Brief:
- In a surprising move, Neiman Marcus Group decided against separating its e-commerce from its physical stores. The New York Post previously reported that the company was thinking about spinning off its online operations and Bergdorf Goodman banner.
- In an interview, CEO Geoffroy Van Raemdonck distanced the retailer's strategy from that of Saks Fifth Avenue, which divided its online and in-store operations earlier this year. "That's not our cup of tea," he remarked.
- Activist investors have been touting separation as a means to generate value, with this strategy primarily applied to department stores, suggesting the sector's struggling health.
Insight:
Neiman Marcus Group Resists Separation in E-commerce Operations
As a private company, Van Raemdonck can afford to reject this concept more freely than public companies under pressure like Macy's and Kohl's.
Recently, Engine Capital criticized Kohl's for subpar stock results and urged the retailer to consider a split or sale. Macy's, initially reluctant, is now collaborating with AlixPartners to explore new growth avenues, as admitted by CEO Jeff Gennette when addressing Wall Street's preference for online pure-plays.
Saks, privately owned, turned the separation into a profitable venture, attracting $500 million in private equity funds. The now-separated e-commerce company has even set a target for an initial public offering of $6 billion. Other retailers following this path are also owned by HBC, like Saks Off 5th off-price business and Hudson's Bay Co.
In his comments about the matter, Van Raemdonck echoed concerns about integration disruptions. Saks made numerous contractual agreements to preserve connections between merchandising, marketing, and other teams during the process. This strong financial shift suggests that the maneuver may be more about finances than streamlining operations.
Facts:
- Department stores like Neiman Marcus Group, Saks Fifth Avenue, Kohl's, Hudson's Bay Co., and Saks Off 5th are contemplating the break-up of their e-commerce and brick-and-mortar operations.
- Separation can provide operational and strategic benefits, including enhanced operational efficiency, clearer financial management, and tailored brand experiences.
- Potential challenges of separation include integration loss, increased costs, and maintaining brand consistency.
- Retailers separating their operations are primarily doing so to attract investment and leverage financial opportunities rather than streamlining their operations.
In the realm of department stores, Neiman Marcus Group and other businesses like Saks Fifth Avenue, Kohl's, Hudson's Bay Co., and Saks Off 5th are considering the detachment of their e-commerce and physical stores. AI and finance have played a crucial role in this strategy, as Saks' separated e-commerce company has set a target for an initial public offering of $6 billion, backed by $500 million in private equity funds.
