May 12, 2021, 7:55 a.m. EDT

Macy’s proposes $235 million NYC neighborhood upgrade and office tower addition to its flagship store

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Tonya Garcia

Macy’s Inc. has unveiled a proposal for its New York City flagship that includes a $235 million investment in the surrounding Herald Square area and construction of an office tower above the location.

The proposal includes a transit upgrade that would improve entry to the local subway stations, a revamp of the surrounding Herald Square and Broadway Plaza into a car-free space for pedestrians to gather, and elevator-access to surrounding transportation hubs.

Moreover, the proposal calls for the addition of an office tower above the department store location.

Macy’s /zigman2/quotes/201854387/composite M -2.74% previously revamped its Brooklyn store location to add office space.

“The project added to the vibrancy of Downtown Brooklyn, spurring economic growth and really lifting the streetscape along the famous Fulton Mall,” said Regina Myer, president of the Downtown Brooklyn Partnership, in a statement.

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Macy’s says the plan will generate $269 million annually in new tax revenues and will support 6,290 annual jobs and $4.29 billion in annual economic output.

Macy’s has been in Herald Square for 102 years. The site has become the iconic backdrop for the annual Thanksgiving Day parade, and hosts events like its spring flower show.

“Macy’s investment in the Herald Square neighborhood, one of New York City’s most heavily trafficked and visited destinations, is a real marker that the city is set to come roaring back,” said Melva Miller, chief executive of the Association for a Better New York, in a statement. 

The project will first have to go through the Uniform Land Use Review Procedure process for approval.

Macy’s is scheduled to report first-quarter earnings on May 18. Besides the impact from the COVID-19 pandemic, Macy’s is part of the department store group that has been under pressure since before the pandemic.

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UBS analysts present the two possibilities for the retailer as the economy reopens and vaccines roll out.

“Bulls believe reopening and ‘return-to-work’ will catalyze a ‘Roaring 20s’-type environment which will disproportionately benefit Macy’s,” analysts wrote in a note published last week. “Bears believe Macy’s is a market share loser and will continue to experience major margin pressure, leading to earnings-per-share disappointments.”

UBS sides with the bears, rating Macy’s shares a sell with an $8 price target.

“Macy’s has major disadvantages vs. peers around price, product, and service. We believe these dynamics should lead to major share loss and margin pressure,” UBS said.

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The FactSet consensus is for a loss of 41 cents per share, after a $2.03-per-share loss last year. The FactSet sales consensus is for $4.315 billion, up from $3.017 billion last year.

Macy’s stock has rallied 53.3% for the year to date. The ProShares Decline of the Retail Store ETF /zigman2/quotes/200757065/composite EMTY +0.76% is down 28% for the period. And the benchmark S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.04% is up 10.5% for 2021 so far.

/zigman2/quotes/201854387/composite
US : U.S.: NYSE
$ 18.13
-0.51 -2.74%
Volume: 24.34M
June 17, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$5.81 billion
Rev. per Employee
$239,027
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/zigman2/quotes/200757065/composite
US : U.S.: NYSE Arca
$ 16.57
+0.13 +0.76%
Volume: 5,536
June 17, 2021 2:52p
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/zigman2/quotes/210599714/realtime
US : S&P US
4,221.86
-1.84 -0.04%
Volume: 2.57B
June 17, 2021 4:20p
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