As Macy’s Officially Revisits Dot.com Spinoff, Attention Shifts to Who Might Be Next

For more than 150 years, “The Magic of Macy’s” has been more than a slogan for the country’s quintessential department store, not only belying its marketing muscle and brand clout, but also its ability to outlast — and often consume — so many of its rivals.

For all its many twists and turns, Macy’s — and the department store category itself — has been struggling to reinvent itself and find relevance for years, but especially during an unprecedented time of consumer upheaval. In fact, earlier this year, Macy’s went as far as dropping its use of the “D-word” (department store) altogether, in favor of the linguistically challenged “digitally-led omnichannel retailer.”

See also: Macy’s Embraces ‘Omnichannel Digital Retailer’ Mantra, But Lags Behind Peers

And yet, in just a matter of months, the real “Miracle on 34th Street” has come at the behest of activist investors pressing the company to unlock the hidden value of its digital platforms, by separating them from the headwinds weighing down its physical retail stores.

In short, with little more than a 1% stake in what, at the time, was a $10 billion company, New York-based investment firm JANA Partners has triggered a re-think rally by demanding the company do what rival Saks Fifth Avenue did with its own .com unit earlier this year.

For Macy’s part, that speculation has pushed its stock to a two-year high thanks to a 230% gain so far this year, far outpacing any recent plans or promos the retail has unveiled — at least by that one, short-term measure.

Just Looking, Thank You

To be sure, rising stock prices are appealing, and usually a good indication that things are moving in the right direction. However, the actual nitty-gritty work of running a nationwide chain of stores and websites is an entirely different metric and conversation. While the current pop in the share price is nice for investors and a relief for management, it is no indication that Macy’s operations or fortunes are any different today than they were a year ago, when its flagship Thanksgiving Day parade — and most of its 700 stores — were shut down due to COVID.

On a call with investors on Thursday (Nov. 18) to discuss the company’s latest earnings results, Macy’s Chief Executive Officer Jeff Gennette confirmed that the retailer had attained the services of corporate turnaround advisory Alix Partners to independently analyze the long-term pros and cons of spinning of the digital asset as a stand-alone.

“Our focus is to ensure that the omnichannel behavior of customers is going to be respected at all costs,” Gennette said in response to questions, showing no change of heart in his company’s commitment to its “Polaris” strategy.

“I think the omnichannel behavior is irrefutable and we need to respect that,” Gennette said, noting that Macy’s is looking at a range of things surrounding the costs and benefits of operating as one integrated business versus two separate businesses. “Ultimately, we just need to see that the additional shareholder value can be unlocked beyond the potential of our current approach with our digitally-led omnichannel Polaris Strategy.”

Saks, Macy’s and Who Else?

With the precedent of rival retailer Saks already spinning off its digital unit, alongside the nudge of a shareholder urging them to do so, Gennette added that “based on how the market is assigning value to eCommerce businesses right now,” the decision to do fresh, further analysis was not difficult. “We added AlixPartners … as an objective third-party firm to really pressure-test all of our analyses, and so we’re in the middle of that work, and we need to complete our analysis, and we plan to provide an update after the work is complete.”

As for industry watchers and investors, it was clear that the 20% spike accompanying Macy’s announcement that it was studying its option was highly contagious throughout the retail patch, where shares of Kohl’s rose 10%,  Nordstrom was up 6% and Gap rallied as much as 7%.

Whether Macy’s — or any other legacy retailers — actually follows suit and decides to make the jump and split the dot.com from the department store remains to be seen. In the meantime, as the analysis plays out and the speculation derby ensues, the short-term moves can be seen as something of an early holiday gift, assuming they don’t have to be returned in the new year.