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Value of Macy's is in its real estate, analyst says

There's no way out of slowing in-store retail sales, but Macy's still holds valuable properties, Cowen analyst Oliver Chen told CNBC's "Power Lunch."

While Canadian retailer Hudson's Bay has approached Macy's, Chen says there's really no value in the famed department store's future business prospects. People familiar with the matter told CNBC that those discussions did take place, but the talks are at an early stage, and may not lead to a deal.

"From a strategic perspective, there's not an easy way to get through the reality of slowing mall traffic and closing stores," he told CNBC. The value, he says, comes from the physical space the stores occupy.

Of course, sales at malls in general were disappointing for 2016 — Chen doesn't deny that. But Macy's is a cheap buyout that could unlock some extremely well-placed properties for development by a prospective buyer.

"Some of the marquis properties, such as Herald Square, such as Chicago, really have a lot of value," Chen said. "It's about extracting those."

Chen isn't sure that Hudson's Bay is the best buyer for Macy's. He said that instead Amazon may be the most logical tie-up. After all, the company is buying property for future plans already.