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Why Shareholders Are Pressuring Macy’s to Lean Into Its Digital Business

Shareholders at Macy’s Inc. want the retailer to lean into digital capabilities.

NuOrion Advisors, LLC sent an open letter to the Macy’s board chairman today asking for the formation of a “Digital Special Committee” to oversee specific proposals for its digital business. In the letter, shareholders said they want Macy’s to pursue investments from private equity firms for Macys.com and allow shoppers to use cryptocurrency to make payments.

“We believe that Macy’s has the digital footprint and landmark stores needed to be a World-Class New Age retailer,” read the letter, which also asks Macy’s to form partnerships with EV Car manufacturing and charging companies such as Tesla, Lucid, and Rivian. This partnership would involve implementing charging stations in parking lots and featuring cars in stores to help drive foot traffic.

Across retail, digital businesses have soared in the pandemic. For example, Nordstrom’s digital sales in Q4 represented 54% of total sales, compared to 35% of total sales in the same period the year prior. And while foot traffic and brick-and-mortar sales are picking up, in-store businesses are still recovering from a hit in 2020.

Macy’s is no different. In the second quarter of 2021, digital penetration represented 32% of net sales, up 10-percentage points from 2019. Of 5 million new Macy’s customers in Q2 of 2021, 41% came from digital channels.

And while digital sales declined 6% year over year in Q2, they grew 45% compared to 2019.

Given the digital growth, investors are increasingly pressuring large brands to lean into their digital arms. In October, Jana Partners LLC took a stake in Macy’s and sent a letter pressuring the retailer to split its online and store businesses to capitalize on an impressive digital growth in the last few quarters. Saks Fifth Avenue’s parent company Hudson’s Bay Co. did this in March when it split the retailer’s website and stores into two separate businesses. The move followed a $500 million infusion from a venture capital firm Insight Partners into Saks’ e-commerce unit, which valued the business at $2 billion.

The e-commerce arm of Saks Fifth Avenue has reportedly started preparations to file for an initial public offering and is targeting a valuation of around $6 billion for an IPO in the first half of 2022.

Like Macy’s, Saks’ move to separate its e-commerce and store businesses represent a desire to lean into a successful part of the business that can drive shareholder value. NuOrion shareholders noted this development at Saks, and said that they “believe that Macy’s is better positioned than Saks to execute a digital transformation.”

“The Board is putting Macy’s digital business at significant risk if it does not adapt to the fast changing environment,” wrote the shareholders. “Macys.com needs to have competitive access to capital, the ability to attract additional top talent, and the agility of modern online fashion to best serve its customers.”

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