Macy's Targeted by Activist Investors - What Now?
What does Jana Partners investment in Macy's signal? Essentially the combination of two things: 1 - Water finding its level, and 2 - Pattern matching gone awry.
The simple formula goes something like this -- Market valuations on retail revenue are something like 1 - 1.5x revenue. Market valuations on revenue from marketplace businesses seem to be something like 3-4x revenue. From D2C? 5-6x.
Of course these fluctuate, but you can see what investors are doing pretty quickly.
How about customers? How about employees? Well, CEOs that are quick to get investment for a business which would NEVER be able to attract investment at these valuations are happy to sign deals stitching together alternative operating structures, with as many as 300+ operating service agreements to make it all work.
In the short-term, this will significantly boost the digital operations of these firms. It is also extremely like that these moves will essentially cut loose the retail arm of these firms, at least in terms of being able to get new investment dollars.
After all, it's much easier to pretend you're a tech company CEO than make tough decisions.
The big questions for me - - In 2021, what is the primary reason for Macy's to exist? What is it's point of view? That is still murky for me besides "more digital".
- Will the brands supporting Macy's support it? Many of the traditional brands on Macy's do not like Amazon. And this would be Macy's becoming more like Amazon, in some sense.
Put another way, do you think that Macy's will buy more inventory after the split or less? If anything, you have to think Macy's will become more like a marketplace, add a retail media business, and later follow with fulfillment services.
This is inevitable, and will be spreading more to other markets as well, so get ready.
