An activist hedge fund that took a stake in Saks Fifth Avenue is pushing the department-store giant to follow its online rival Macy s, The Post learned.
Saks separated its bricks-and-mortar business from its online division in March, with the latter becoming a new private company controlled by Saks whose value has exploded as demand for online luxury goods rose during the pandemic.
In New York City, Jana Partners — headed by hard-charging billionaire Barry Rosenstein — is now proposing that Macy s split off its e-commerce business into a separate private company, according to a source familiar with the situation.
Macy s is first in talks with private equity investors about investing in its e-commerce business, according to a Wall Street Journal report which discloses a writing sent to Macy's directors on Wednesday.
In such a deal, Macy s could potentially keep control of its in-store e-retail business while securing additional backing to accelerate its fast web sales. Macy s says that 40 percent of its new customers come via its physical channels, the fastest response time possible going to online orders in November.
Industry sources tell The Post that retailers can also attract tech talent by separating the digital business from bricks and mortar stores. 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.
These tech experts have improved Saks.com search function, the speed of the site and its overall functionality, which has led to explosive growth at the company, said the source. Saks.com doubled its marketing budget, which has not only fueled physical sales but also benefitted digital stores as well.
Macy s is seeing that and thinks Jana should do the same, sources said. In the past week, Macy s investors appear to agree: Its stock was nearly 5 percent higher in the past week compared with gains of 1.5 percent in the broader market.
Last week, Jana executive Scott Ostfeld hinted at the hedge fund plan, suggesting Macy's e-commerce business could be worth $14 billion as a standalone entity — or twice Macy s current market valuation. Saks pointed to Ostfeld as an example of a company who successfully leveraged its fast-growing e-commerce site.
The size of the stake taken by Jana, which has forced changes at other big companies including Outback Steakhouse, Tiffany Co. and Whole Foods, hasn't been disclosed. Macy s, meanwhile, is investigating with Goldman Sachs and Wells Fargo to explore its options, the source said. Wells and Goldman declined to comment. Macy s online revenue accounts for about a third of its total sales as of July 31 and it increased by 45 percent over the same period in 2019, according to the company s second quarter financial report. Also, they said it added 5 million new customers in the quarter -- or a 30 percent increase over the same period in 2019 – for an additional 3 million accounts. Macy s CEO Jeff Gennette said that he expects macy digital sales to reach $10 billion within three years — up from $8 billion currently, according to The Journal.
Macy's had previously been under activist investor pressures. In 2015, Starboard Value demanded a steak at Macy's and took over its real estate assets. Starboard s stood its ground, rejecting the idea and later sold its entire stake in the company.
In March in Saks.com invested $ 500 million for a minority stake in Insight Partners, which values the company at $2 billion. But the Toronto-based Hudson Bay Company, which owns Saks Fifth Avenue, continues to hold most of the luxury store's digital businesses.
The deal has been 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 also split from the bricks and mortar stores, in June.
The success of Saks.com will likely cause pressure on other department stores to separate their digital businesses from the stores, including Nordstrom, source said.