Macy’s CEO, department store veteran, fights the Amazon future

As Macy’s prepares to release its third quarter earnings on Nov. 18 ahead of retail’s biggest season, the most pressing in the litany of investor questions will be: Has Macy’s ability to build a dot-com business inside of a legacy brick-and-mortar foundation reached its limit?

Macy’s, which has said its digital sales will hit $10 billion in 2023, up from $7.6 billion in 2020, will likely say no. But given that Macy’s dotcom sales have been outpacing same-store revenues for years — and that the company operates 788 stores across its portfolio — begs another question: Is Macy’s current management team, led by the “quintessential department store executive,” as one retail investor recently characterized Macy’s CEO Jeff Gennette, the best choice for leading the nation’s largest legacy department store into the new era of retail that is increasingly sophisticated, digital and dominated by digitally-native competitors like Amazon?

Both questions have dogged Macy’s since October, when activist investor Jana Partners implied in a presentation to investors that Macy’s could boost its valuation by spinning off its e-commerce business. Jana, with its history of pushing large retailers to shake up operations, took a stake in Macy’s and soon after that presentation urged the company’s board in a letter to spin off the digital arm, speculating that Macy’s online arm could be worth about $14 billion, roughly twice what Macy’s is valued at today.

Macy’s declined to comment ahead of earnings.

Jana Partners won’t comment on its stake in Macy’s, but a person familiar with the situation said that Macy’s is being urged to evaluate pursuing the same strategy followed by Saks Fifth Avenue of bringing in an investor to its dot-com business to accelerate its growth, highlight its value and better position it to attract top technology talent. This last point was underscored twice recently at Saks, first when a former Amazon exec joined the board of the new Saks.com — which is reportedly readying its initial public offering — and then over the summer, when another former Amazon executive took the COO role at the new standalone Saks Off 5^th e-commerce company.

“Companies are going to be learning from people who aren’t necessarily in their own swim lanes,” said Bernadette Nixon, CEO of Algolia, a technology firm that helps retailers optimize their e-commerce. Nixon predicts that we’ll see lots of senior executive tech talent crossing industry lines. “At the end of the day, we’re in a digital world and Amazon is setting the bar, not Lord & Taylor, Saks, or Macy’s,” she said.

Gennette was appointed to CEO in 2017, tasked then with fixing the waning department store model which was losing ground to Amazon and purveyors of cheap fast fashion. Gennette has been with Macy’s almost exclusively since 1983, when as an…