This article was co-written with Gwen Morrison.
On the heels of Macy’s exuberant earnings report last week, which pushed its stock price up 21 percent overnight to a 230 percent gain for the year to date, a boardroom drama has intensified, spurred by an activist investor.
The proposal on the table seems astonishing to us: Split Macy’s multibillion-dollar e-commerce business from its 600-store brick-and-mortar business to release trapped shareholder value. Macy’s announced last Thursday that it has retained consulting firm AlixPartners to evaluate the proposal.
The demand to “de-omnify” Macy’s had been delivered in a letter to the board by Jana Partners (the activist investor) on October 13 after it acquired an unknown stake in the company.
There was an important precedent for this maneuver. On March 5, privately held Hudson’s Bay Company (HBC) split its 40 Saks Fifth Avenue stores from its digital unit into two separate businesses. In doing so, it sold a $500 million minority equity stake to a private investor, Insight Partners. The move was controversial — although HBC insisted Saks brand experience would not change for shoppers.
Macy’s has worked hard to establish its omnichannel business model and it has led the industry in online apparel sales. It is also a public company — a key difference when compared to HBC.
Industry thought leaders have long critiqued the organizational silos that kept retail ecommerce teams walled off from their counterparts in merchandising, marketing and operations. Many digital innovation labs were even located in separate cities. In early years, retailers including Macy’s missed out on sharing the insights and analytics that would have added momentum to their business as Amazon was accelerating.
After overcoming early inertia, Macy’s has proved to be an innovator on several omnichannel fronts:
- Appealing to younger shoppers who are harder to attract;
- Capturing both store and digital data to personalize offers and enhance loyalty rewards;
- Using physical stores to fulfill online orders, thereby reducing markdowns.
As Macy’s explores separating its e-commerce business, it contemplates a future in which its stores lose the ability to stitch each point of the shopper journey into a unified data picture. If shoppers want the brand to know them and serve them in any number of situations, why would any retailer de-omnify and break the connection?
We believe Jana Partners’ intent once again reveals how investor goals can risk undermining the connection between a brand and its shoppers. Macy’s should tread carefully.
- Jana Partners Takes Stake in Macy’s, Urges E-Commerce Spinoff – The Wall Street Journal
- Macy’s Hires Adviser to Study Separation of E-Commerce Business – The Wall Street Journal
- Macy’s says it is working with AlixPartners to review its business structure – Reuters
- Is Saks Taking A Giant Leap Backwards By Splitting Off E-Commerce – Forbes
- Macy’s stock, once left for dead, is roaring back to life – CNN