Illustration: Aïda Amer/Axios
Retailers have gotten really good at selling stuff online. So much so, investors want them to separate from the business units that do just that.
Why it matters: Spinning off these crown jewels may jeopardize both the physical and e-commerce sides of the companies in the long run by breaking the benefits of hybrid operations, analysts say.
Driving the news: Saks Fifth Avenue’s e-commerce unit is interviewing potential bankers for an IPO, WSJ reported.
- Last week, activist investor Jana Partners took an undisclosed stake in Macy’s as it continues to urge the retailer to spin off its e-commerce arm.
Details: Saks, which was taken private early last year, split off its e-commerce division in March. The value of Saks.com at the time, when it also sold a minority stake to venture capital firm Insight Partners, was $2 billion.
- An IPO could value the standalone e-commerce company at $6 billion, which would be "a no brainer for executives and investors," says Web Smith, founder of 2PM, a B2B e-commerce newsletter.
- Jana Partners says Macy's could boost its valuation by making a similar move to Saks, valuing the retailer's online business at $14 billion as its e-commerce sales explode.
Yes, but: Benefitting from a higher multiple on the e-commerce platform is a short-term benefit, says Zachary Warring at CFRA Research.
- Longer-term, the e-commerce platform would have to invest heavily in new distribution and logistics, he adds.
What to watch ... Whether Macy’s follows in the footsteps of Saks. If so, look out for potential conflicts of interests, such as certain items sold only online, dismissing floor associates and thereby degrading experiences of customers and pushing more customers online, says Smith.
The bottom line: Operationally, the companies would be better off continuing to take a hybrid approach and staying together, says Warring.
- A Macy’s spokesperson referred Axios to the company’s Q2 2021 earnings transcript for its “omnichannel strategy.”
- Jana Partners did not return a call for comment before publication.