Jana Partners Takes Stake in Macy’s, Urges E-Commerce Spinoff

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An activist shareholder has taken a stake in

Macy’s Inc.

M 2.89%

and is urging the famed retailer to spin off its fast-growing e-commerce business, according to people familiar with the matter.

Jana Partners LLC on Wednesday sent a letter to the company’s board prodding it to separate the online unit, which has about $8 billion in annual revenue, the people said.

Macy’s biggest department store rival, Saks Fifth Avenue, plans to separate its e-commerce business from its store operations as part of a deal that includes an additional investment. Macy’s e-commerce business has already drawn interest from firms that could invest in it in conjunction with a spinoff, some of the people said.

Jana believes that a stand-alone e-commerce business would be worth a multiple of Macy’s current market value, which stood at about $7 billion Thursday after a recent rally. Macy’s shares are still down substantially in the past several years, while the valuations of online-only retailers such as

Farfetch Ltd.

and MyTheresa have soared.

Macy’s shares have rallied this year and at around $23 are now more than triple the low they tumbled to in 2020. The company’s market capitalization is down from well over $20 billion in 2015.

Jana hinted at its interest in Macy’s at the 13D Monitor Active-Passive Investor Summit in New York last week, suggesting the retailer should separate out its e-commerce business without saying it had a stake or giving other details.

New York-based Macy’s, which also owns the more upscale Bloomingdale’s brand, like other department stores was hit hard last year by the Covid-19 pandemic, which forced the temporary closure of physical stores. Online sales, meanwhile, have surged as more customers shop from home.

Macy’s Chief Executive

Jeff Gennette

said in February that he expected digital sales to reach $10 billion within three years. For the holiday quarter that ended January 2021, digital accounted for 44% of net sales.

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

Earlier this year, Hudson’s Bay Co. said it was splitting off Saks.com to try to capitalize on the surge in online shopping during the pandemic. (After the financial move, the two businesses are still integrated from customers’ perspective.) Venture-capital firm Insight Partners said it would invest $500 million for a minority stake in Saks.com, valuing the business at $2 billion.

Many retailers have more closely integrated their online and store operations. Stores are increasingly used to fulfill online orders and shoppers can use them to pick up and return digital orders.

This is at least the third time Macy’s has faced a campaign from an activist investor in recent years. But in a sign of how much the retail world has been upended by online shopping and the Covid-19 pandemic, investors previously called for the company to unlock the value of its real-estate holdings.

In 2015, Starboard Value LP took a stake in Macy’s and called on the company to spin off its real estate, which included hundreds of stores in suburban malls as well as in city centers. Macy’s rejected the idea and instead the company promised to find joint-venture partners for its real estate. Macy’s has announced plans to redevelop some spaces and the construction of an office tower atop its flagship Herald Square store in New York City.

Write to Dana Cimilluca at d[email protected] and Cara Lombardo at [email protected]

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Candice Cearley

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