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Macy's shares rise 2% on report retailer may build office tower on top of flagship New York store

Key Points
  • Shares of retailer Macy's rose 2% Wednesday, following a report by Bloomberg that the retailer may build an office tower on top its flagship New York store at Herald Square.
  • The report is an indication the retailer may be further evaluating ways to make money off its expansive real estate portfolio.
  • Macy's shares, which are valued at $7.7 billion, are down nearly 17% over the past year.
People walk past Macy's flagship store in Manhattan, New York.
Xinhua | Wang Lei | Getty Images

Shares of retailer Macy's rose 2% Wednesday, following a report the retailer may build an office tower on top its flagship New York store.

The Bloomberg report is an indication the retailer may be further evaluating ways to make money off its expansive real estate portfolio.

Department stores across the U.S. have been hurt as shoppers make more purchases online, forcing retailers to think of ways to either downsize their footprints or repurpose their stores. Macy's has one of the country's largest fleet of stores, and has been vocal about its desire trim footage at some of its stores.

Macy's declined to comment on the report.

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Macy's jumps on report it may add office tower to flagship New York City store

An official from the New York City Department of Buildings told CNBC an application to enlarge the building at 151 West 34th Street has not been submitted, according to the department's records.

Shares of Macy's are down nearly 17% over the past year, giving it a market capitalization of $7.7 billion. However, investment firm Cowen has previously valued the retailer's real estate at roughly $16 billion.

Macy's CEO, Jeff Gennette, earlier this year said the company has been evaluating other uses for some of its flagship locations, including its Herald Square store. He said the company is in the process of holding "preliminary meetings with city officials and community stakeholders" to discuss "complementary uses" at the Herald Square shop.

The retailer is also adding 1,500-square-foot "Story" shops, which will curate rotating merchandise, at 36 Macy's stores across the country, including Herald Square store.

Macy's, which also owns Bloomingdale's, operates about 680 department stores. In early 2017, Macy's announced plans to shut 100 stores, but it also has been working with Brookfield Asset Management to redevelop all or part of 50 properties. Another 350 stores are slated to get a facelift. And at four locations, the company is testing a smaller format it calls "neighborhood stores," which are cut by about a fifth.

Should Macy's pursue building an office tower on its flagship, it would not be the first case of an iconic department store in New York's Midtown offering its real estate for offices. Hudson's Bay earlier this year completed the sale of its Lord & Taylor Fifth Avenue store to office sharing company, WeWork Property Investors.

—CNBC's Lauren Thomas contributed to this report.