Jan Partners is now proposing that Macy’s split its e-commerce business into a separate, privately held company, source says
An activist hedge fund holding a Macy’s stake in the department-store giant is the online playbook of its up-and-coming rival Saks Fifth Avenue, The Post has learned.
In March, Saks spun off its brick-and-mortar business from its online division, later becoming a new private company controlled by Saks, whose value has been fueled by a boom in demand for online luxury goods during the pandemic.
Similarly, New York-based Jan Partners — headed by hard-charging billionaire Barry Rosenstein — is now proposing that Macy’s split its e-commerce business into a separate, privately held company, a source familiar with the situation said. According to.
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Macy’s is reportedly in talks with private equity investors about investing in its e-commerce business, according to a Wall Street Journal report, which first revealed Wednesday’s letter to Macy’s directors from Jana.
In such a deal, Macy’s could potentially take control of its e-retailing business, while securing additional support to accelerate its rapidly growing Web sales. Macy’s says that about 40 percent of its new customers come from its online channels, while it has more than 700 physical stores.
Industry sources tell The Post that by separating the digital business from the brick-and-mortar store, retailers can also better attract tech talent. Saks.com has hired hundreds of employees who used to work for Amazon, Apple, Netflix and Disney, according to a source close to the company.
The source added that these technical experts have improved Saks.com’s search function, site speed and its overall functionality, leading to explosive growth for the company. Saks.com also doubled its marketing budget, which has boosted not only digital sales, but also benefits Saks’ physical stores.
“Go he’s watching” and thinks Messi should do the same, the source said. Macy’s investors seem to agree: Its stock was up about 5 percent last week, compared to a 1.5 percent gain in the broader market.
Last week, Jan executive Scott Ostfeld hinted at the hedge fund’s plan, saying Macy’s e-commerce business as a standalone entity could be worth $14 billion — or twice Macy’s current market valuation. Ostfeld pointed to Sachs as an example of a company that successfully leveraged its rapidly growing e-commerce site.
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The size of the stake held by Jan — which has forced changes at other large companies including Outback Steakhouse, Tiffany & Co. and Whole Foods — has not been disclosed. Meanwhile, Macy’s is working with Goldman Sachs and Wells Fargo to explore its options, the source said. Wells and Goldman declined to comment. Messi did not return a request for comment.
According to the company’s second-quarter financial report, Macy’s online revenue as of July 31 accounts for nearly a third of its total sales and has increased by 45 percent over the same period in 2019. The company also said it added 5 million new customers in the quarter — or a 30 percent increase over the same period in 2019. More than 40 percent of new customers came through the digital channel, the company reported at the time.
According to The Journal, Macy’s chief executive Jeff Gennett has said he expects Macy’s digital sales to reach $10 billion within three years — up from $8 billion currently.
Macy’s has faced active investor pressure in the past. In 2015, Starboard Value took a stake in Macy’s and demanded that its real estate assets be closed down. Macy’s rejected the idea, and Starboard eventually sold its entire stake in the company.
In March, Insight Partners invested $500 million for a minority stake in Saks.com, valuing the company at $2 billion. But the Toronto-based Hudson’s Bay Company, which owns Saks Fifth Avenue, owns most of the luxury retailer’s digital business.
The deal is working so well that Insight Partners was part of an investment group that took a $200 million stake in Saks Off 5th’s digital business, which was spun off from bricks-and-mortar stores in June .
The success that Saks.com is seeing is likely to put pressure on other department stores, including Nordstrom, to separate their digital businesses from stores, the source said.