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Marcato Bets on Dillard's Success

Apr 23, 2014
Jing Chen

Hedge fund manager Marcato Capital Management is optimistic in retail chain Dillard’s.

Reuters reported that the San Francisco-based firm is betting that Dillard’s stock can rise to $155 a share—a 62% increase from its current level. The size of the investment was not disclosed.

The article added that Marcato explained in a regulatory filing on Wednesday that Dillard’s has been has been turning itself around by closing underperforming stores, cutting expenses and buying back shares. Dillard's, which underperformed its peers by 200% between 2000 and 2007, is currently trading at a 12% free cash flow yield and has been using all of its free cash to repurchase shares.

Marcato, which has a 7% stake in auction house Sotheby’s, stated last month that it plans to support Third Point’s position in the proxy battle between the auction house and the hedge fund.

Marcato was launched in 2010 by former Pershing Square Capital Management employee Mick McGuire with seed capital from Blackstone Group.



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