Activist Jana Calls for Macy’s to Spin Off E-Commerce Unit

Scott Deveau, Bloomberg News

Customers walk through Macy's Inc. flagship department store in the Herald Square area of New York, U.S., on Thursday, May 13, 2021. Macy's Inc. is scheduled to release earnings figures on May 18. Photographer: Amir Hamja/Bloomberg , Bloomberg

(Bloomberg) -- Activist investor Jana Partners believes Macy’s Inc. could boost its valuation by spinning off its e-commerce business.

Jana said in an investor presentation Wednesday that the retail chain could follow the lead of Saks Fifth Avenue, whose owner spun out its e-commerce business. At a similar valuation, Macy’s online business could be worth about $14 billion, Jana said.

Macy’s as a whole has a market valuation of about $7 billion, including its bricks-and-mortar business. Jana, run by Barry Rosenstein, didn’t disclose whether it owns a stake in the 163-year-old retailer.

Shares in Macy’s rose as much as 3.9% in trading Wednesday, erasing earlier losses. The stock was up 1% to $22.51 at 12:57 p.m. in New York.

In March, Hudson’s Bay Co. sold a stake in Saks Fifth Avenue’s e-commerce business to investment firm Insight Partners for $500 million, separating the division from its bricks-and-mortar business. The deal valued Saks.com at $2 billion, or roughly double its annual sales. HBC and Insight said at the time it would help the standalone digital company to gain market share, and allow more planning and investment in the platform.

Macy’s could structure a transaction in a similar manner, Jana’s Scott Ostfeld said during the presentation.

Insight Partners subsequently led a $200 million investment in the e-commerce business of Saks’s discount chain -- Saks Off 5th -- that also spun off that division as a standalone entity.

A representative for Macy’s wasn’t immediately available for comment.

Macy’s digital sales for 2021 are expected to be about $8.35 billion to $8.45 billion, after nearly doubling in the past four years, according to a company presentation in August. If Macy’s spun off the business at a similar sales multiple to Saks.com, it would be valued at about $16.8 billion including debt, or $14.1 billion on an equity basis.

Retailers are reshaping their businesses to adapt as the world emerges from a pandemic that has shifted consumers’ buying habits, particularly in the apparel market. While online revenue for some sectors has historically lagged in-store sales, the pandemic gave e-commerce a boost as more people shopped from home.

Shares in Macy’s are up 90% this year, including the boost it received in August when it reinstated its dividend and raised sales guidance. Same-store sales, a key retail metric, rose 61% year-over-year in the second quarter for the company’s owned stores.

(Updates valuation, share price starting in third paragraph.)