For immediate release
Chicago, IL – November 8, 2021 – Zacks.com announces the list of stocks featured on the Analysts Blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Recent actions featured in the blog include: Macy’s, Inc. M and Amazon.com, Inc. AMZN.
Here are highlights from Friday’s analyst blog:
Should Macy’s split up its e-commerce business?
A few weeks ago, The Wall Street Journal reported that luxury department store chain Saks Fifth Avenue (owned by Toronto-based Hudson’s Bay Co.) is aiming to go public with its e-commerce division at a valuation of $ 6 billion, which is impacting the industry of retail and prompts investors to consider whether Macy’s would do the same.
The new $ 6 billion valuation for Saks.com is triple the valuation the unit received following the investment from private equity firm Insight Partners earlier this year.
Many have rightly taken this as a sign that the online channels of other department stores, like Macys.com, could have similarly increased, especially after activist investor Jana Partners announced a stake in the department store chain last month; the company sent a letter to Macy’s board urging the retailer to separate its online and physical activities and saying its e-commerce segment is now worth more than Macy’s as a whole is today.
Considering these two catalysts, it’s no surprise that Macy’s shares climbed 17.5% on the day the WSJ report has been published. The Covid-19 pandemic has certainly changed the way we think about the retail industry, as it has highlighted which brands have the capacity to cope with unprecedented circumstances.
If Macy’s moved away from its e-commerce unit, it would be a major event for retail, reflecting how valuable online storefronts have become these days.
But that would not be an easy task.
Macy’s still has hundreds of stores open across the country (compared to just a few dozen for Saks), so separating physical and digital activities would present many logistical and operational challenges. Moreover, management has yet to indicate that it is even considering such a move.
Wall Street analysts also weighed in on the idea. Citibank analyst Paul Lejuez told clients he didn’t think a split made sense for Macy’s, maintaining a sell rating and a target price of $ 20 on the stock. On the flip side, Cowen analyst Oliver Chen argued that while a spin-off is unlikely to happen in the short term, Macy’s e-commerce unit could be worth more than $ 40. per share as an independent enterprise.
Investors, however, are clearly open to the idea. It’s also important to note that Jana Partners is used to approving mega-retail deals; they were part of the mob that pushed the organic grocer Whole Foods Market to be bought out by Amazon.
Macy’s stock has gained more than 174% year-to-date and its market capitalization now stands at nearly $ 9.6 billion. Stocks also remain a good deal, currently trading at a futures multiple of 8.2 times.
The company is expected to release its results on November 18, which will give us an up-to-date snapshot of its online business performance as the ultra-important holiday season approaches.
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