Saks Fifth Avenue set to pull the trigger of a potential IPO for its rapidly growing e-commerce business with a listing indexed to the first half of 2022 valuing the company at around $ 6 billion, sources say . This is three times its last valuation of $ 2 billion in March, a sign that this e-commerce is the strength of department stores. Macy’s investors would push for a similar scenario.
The increase in valuation is attributed to the Covid-19 pandemic when consumers flocked to e-commerce and buying habits irrevocably changed. Saks reportedly said e-commerce grew 82% in gross merchandise value in the recent second quarter compared to the same period in 2019 before the pandemic.
News of Saks Inc. reported that the IPO had skyrocketed the shares of other retailers, including Macy’s, where activist investor Jana Partners called for a split of Macy’s e-commerce business, claiming that the online entity could be worth over $ 14 billion.
The owner of luxury retailer HBC went ahead with his SEO for the discounted unit Saks Off 5th and its Hudson’s Bay Co., its main Canadian store.
“We do not comment on rumors or speculation,” Saks Fifth Avenue said. “For now, we remain focused on executing our strategy and providing our customers with the best luxury shopping experience throughout our next peak season and beyond.”
“There is an element of getting when getting is good,” said Carol Spieckerman, president of Spieckerman Retail, referring to the reality that the retail recovery could falter next year. “I imagine Saks has aggressive plans to grow their online market after the IPO. As Amazon places more and more brands in its market, including its own private labels in all kinds of categories, Saks can position itself as a more organized environment for better brands.
“These types of alternative games to Amazon will become more and more mainstream as retailers seek to monetize their digital investments and brands fear they will get lost in the Amazon overhaul,” she added. “Not all brands have the aspiration or the resources to create direct-to-consumer digital platforms so that in-market partnerships can be meaningful to many brands. Saks gets the ball rolling and others are already taking note.
Referring to activist investors pressuring Macy’s to dive into e-commerce spinoffs, Spieckerman said, “This is just the start.”
Wall Street has fallen in love with retail e-commerce lately. The US IPO market has been the most active since the dot-com bubble in 2000 with the launch of Mytherea, Poshmark and ThredUp on public exchanges earlier this year. Mytheresea raised $ 407 million after valuing shares at the top of its range, while Poshmark shares climbed 141.7% to $ 101.50 on its first day on the Nasdaq.
The most recent announcement came from Rent-the-Runway. Mytheresa, Poshmark, and ThredUp had strong finances and solid plans for strategic growth, but what will Wall Street do with Rent the Runway, which revealed its subscriber base had shrunk during the Covid-19 pandemic, but began to increase recently.
Saks Fifth Avenue parent company Hudson’s Bay Co. split the luxury retailer’s website and stores into two in March, following a $ 500 million injection from Insight Partners, a company venture capital.
Not everyone thinks the spin-off is a good idea. According to sources, the recovery in retail may not be as robust as the industry would like. The division between physical and online activities may not make operational sense; retailers have devoted time and resources to creating a seamless shopping experience between the two channels.
While splitting the two companies may make sense to increase shareholder value, such moves are often seen as financial maneuvers with investors eager to unlock value. However, their long-term effectiveness is subject to debate.
The current valuation is a 30% premium over what HBC got back when it went private a year ago when it went private a year ago. “This transaction strengthens HBC’s ability to unlock significant value in our company’s assets,” HBC Governor, Executive Chairman and CEO Richard Baker said in March when he announced he was splitting the business. physical and e-commerce systems from Saks.
Wall Street craves retail listings, and while there is potential for short-term financial gain, the higher multiples may not come true. It wouldn’t be the first time investors have turned to retail to sober up when the plans aren’t working as well as they had hoped.