38, Macy’s shares had risen 9.7 percent this year. Kohl’s shares, which closed at US$45.70 on Wednesday, had gained 4.1 percent.

(Reporting by Gayathree Ganesan in Bengaluru; Editing by Saumyadeb Chakrabarty and Ted Kerr)

Photo courtesy of Reuters/Shannon Stapleton