Macy’s Decides Against Ecommerce Spinoff


Macy’s has decided against a spinoff of its more profitable ecommerce business, after a review by its board determined the risk for the business and its customer base was too high and that the company was stronger as a combined physical and digital operation.

CEO Jeff Gennette said the board had considered scenarios including outside investment and a special equity offering that tracked the performance of its digital business. He said Macy’s also directed advisor AlixPartners to “pressure test” the company’s Polaris digital strategy.

“We determined that Macy’s Inc. has a stronger future as a fully integrated business, with Macy’s and Bloomingdale’s together and assessing a broad range of brands, price points and customers across digital and stores,” Gennette said. “Their findings reaffirmed our confidence in the strategy and boosted clarity on several initiatives that could be accelerated over the next several years to unlock greater value for our investors.”

These initiatives included a marketplace launched last year, which Gennette said is adding $10 billion in incremental value above its $10 billion target, growth in categories including furniture, men’s tailored clothing, women’s shoes, beauty, dresses and jewelry and watches and expansion of its store-within-a-store partnership with Pandora from 5 to 28 stores. He also said a partnership with Toys “R” Us led to a doubling of toy sales in 2021.

Gennette said since 2019, Macy’s has fully integrated its digital and physical businesses, and upgraded its supply chain structure into a more omnichannel format, vs. previously segregated ecommerce and store inventories that “lacked efficiency.”

“Today, as a result of our investments, we have a more modern supply chain network that is agile, data-driven and increasingly automated,” he said. “We’ve seen the results of this work pay off throughout 2021 from increased speed of delivery to operational efficiency and to better inventory utilization.”

In December, experts told Reuters that an ecommerce spinoff was problematic for Macy’s than for Saks, which took that route in 2021, given how heavily the former’s digital business relied on the store footprint for order fulfillment.

In 2019, Gennette said, Macy’s prioritized stores in higher-quality malls while accelerating closure of doors in under-performing locations. “Today, the consumer is increasingly more omnichannel, and we are focused on establishing a more appropriate footprint in markets to drive sustainable and profitable omnichannel growth.”

As a result, store closures identified as part of a 2019 right-sizing plan have been paused to maintain a presence in more markets and scale up its off-mall format stores.

For the quarter, comparable sales were up 28.3% on an owned basis vs. 2020, and up 6.6% vs. Q4 2019. Ecommerce sales increased 12% year-over-year, and were up 36% from Q4 2019. Ecommerce penetration was 39% of net sales, down 5 percentage points from 2020, but up 9 percentage points from Q4 2019.

Including holiday surcharges, delivery expenses were 5.9% of net sales, 19% higher than in Q4 2019 but down from the fourth quarter of 2020.

CFO Adrian Mitchell said Macy’s is focused on tackling those costs by reducing split shipments and increasing the efficiency of in-store fulfillment.

“Improving order throughput per labor hour is one initiative that we’re working on, and we have been pleased with the improvements we achieved in the fulfillment test stores that we deployed in November,” Mitchell said. “Based on these results, we plan to roll this initiative out to an additional 35 locations before holiday 2022.”