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Illustration: Aïda Amer/Axios

Department stores and their investors are obsessed with one retail trend you won't see on the runway: Spinning off their e-commerce businesses.

Driving the news: Macy's is the latest chain to explore such a move.

Why it matters: Department stores were further behind other retailers in modernizing and, as a result, were the most cash starved.

State of play: Investors, particularly activists taking positions in depressed retail stocks, are pushing hard for companies to bolster their cash positions and reinvest in their transformations.

  • Despite Macy's roughly $25 share price in late September, a level not seen since before the pandemic, activist investor Jana Partners argued in early October that the retailer could double its valuation to about $14 billion by spinning off its e-commerce platform.

Catch-up quick: It all started in March when Hudson's Bay announced its luxury subsidiary Saks was splitting off its e-commerce business, subsequently raising hundreds of millions of dollars.

  • Then Macy's, the largest department store retailer in the U.S., disclosed its split review and the retention of AlixPartners after being pressured by Jana Partners. AlixPartners also advised Hudson's Bay.
  • Now, according to sources who asked for anonymity because they are close to such matters, all department stores will at least explore separating their digital platforms.

What we're watching: Likely e-commerce spin-out candidates include privately-held merchants Belk, J.C. Penney and Neiman Marcus, as well as publicly-held banners Dillard's and Nordstrom, the sources say.

  • Sycamore declined to comment on behalf of Belk, its portfolio company. Simon Property, the owner of J.C. Penney, and Nordstrom also did not provide a comment. Neiman Marcus and Dillard's did not respond to a request for comment.
  • Industry sources say the impetus for department stores splitting off their e-commerce units are the standalone valuations such businesses could achieve.

The capital raised can then be reinvested in digital capabilities and remaining stores.

  • And it will take a lot of cash to transform department stores — formerly known for hosting events from dinners to fashion shows and as places to discover new products — back into the kind of physical environments that capture shoppers' imaginations.
  • One of the sources pointed to Restoration Hardware as an example of how to reimagine a business.

The intrigue: Companies such as Authentic Brands Group have innovated by creating corporate structures in which the intellectual property is held by a parent entity, while the operations reside in a separate company with its own group of shareholders.

  • That structure may serve as a kind of prototype, said one source. The idea is for both businesses to remain connected and then to reunite at some point in the future.

Go deeper

Kate Marino, author of Markets
Dec 27, 2021 - Economy & Business

Top CEO worry for 2022: Job security

Illustration: Allie Carl/Axios

Powerful CEOs worry about their job security as much as the rest of us do — in fact, maybe even more.

The big picture: An eye-popping 72% of CEOs are worried about losing their jobs due to the disruptions facing their industries, according to a new report out today from the global consulting firm AlixPartners.

China builds its own movie empire

Expand chart
Data: Gower Street citing Comscore; Chart: Kavya Beheraj/Axios

China blocked all four of Disney's Marvel movies from being released in its theaters last year, a grim sign for U.S. film giants being squeezed out of the world's fastest-growing box office.

Why it matters: The Chinese Communist Party is using domestic films as a key conduit for mass messaging aimed at achieving political goals, leaving little room for foreign views.

Why 401(k) rollovers are so annoying

Illustration: Aïda Amer/Axios

If you happened to change jobs recently, you may have tried to transfer your retirement account from your former employer into an Individual Retirement Account or your new employer's 401(k) plan. If so, you probably encountered a bureaucratic gantlet — and you're not alone.

Why it matters: Kludgey processes around retirement account transfers result in people losing track of their funds, giving up important tax advantages, or otherwise disadvantaging themselves and being less prepared for retirement.