NuOrion Advisors, a Macy’s shareholder, insisted in a recent letter to Macy’s Chairman and CEO Jeffrey Gennette that the retailer form a Digital Special Committee to evaluate and solicit proposals from private equity firms to make a strategic investment in Macys.com from EV Car manufacturing and charging companies to use ground floor and parking facilities of landmark stores and to pursue the acceptance of crypto payments.
The idea of adding car charging to retail parking lots isn’t exactly new, but NuOrion, which describes itself as “a private investment firm that makes direct investments in undervalued corporate fallen angels that can regain their economic strength,” suggests that a more comprehensive approach to emerging technologies could have particular benefits. With car changing part of the retailer’s strategy, it could make more of the operation than as an ancillary service and cash stream, encouraging shoppers to charge at its locations during the course of shopping trips as a convenience. In doing, so Macy’s could not only help consumers take care of a chore but also encourage visits and lengthening their duration in the shopping world that is emerging from the COVID-19 pandemic.
In a related development, the crypto payments issue came to the forefront in retailing, recently, when media reports emerged recently about Walmart accepting such payments, one that wound up spurring denials until it turned out that Coinstar kiosks in certain Walmart stores would offer bitcoin, not Walmart itself.
NuOrion’s letter to Gennette stated:
On October 14, 2021, we sent a letter requesting that the board of directors give immediate consideration to a proposed path to unlock the full value of Macy’s digital business. We believe that Macy’s has the digital footprint and landmark stores needed to be a World-Class New Age retailer.
Macy’s share price is materially undervalued and requires urgent action to unlock value. We believe that by adopting the strategies discussed below, Macy’s would be worth more than $75 per share.
Macy’s should form partnerships with EV car companies (e.g. Tesla, Lucid or Rivian) to showcase their products on the ground floor of Macy’s 100 top landmark stores (e.g. Herald Square, Marshall Field, Union Square) and to use their massive parking footprint to build an EV charging network. Atom Power, a leader in EV charging, is adding more than 1,000 charge points in NYC alone. Atom Power could similarly add charging stations throughout the Macy’s store footprint. We believe that direct association with EV companies will drive enormous traffic to Macy’s stores.
In addition, Macy’s should announce immediately that they are partnering with various crypto platforms to allow digital payments. Macy’s can be one of the first major retailers to accept crypto, joining companies like Starbucks and Whole Foods.
As part of the digital transformation, it is incumbent upon the board of directors to evaluate a strategic investment in Macys.com from outside investors. In March 2021, Saks Fifth Avenue announced that Insight Partners invested $500 million in Saks.com at a valuation of $2 billion, or 2 times sales. It is our understanding that this was the result of a highly competitive process managed by Morgan Stanley that attracted significant interest culminating in seven proposals from private equity firms. In addition, on October 17, the Wall Street Journal reported that Saks.com expects to go public at a valuation of $6 billion. In comparison, Macy’s current market capitalization is $9.5 billion with an enterprise value of 0.6 times its $24 billion 2021 expected sales. We believe that Macy’s is better positioned than Saks to execute a digital transformation.
The board is putting Macy’s digital business at significant risk if it does not adapt to the fast changing environment. Macys.com needs to have competitive access to capital, the ability to attract additional top talent, and the agility of modern online fashion to best serve its customers.
We believe inaction is the highest risk strategy for the board and its shareholders.
Sincerely,
Guy Phillips
Managing Member NuOrion Advisors, LLC
