Macy’s shares have risen thanks to the news about the launch of the online trading direction

Shares of American retailer Macy’s Inc. (M) rose 17.51% to $28.25 at auction on October 18. The reason was a report by The Wall Street Journal about the entry of a competitor Saks Fifth Avenue into the public market with an e-commerce division. 

Saks Fifth Avenue intends to bring its online trading division, which can come at $6 billion, to the public market. Saks Fifth Avenue is the closest competitor to Macy’s, so investors took this high evaluation of a competitor as a sign that Macy’s e-commerce division may cost more than previously thought. 

Earlier, the investment company Jana Partners called on Macy’s management to separate the online trading division into a separate business. The reason cited was its high revenue of about $8 billion, which makes the unit’s valuation higher than that of Macy’s itself as a whole. 

However, the separation in the case of Macy’s will not be as simple as that of Saks Fifth Avenue, which has only a few dozen physical stores. Instead, Macy’s has hundreds of stores that need financial support from the e-commerce segment. 

Therefore, separation may be a less attractive idea for the company’s management. However, the separation may still occur in the future. Macy’s will attract funds for business development through the IPO of its online trading division while maintaining partnerships with its former division. 

Thus, Macy’s has the potential to raise significant funds through a spin-off. But even if this does not happen in the next two years, the company still has an e-commerce business with growth potential. In 2020, Macy’s annual sales approached $22 billion with a market capitalization of less than $9 billion.