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Here’s why Macy’s isn’t splitting its online business from its stores


As he passes Macy’s New York City flagship store, a man looks at his smartphone.

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Macy’sIt’s not breaking apart after all.

A department store chain announced Tuesday it was going to remain one retailer in spite of being outsourced. pressure from activist Jana Partners to split into two entities.

Jeff Gennette, Macy’s chief executive, explained to analysts that Macy’s had worked closely with advisors in order to explore a variety of options, including the possibility for Macy’s seperating its websites from its stores. He stated that the conclusion of the review was that Macy’s had already started to move in the right direction with its turnaround plans. will accelerate those plans even more so in the coming months.

Macy’s decision may have important implications for retailers like Kohl’s, Nordstrom Dillard’sAll three have been under similar pressures to dissolve. Analysts believe the appeal of an online-commerce spinoff is attractive similar to what Saks Fifth Avenue did early last yearThis is because shoppers are returning to physical stores, while online only businesses have to incur greater expenses in order to gain customers and handle returns and shipping.

Gennette outlined four reasons why Macy’s chose not to spin-off its ecommerce division. Macy’s doesn’t have the capital available to expand its business. A breakup could lead to high separation costs. A third reason is the increased ongoing costs of running two businesses. Gennette also said that there was a risk of customers being discouraged by a dissolution.

According to the CEO, “In any alternative scenario that we examined, the execution risk was too high for the business as well as our customers.” “We concluded that Macy’s is a more integrated company than Bloomingdale’s. We also have Macy’s as well as Macy’s. This allows us to offer a wider range of products, prices and customers digitally and in-store.

Macy’s Chief Financial Officer Adrian Mitchell echoed this sentiment on the earnings conference call and said that Macy’s long-term strategy is durable. “It’s crucial to admit that today, we’re just in a different competitive position than just two years back,” he stated.

Macy’s will, in turn, increase its plans for opening more small-format shops and creating new private labels. The company is also working to launch a digital marketplace later in the year.

Stephanie Wissink, a Jefferies analyst said that it’s not surprising that Macy’s has rejected the idea to split online. She said that the agitist heat in recent months has subsided and Macy’s was not ready to split up.

Jana’s Macy’s holdings were reduced by 84% during the last month of 2021 according to a regulatory filing. This was in response to its October push for Macy’s to dissolve.

CNBC reached Jana Partners’ representative but she didn’t respond immediately to our request.

GlobalData Retail’s managing director Neil Saunders said that both online and offline stores form part of the same ecosystem. He also stated, “Management understands that they work best when the two are aligned.”

Saunders said, “What’s in Wall Street investors’ short-term gains is not necessarily the best interest of the company’s long-term health.”

Macy’s, to be certain, noted that it is not allowing itself to fall from a position where strength has been surpassed by its desire to seperate. better-than-expected results for the fiscal fourth quarter. Saunders indicated that Nordstrom, Kohl’s, and Nordstrom have not been performing as well. It could be making it harder for them to ignore calls from investors seeking to change.

Nordstrom and Kohls will report their quarterly results on Tuesday.

Macy’s shares rose by more than 8.8% Tuesday in the early trades, following a favorable outlook from Macy’s department store chain for 2022. Over the last 12 months, Macy’s stock has risen more than 80%.