Masi Herald Square Flag Store in downtown Manhattan, New York.

Nicholas The Economy | NurPhoto | Getty Images

An activist is putting pressure on an investor. Macy Divide his digital works from the stores to open a 162-year-old store chain.

And while it may be an exciting move in the short term, some experts are raising red flags about the long-term logic of the proposal.

Activist shareholder. Jana partners He is looking forward to seeing what is becoming a bustling market for digital retailers, which will increase prices. Investors love technology-focused names because the companies promise to grow faster than traditional store operators. When consumers buy more items online, they see faster sales. E-commerce retailers, such as Meteeresa and Zalando, are also considered a resource because they do not have many stores. This allows the administration to invest in other business sectors such as marketing.

“The market is willing to pay a huge price for e-commerce,” said Michael Collander, head of the Consumer and Retail Investment Bank. “So how can we unlock that value?”

Can be copied by Macy’s Separation. Same action earlier this year at the luxury department store chain Saks Fifth Avenue. Operated by President Larry Bruce, Sachs stores are still fully owned by HBC. The Sachs digital division, however, is now a subsidiary of Insight Partners, a small shareholder in the business. Former Sachs CEO Mark Metric leads the digital side.

Although the two businesses are financially separated, their customers do not know that there is no change because their experience is flawless.

Jana’s eyes sky-high estimate

According to recent investors, Masi e-commerce could reduce market capitalization by at least $ 15 billion, or double down on the value of the joint venture before the news of disintegration begins. Since the beginning of Bloomberg, Macy’s shares have grown by about 18 percent. On October 6, Jana reported that she was calling Digital Spinoff.

Raising that estimate means that despite the fact that the overall revenue base has shrunk, Messi’s e-commerce business is still growing. Digital sales grew by 7.7% in 2019 and 23.7% by 2020. Overall, Macy’s income declined by 1.6% and 29%, respectively.

Rapid e-commerce profits have increased the number of other online retailers. Fashion giant Mobile group In 2021, revenue is trading 6.5 times. FarfichAnother online luxury fashion platform, bringing a 5.9-fold increase. Macy’s is trading at 0.3 times the expected 2021 sales.

A few months after the split was announced, it is reported that Sachs Digital is planning to make it public Estimated at $ 6 billion, Or approximately six times income. As of March, it was worth $ 2 billion.

An HBC representative declined to comment.

But one would call it ‘crazy financial engineering’

But some experts still do not think the structure makes much sense.

“It’s crazy financial engineering,” said David Scheffman, co-founder of the Global Consumer Retail Group. “It’s impossible to separate the two. I’m not saying one doesn’t try, and I’m not saying one doesn’t pay a lot of money for that. But sometimes, it doesn’t work.”

One retailer may not be getting all the money, and the other is holding all of its assets, he said.

A customer leaves Sachs Street in New York.

Scott Eles | Bloomberg | Getty Images

The Sachs department stores set up businesses to accept affiliate payments that cover online sales and physical driving benefits. Saks.com’s legal entity has used the additional capital to improve website and user experience.

“It contradicts what we have learned,” says Steve Dennis, a retail strategist and former vice president of Niamey Marcus. “All online-only businesses are given these nut reviews.”

Dennis said as brands Warby Parker And Allbirds, originally only launched on the Internet, They are now plotting a massive store expansion.. The companies say having more stores will help raise awareness for brands and increase profitable sales.

“If you are Saks.com, an independent organization, there is no doubt that you can have stores,” Dennis said.

Dennis also predicts that there will soon be a slowdown for digital fashion players who are stuck in the house during the epidemic and will be able to navigate the web from the couch. Wealthy consumers have a lot of money in their bank accounts, but that can change as they spend their money on travel, dining, and other activities. He said this would not be good for e-commerce alone.

“It’s hard to see how online fashion won’t have a significant head wind next year,” Dennis said. “You’ve got this dead cat in numbers and an unnatural e-commerce business.”

“This does not mean that e-commerce growth will not continue. But the growth rate will be very moderate,” he said.

Massie Tutsi ‘Retail Ecology’

Makis declined to comment before the Fiscal Third Quarter Report. But in August, CEO Jeff Genet said in a call for a revenue conference that the store chain was running a “fully integrated business” in approximately 800 stores – including Bloomingdale’s – and the website.

“Our commitment to providing a dynamic, seamless omnichannel experience on customer shopping has never been stronger,” he said. “It is clear to me that the overall retail ecosystem is a strong combination of the best shopping malls in the physical stores and the most effective e-commerce offerings outside of the market.”

Messi also said that customers who visit the shops and the website spend two and a half to three and a half times more than those who buy only one channel. He said e-commerce was declining in the regions where the company closed its stores.

Stores serve other purposes, such as online orders as a small endpoint. In the second quarter of the fiscal year, Macy said 24% of digital sales were in stores.

So, while a possible split may increase the price for Macy’s share in the near future, it could cause further headaches later.

Neil Sounds, managing director of Global Retail, says: “This raises a lot of questions about how loyalty plans, branding, product development, marketing and customer relationships work. “There is a huge potential for mud and confusion, especially if different companies want to separate over time.”

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