×
69 441
Fashion Jobs
ESTEE LAUDER
Manager, Channel Marketing, Aveda na
Permanent · New York
ESTEE LAUDER
Area Manager, Production - Bristol - 2nd Shift
Permanent · Bristol
ESTEE LAUDER
Keyholder - The Cosmetic Company Store - 20hrs - Philadelphia Premium Outlets - Pottstown,PA
Permanent · Pottstown
ESTEE LAUDER
Area Manager, Technical Services - Bristol - 2nd Shift
Permanent · Bristol
ASCENA
Part Time Sales Manager - Ann Taylor, The Woodlands Mall
Permanent · The Woodlands
LEVI'S
Art Director
Permanent · Remote
LULULEMON
Assistant Manager, Operations | Ponce City Market
Permanent · Atlanta
LULULEMON
Assistant Manager, Operations | Arizona Market
Permanent · Scottsdale
LULULEMON
Assistant Manager, Guest Experience | Arizona Market
Permanent · Scottsdale
ULTA BEAUTY, INC.
Skin Care Consultant
Permanent · Fort Walton Beach
ULTA BEAUTY, INC.
IT Manager - End User Services
Permanent · Bolingbrook
ULTA BEAUTY, INC.
Tax Analyst - Sales & Use Compliance
Permanent · Bolingbrook
ULTA BEAUTY, INC.
General Manager
Permanent · Walker
ULTA BEAUTY, INC.
General Manager
Permanent · Baltimore
ULTA BEAUTY, INC.
Inventory Control Specialist
Permanent · Bolingbrook
ULTA BEAUTY, INC.
General Manager
Permanent · Harker Heights
ULTA BEAUTY, INC.
Retail Sales Manager
Permanent · Jacksonville Beach
ULTA BEAUTY, INC.
Retail Operations Manager
Permanent · Wall Township
ULTA BEAUTY, INC.
General Manager
Permanent · Carbondale
URBN
Anthropologie Buyer - Upholstery
Permanent · PHILADELPHIA
URBN
Free People Senior Merchandise Planner
Permanent · PHILADELPHIA
ALICE AND OLIVIA
Sales Supervisor - Los Angeles
Permanent · Los Angeles
By
Reuters API
Published
Dec 6, 2021
Reading time
4 minutes
Share
Download
Download the article
Print
Click here to print
Text size
aA+ aA-

Macy's reliance on stores for e-commerce weighs on mulled split

By
Reuters API
Published
Dec 6, 2021

Macy's Inc is grappling with how to make its e-commerce business a standalone company without losing customers who rely on its department stores to pick up or return items they bought online, according to people familiar with the deliberations.

The 163-year-old retailer said last month that it had asked consulting firm AlixPartners to review its business structure after Jana Partners urged it to separate its e-commerce arm.


A separated Macy's online business will need to have extensive commercial agreements with the company holding the department stores - Reuters


The activist hedge fund said in October that the e-commerce business could be worth $14 billion on its own, more than Macy's entire market capitalization of about $8 billion.

AlixPartners also advised HBC, the owner of Saks Fifth Avenue, on the separation earlier this year of its e-commerce business from its department stores.

Macy's views a similar separation as more challenging because of its large store footprint and its online customers' reliance on it, the sources said.

Macy's has close to 800 stores. It has said its online sales are two to three times higher per capita in regions where the stores are located, because of the convenience for customers of picking up and returning items at the stores.

Saks, on the other hand, has only about 40 stores, and the privately held company's e-commerce business generates annual revenue of less than $1 billion. That is a fraction of Macy's e-commerce revenue, which is set to exceed $8 billion this year, according to Morningstar analysts.

A separated Macy's online business will need to have extensive commercial agreements with the company holding the department stores. They would have to govern everything from merchandise distribution and storage to promotions and marketing, in order to provide Macy's customers a seamless experience in-store and online, the sources said.

Such agreements will need to withstand the test of time as the company holding the department stores downsizes further, shutting down locations on which the e-commerce business relies, the sources added.

"The introduction of numerous service agreements to compensate stores would likely lower profitability," Cowen analysts said in a note last month.

Macy's did not respond to requests for comment.

The duplication of functions now housed under one roof, such as logistics and administration, would add to the costs, the sources said.

Macy's has been going in the opposite direction with its "Polaris" strategy launched last year, which envisions $1.5 billion in annual cost reductions through the synergies of brick-and-mortar retail with e-commerce by the end of 2022.

In a letter to Macy's in October, Jana suggested that a benefit of separation could be a cash infusion in the online business that would help hire top talent and invest in new technology, the sources said. It pointed to the case of Saks, which attracted a $500 million investment from private equity firm Insight Venture Partners at a $2 billion valuation for its online business.

The Macy's review is also exploring this possibility, according to the sources.

"Our objective is to light a fire under this company that has an incredible brand," said Guy Phillips, managing member at NuOrion Advisors, a Macy's investor that is also pushing the company to make changes.

Macy's has not provided a timeline for completion of the business review.

While Jana applauded Macy's decision to launch the review, it has not ruled out a challenge to the company's board. It will have the opportunity to nominate directors early next year should it decide the company has not made enough progress.

Passing On Costs To Customers



This is not the first time Macy's faces calls for a breakup. It fended off demands from activist hedge fund Starboard Value LP six years ago to sell its real estate and then lease it back for its stores. It has subsequently trimmed its property portfolio and entered into a partnership with Brookfield Asset Management to cash in on some of it.

Department stores have enjoyed a sales rebound in recent months as Americans splurge on perfumes, dresses and formal wear following COVID-19 pandemic lockdowns. But their profitability has suffered amid shipping logjams, labor shortages and inflationary pressure.

Macy's has fared much better than most retailers thanks to its ability to pass on some of the additional costs to customers. Its shares are up 143% year-to-date, compared with an 18% rise in the S&P 500 retailing index.

Macy's said last month it expects a 1% rise in gross margins from pre-pandemic 2019 levels. It also raised its full-year sales and profit outlook and expects full-year net sales of $24.12 billion to $24.28 billion, compared with $23.55 billion to $23.95 billion previously.

© Thomson Reuters 2022 All rights reserved.