E-commerce

Macy’s new marketplace could bolster calls to separate its e-commerce business, one analyst says – MarketWatch

Summary

Macy’s Inc. talked up the launch of a new marketplace as a way to further build out its merchandise assortment and e-commerce business, but GlobalData says a new marketplace could doom the department-store retailer’s traditional business.

Macy’s
M,
-1.89%
announced plans to launch a curated digital marketplace alongside third-quarter profit that soared past expectations. The marketplace, which is expected to launch during the second …….

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Macy’s Inc. talked up the launch of a new marketplace as a way to further build out its merchandise assortment and e-commerce business, but GlobalData says a new marketplace could doom the department-store retailer’s traditional business.

Macy’s
M,
-1.89%
announced plans to launch a curated digital marketplace alongside third-quarter profit that soared past expectations. The marketplace, which is expected to launch during the second half of next year, will be created in collaboration with marketplace technology company Mirakl.

Macy’s Chief Executive Jeff Gennette says the company’s digital business is en route to $10 billion by 2023.

Expanding into new categories and brands is driving growth, according to Gennette. Toy sales have more than doubled versus 2019 since the Toys ‘R’ Us partnership launched in August, for instance.

See: Target says measures to manage the supply-chain bottleneck has pressured margins, but analysts say it’s worth it

Macy’s has been under pressure from activist investors Jana Partners LLC to separate its e-commerce business from the bricks-and-mortar business, according to reporting by The Wall Street Journal.

Macy’s has conducted an analysis of the business as part of its turnaround strategy, which is focused on serving customers across platforms. But Gennette says the company is taking another look.

“It is too early to tell what the results of this additional analysis will be, but we plan to update everyone after the work is complete,” he said on the call, according to a FactSet transcript.

GlobalData says the marketplace is the result of “misplaced thinking.”

“A possible danger of the marketplace is that it will decrease the overlap between stores and online which will, in turn, amplify the calls for Macy’s to spin off e-commerce,” wrote Neil Saunders, managing director at GlobalData, in a note.

“At present this is a strategy management firmly resists – and is something we applaud them for – but we do not see the matter going away any time soon. In our view, tearing digital and store asunder would be a huge mistake and would, over time, be the death-knell for Macy’s as a mainstream brand.”

Also: ‘Fighting inflation is in our DNA’: Walmart says its pricing and inventory can deliver for the holidays

Moreover, Saunders highlights other problems that Macy’s has, including stores that are an “atrocious mess” and “mediocre” customer service.

Credit Suisse analysts maintained their underperform stock rating after the earnings announcement, though they raised their price target to $32 from $19.

“While we have concerns that longer-term incremental industry pressures will restart by late 2022, our raised target multiple reflects better near-term execution by Macy’s and potential for new value unlocks (like a bigger marketplace model) in 2022 and beyond,” analysts wrote.

Investors have been far more optimistic about the stock, with shares …….

Source: https://www.marketwatch.com/story/macys-new-marketplace-could-bolster-calls-to-separate-its-e-commerce-business-one-analyst-says-11637609072

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