font-family:"Arial",sans-serif">Macy’s rejects calls from Jana Partners for online
business spin-off
- font-family:"Arial",sans-serif">Forecasts an upbeat outlook for 2022 amid
continued macro headwinds, including inflation, supply chain pressures, and
labor shortages
"Arial",sans-serif">Macy’s Inc (NYSE: M) on Tuesday decided
not to separate its e-commerce business, which an activist investor has been
pushing for, after the departmental store forecasted better-than-expected
annual sales.
"Arial",sans-serif">After a strategic review, the company said that both brick-and-mortar
stores and online stores, together with Polaris strategy, will deliver more
excellent value to the shareholders than the spin-off.
"Arial",sans-serif">The Polaris initiative, which Macy’s announced in 2020, comprises
five major components, which include strengthening customer relationships, curating
quality fashion, optimizing store portfolio, and accelerating digital growth,
to stabilize profitability and position the company for growth.
"Arial",sans-serif">“We are more confident in our path forward as one
integrated company,” Chief Executive Jeff Gennette said.
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"Arial",sans-serif">Macy’s also announced a $2 billion share buyback plan and
raised its quarterly dividend by 5%, sending its shares up by 9.8% to $28.21 in
early trading in New York.
"Arial",sans-serif">However, the company dropped 5.2% to $25.99 from its Monday
closing price.
font-family:"Arial",sans-serif">Better-than-expected Q4 earnings
"Arial",sans-serif">The biggest departmental store chain in the U.S. reported
its fourth-quarter earnings on Tuesday, which outpaced analysts’ expectations
after benefitting from higher prices and its efforts to speed up shipments for
the holiday quarter.
"Arial",sans-serif">Macy’s reported that its revenue jumped nearly 28% to $8.67
billion from a year earlier, beating expectations for $8.47 billion, and its
net income rose over four and a half fold year-over-year as the COVID-19
pandemic devasted the 2020 holidays season and business from the physical
stores.
"Arial",sans-serif">While same-store sales, both owned or licensed by Macy’s, jumped
27.8% compared to a year earlier, topping analysts’ estimates, digital sales
rose 12% from fourth quarter 2020.
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"Arial",sans-serif">The company said its e-commerce business represented 39% of
net sales.
"Arial",sans-serif">Macy’s, which also owns Bloomingdale’s and beauty store
chain Bluemercury, has been beefing up its online business and garnered 58% of
the 7.2 million new customers that it added in the fourth quarter.
"Arial",sans-serif">The departmental store chain said it expects net sales
between $24.46 billion and $24.70 billion for fiscal 2022, above expectations
of $24.23 billion.
font-family:"Arial",sans-serif">Turnaround plans
"Arial",sans-serif">Gennette said Macy’s board decided against a split after a
four-month “comprehensive review of the company’s e-commerce and brick and
mortar operations,” mainly due to “the high separation costs and ongoing costs
from operating separated businesses, as well as high execution risk for the
business and the company’s customers.”
"Arial",sans-serif">Activist investor Jana Partners, which had taken a 1.5%
stake in the company last year, had urged Macy’s to spin off the e-commerce
business, like its luxury department store rival Saks Fifth Avenue had done in
2021.
"Arial",sans-serif">At the time, Jana said Macy’s online business could be
worth $14 billion – or twice as much as the company’s market value.
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"Arial",sans-serif">Macy’s turnaround plans have been winning back customers
who had left the department store chain over the past decade for rivals such as
Nordstrom and big-box chains like Target or who shop directly from brands like
Nike.
"Arial",sans-serif">To maintain its sales, Macy’s is launching more of its private
labels, revamping its loyalty program, overhauling its website.
"Arial",sans-serif">The company is investing in opening smaller, off-mall shops
with a more modern look called Market by Macy’s and also testing smaller
Bloomingdale stores, Bloomie’s.
"Arial",sans-serif">Macy’s said it will also launch a digital marketplace to
sell more third-party brands.
"Arial",sans-serif">Picture Credit: Fortune
