Macy's needs to revive its creativity by featuring more interesting products in stores and hosting interesting events for attract the younger generation, according to activist investor Barington Capital.

Those are just two of several changes that activist investors say are necessary to transform Macy's, which once established itself as a premier department store but has struggled to keep up with rapid industry change and competition.

Jim Mitarotonda, CEO of Barington Capital Group, made it clear that he has confidence in Macy's executive leadership, saying there is "no reason" why the company should not be able to improve its business execution. While Macy's CEO Tony Spring and CFO Adrian Mitchell "have a good understanding of the retail sector," Mitarotonda told FOX Business that "thinking has to change."

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Barington Capital, Thor Equities LLC and their respective affiliates, which are Macy's shareholders, recommended that the retailer make changes to its capital allocation strategy and consider other structural actions to increase shareholder value.

Mitarotonda said the company needs to bring in "great traders." Spring did not favor merchandising when he led Bloomingdales, so it was important that he bring in a highly creative team with people with strong merchandising and fashion skills, according to Mitarotonda.

A man holds a Macy's bag in Manhattan, New York, on July 5, 2024. (Photo by Beata Zawrzel/Nur via Getty Images / Getty Images)

"If the product isn't interesting, they (customers) won't go to the store or go to the Macy's website. It's not going to happen. So it's really about the product and about creating an interesting event to drive people into the store," Mitarotonda said. .

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The company also needs to improve its digital marketing strategy, including leveraging influencers. Appealing to younger consumers is important in helping the company break through the vast retail options available to US consumers today, according to Mitarotonda.

"Young people are going to TikTok. They're going to Instagram, they're going to Threads, they're going to all these other things that aren't just for older people," he said. "They (Macy's) need to think about that. They need to recreate the excitement that existed a long time ago."

People cross the street outside Macy's Herald Square store on December 17, 2023 in New York City. (Kena Betancur/VIEWpress) / Getty Images)

The head of Barington Capital praised Dillard's, another major department store, for its strong performance, highlighting its success in both merchandising and improved business execution, which led to a significant improvement in margins.

Over the past year, Macy's stock has fallen more than 16%. At the same time, Dillard's stock has risen more than 11%.

Shoppers exit a Macy's department store in Las Vegas, Nevada, on November 7, 2021. (Bridget Bennett/Bloomberg via Getty Images / Getty Images)

Mitarotonda also suggested that Macy's should separate its operating company from its real estate business, meaning that Macy's should create a separate real estate company that owns the property, with the operating business paying rent to the real estate company.

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This will not "damage the retail business at all," Mitarotonda said. Instead, he said it would "make them better."

Mitarotonda said this would create more transparency, allowing shareholders and the financial community to clearly see revenue and expenses for each part of the company. Also, by having real estate specialists manage the real estate side, rather than retailers, the firm believes it will help maximize property value.

The firm also proposed discontinuing the company's luxury brands, Bloomingdale's and Bluemercury, which continue to generate positive store sales.

A shopper browses shoes at the Macy's store in Herald Square on Dec. 23, 2023, in New York City. (Jeenah Moon/Getty Images/Getty Images)

Mitarotonda said that if Bloomingdales and Bluemercury traded independently of Macy's, they would trade at higher multiples than their corporate parent.

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"It is important for the board of directors and the management team to look at how to maximize value for the company's owners and shareholders which they are as well," he said.