Late last year, investment fund Land & Buildings Investment Management reached an agreement with Hudson's Bay Company (NASDAQOTH:HBAYF) to suspend its activist campaign at the multinational department store giant until the company's 2018 annual meeting. That meeting took place two weeks ago.

It didn't take long for Land & Buildings to resume its criticism of Hudson's Bay. However, while the fund's exasperation is understandable, some of its arguments miss the mark, given that Hudson's Bay recently brought in a new CEO who is still finalizing her management team.

Still pressing for radical change

The key premise of Land & Buildings' initial investment in Hudson's Bay was that the company should act more like a real estate company than a retailer. Jonathan Litt, the chief investment officer of Land & Buildings, noted that Hudson's Bay's real estate is worth many times the company's market value.

The exterior of the Saks Fifth Avenue flagship store

Hudson's Bay owns a lot of valuable real estate. Image source: Hudson's Bay Company.

In the year since Land & Buildings first became involved, Hudson's Bay has taken steps to monetize some of its valuable real estate. Nevertheless, Land & Buildings wants the company to either go private or move much more aggressively to capture the value of its real estate.

In an open letter to shareholders last week, Litt compared Hudson's Bay unfavorably to Macy's (NYSE:M). Indeed, while Hudson's Bay has continued to post dreadful earnings results, Macy's has now achieved two consecutive quarters of comp sales increases and strong earnings growth. Litt noted that the uptick in sales and earnings at Macy's and other department store operators means Hudson's Bay can no longer blame its poor performance solely on "macro" headwinds. He also heaped praise on Macy's for building a strong in-house real estate team and partnering with Brookfield Asset Management to provide additional real estate expertise.

Land & Buildings even said that selling Hudson's Bay to Macy's would be an appealing option. However, there's no evidence that Macy's would be interested, given that it has been focusing on debt reduction recently. The fund didn't offer any other concrete suggestions for what Hudson's Bay should do.

A rendering of the exterior of a Macy's store

Macy's probably wouldn't be interested in acquiring Hudson's Bay. Image source: Macy's.

It's too early to condemn management

In the recent open letter, Litt questioned whether Hudson's Bay has the right management team in place, observing that CEO Helena Foulkes has no prior department store experience. He also pointed to the company's continued underperformance.

However, department store CEOs don't exactly have a great track record of adapting to changes in the retail landscape. Having an outsider at the helm could be an advantage. Hudson's Bay's subpar results last quarter don't reflect poorly on Foulkes, either, as she joined the company just four months ago. Much of her first few months on the job were spent getting up to speed on the company's issues and hiring deputies.

Furthermore, Foulkes has sprung into action over the past month to get Hudson's Bay moving in the right direction again. The company sold its loss-making flash sale site Gilt to Rue La La. It also announced that it will close about 10 of its 48 Lord & Taylor stores to help improve the profitability of that underperforming brand.

In short, Foulkes is already moving decisively to get Hudson's Bay back to consistent profitability. This may take a while, given the complexity of the business (which operates in multiple countries on two continents), but shareholders ought to give her a year or two to refine and implement her strategy before passing judgment.

Real estate isn't being ignored, either

Hudson's Bay hasn't cashed in on its real estate as fast as investors like Land & Buildings would have preferred, but it hasn't been standing still, either. Last October, the company agreed to sell the Lord & Taylor flagship store in Manhattan to an affiliate of WeWork for $850 million. This deal is set to close later this year, allowing Hudson's Bay to pay off a big chunk of its debt.

Management also negotiated favorable lease buyouts for the Lord & Taylor stores that have closed recently. As Lord & Taylor closes more stores in early 2019, the company could see another influx of cash as it sells its leasehold interests and wholly owned properties.

Looking ahead, Hudson's Bay may be nearing a deal to sell its flagship store in Vancouver for more than $500 million. (The proposed sale was reported by Reuters last month but hasn't been confirmed by the company yet.)

These steps represent sensible moves to monetize some of Hudson's Bay's valuable real estate. Thus far, the company hasn't capitalized on its most valuable property -- the Saks Fifth Avenue flagship in Manhattan -- but that's no different than Macy's decision to proceed very carefully with the potential monetization of its Manhattan flagship store.

Hudson's Bay may not be doing everything that Land & Buildings Investment Management wants, but at least it is finally addressing its chronic underperformance. It may take a few quarters for results to start improving, but ousting the board and management right now would not make much sense.

Adam Levine-Weinberg owns shares of Macy's. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.