Businesshala News Exclusive | Jana Partners Takes Stake in Macy’s, Urges E-Commerce Spinoff

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Activist investor says stand-alone e-commerce business will be equal to multiples of retailer’s current market value

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Saks Fifth Avenue, the largest department-store rival to Macy’s, is planning to separate its e-commerce business from its store operations as part of a deal that includes an additional investment. Jana is eyeing a similar arrangement, and Macy’s e-commerce business has already drawn interest from firms that might invest in it with spinoffs, some said.

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New York-based Macy’s, which also owns Bloomingdale’s brand, was hit hard last year by the Covid-19 pandemic, along with other department-store brands, which caused it to temporarily close physical stores. Meanwhile, online sales have soared across the industry as more customers avoid crowded places and shop from home.

Shoppers have abandoned department stores—the traditional mainstay of retail—in favor of e-commerce, accelerating a trend. While consumers have returned to malls and physical stores this year as vaccination rates have increased, many are also stuck with the online shopping routines they have adopted during the pandemic.

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That, in turn, has led to a major push by retailers like Walmart. Inc.

Linking e-commerce platforms with bricks-and-mortar stores where online orders can be fulfilled and where shoppers can get a closer look at products and in some cases can pick up and return digital orders. E-commerce giant Amazon.com Inc.

recently announced plans to open several larger retail locations that would function similar to department stores, as part of an effort to expand sales of clothing and home goods.

Jana believes that a stand-alone e-commerce business would be several times the current market value of Macy’s, which stood at about $7 billion as of Thursday. The retailer’s market capitalization is down from more than $20 billion in 2015.

While Macy’s shares have declined significantly over the past several years, online-only retailers such as Farfetch are undervalued. Ltd.

And Mytheresa has increased. Macy’s shares have rallied since their lows in 2020 — on the back of continued growth in digital sales — and now trade at nearly five times their levels. The stock closed at $23.11 Thursday, up nearly 3% after the Wall Street Journal reported on Jan’s stake.

Jana indicated its interest in Macy’s at the 13D Monitor Active-Passive Investor Summit in New York last week, suggesting that the retailer should divest its e-commerce business, though Jana didn’t say whether it has a stake or Provide other details.

It’s unclear how Macy’s will react to Jana’s progress.

Macy’s CEO Jeff Gennett has stressed that the company aims to provide a seamless experience between its website and store. He told a September conference that about 70% of Macy’s customers shop in multiple ways. “We just believe that Store and Mobile and our website are stronger together than they are alone,” he said.

Mr. Janet has said he expects the company’s digital sales to reach $10 billion within three years. For the holiday quarter ended January 2021, digital accounted for 44% of total sales.

Macy’s total revenue for the fiscal year ended January 2021 was $18 billion, down from about $25 billion in the previous fiscal year. The company is forecasting revenue and return on profitability of approximately $24 billion for the current fiscal year. Last week, it added two new board members: the CEO of Michaels Cos and a Zipcar executive.

Earlier this year, the Hudson’s Bay Company said it was divesting Saks.com to try to capitalize on the boom in online shopping during the pandemic. (A financial move, the two businesses are still integrated from a customers standpoint.) Venture-capital firm Insight Partners said it would invest $500 million for a minority stake in Saks.com, which is valued at $2 billion.

This is at least the third time that Macy’s has faced an active investor campaign in recent years. But in a sign of how much the pandemic and e-commerce have reshaped retail, investors first called on the company to unlock the value of its real-estate holdings.

In 2015, Starboard Value LP took a stake in Macy’s and called for the company to divest its real estate, which included suburban malls as well as hundreds of stores in city centers. Macy’s rejected the idea and instead promised to find joint venture partners for its real estate. The retailer has unveiled plans to redevelop some of the space and build an office tower above its flagship Herald Square store in New York City.

Macy’s Rival Kohls Corporation

It also faced active pressure earlier this year, when a group of investors attempted to take control of its board. He called on Kohl’s to take a number of actions, including adding directors with retail experience. Later both the parties reached an agreement to add three directors.

New York-based Jana was founded in 2001 by Barry Rosenstein. It acquired Whole Foods Market Inc. companies including, which was later sold to Amazon, and Callaway Golf. Co.

Dana Similuca at [email protected] and Cara Lombardo at [email protected]

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