Macy’s decided against creating a spin-off of its more profitable e-commerce business, after a review by its board of directors determined that the risk to the company and its customers was too high and the business was stronger as a combined physical and digital operation.
CEO Jeff Gennette said the board considered scenarios that included outside investments and a special stock offering that tracked the performance of its digital business. He said Macy’s also asked adviser AlixPartners to “pressure test” the company’s Polaris digital strategy.
“We determined that Macy’s Inc. had a stronger future as a fully integrated company, with Macy’s and Bloomingdale’s together and valuing a wide range of brands, price points and customers across digital and stores,” said Gennette. “Their findings reaffirmed our confidence in the strategy and clarified several initiatives that could be accelerated over the next few years to unlock greater value for our investors.”
These initiatives included a marketplace launched last year, which Gennette says adds an additional $10 billion in value above its $10 billion target, growth in categories such as furniture, bespoke apparel for men, women’s shoes, beauty, dresses, jewelry and watches and the expansion of its store. – intra-store partnership with Pandora from 5 to 28 stores. He also said a partnership with Toys “R” Us led to a doubling of toy sales in 2021.
Gennette said that since 2019, Macy’s has fully integrated its digital and physical businesses and upgraded its supply chain structure into a more omnichannel format, compared to e-commerce and previously separate store inventory that “lacked… ‘efficiency”.
“Today, thanks to our investments, we have a more modern, agile, data-driven and increasingly automated supply chain network,” he said. “We’ve seen the results of this work pay off throughout 2021, from increased speed of delivery to operational efficiency and better inventory utilization.”
In December, experts told Reuters that an e-commerce spinoff was problematic for Macy’s than for Saks, which took this route in 2021, given how heavily the former’s digital business relied on the store footprint for order fulfillment.
In 2019, Gennette said, Macy’s stores prioritized higher-quality malls while accelerating door closures in underperforming locations. “Today, the consumer is increasingly omnichannel, and we are focused on establishing a more appropriate footprint in markets to drive sustainable and profitable omnichannel growth.”
As a result, store closures identified as part of a 2019 resizing plan have been put on hold to maintain a presence in more markets and grow its non-mall format stores.
For the quarter, comparable sales increased 28.3% on an owned basis compared to 2020 and 6.6% compared to the fourth quarter of 2019. E-commerce sales increased 12% year-over-year each other and were up 36% from Q4 2019. 39% of net sales, down 5 percentage points from 2020, but up 9 percentage points from Q4 2019.
Including holiday surcharges, delivery costs accounted for 5.9% of net sales, 19% higher than Q4 2019 but down from Q4 2020.
Chief Financial Officer Adrian Mitchell said Macy’s is focused on reducing those costs by reducing split shipments and increasing the efficiency of in-store fulfillment.
“Improving order throughput per labor hour is an initiative we’re working on, and we’ve been pleased with the improvements we’ve seen in the fulfillment test stores we rolled out in November,” Mitchell said. . “Based on these results, we plan to roll out this initiative to 35 additional sites before the 2022 holidays.”
