What: Retail veteran Walter Loeb is wondering what would be at stake should Macy’s follow the lead of Saks Fifth Avenue and the Hudson’s Bay Company, and split its offline and online activities into two specific companies.

Why it is important: It is all about what to do with stores and digital, and how to combine both of them in the most efficient manner possible. What works for a company might not work for others.

Financial activists call for Macy’s to spin off its e-commerce unit (USD 8,45 billion estimated sales in 2021, doubling in the past four years). Walter Loeb recalls that Macy’s and Bloomingdale’s have worked hard to maintain a business model properly blending e-commerce (a third of the business) and store business. Overall, the total merchandise sold generates a profit that allows the company to remain in business across both channels.

Splitting up activities might create unneeded problems:

• In a particular store is unprofitable, in the new scheme, it will have to be written off since the asset is no longer viable, and might generate a snowball effect putting the whole spin off company dedicated to stores under a considerable stress,
• Every resource (warehouses, trucks…), function (CFO, logistics…) and salary in the current Macy’s company will have to be reviewed and prorated across the brick & mortar and digital company. This will generate additional administrative workload which will not be contributing to profit.

For Mr Loeb, a well-managed organization could more smoothly ensure that seamless experience a customer would want. Macy’s being significantly bigger than Saks in terms of store count, he does not believe a split-up would benefit the company as a whole.

Why Macy’s Won’t Survive If It Sells Off Its Digital Business