Macy's (M) is staying whole despite pressure from activist investor Jana Partners.
The retailer said Tuesday it would not split off its e-commerce operation in a bid to boost shareholder value. Macy's CEO Jeff Gennette hyped the idea of a split of the business in mid-November.
"Key to the Board’s decision-making were the high separation costs and ongoing costs from operating separated businesses, as well as high execution risk for the business and the company’s customers," Macy's explained in a statement.
Jana pressured Macy's in October 2021 to explore a transaction.
Spinning out the e-commerce business "would be pretty deadline for Macy's overall. So, even though some may benefit, the employees would really suffer and landlords would suffer. And that would probably pretty much mean the end of Macy's," said Forrester retail analyst Sucharita Kodali on Yahoo Finance Live.
Markets took the lack of an e-commerce spinoff by Macy's as a negative, however.
Macy's shares fell 1% in afternoon trading, reversing a nearly 7% early gain as investors questioned the decision and dug into the company's quarter and upbeat outlook.
The department store retailer's fourth quarter same-store sales rose 27.8%, beating estimates for a 25.3% gain. Gross profit margins of 36.5% surpassed analyst forecasts for 35.8%. Fourth quarter profits tallied $2.45 a share versus forecasts for $2.
For the full year, Macy's outlined earnings of $4.13 to $4.52 a share. Analysts expected $3.98 a share.
Kodali said the outlook from Macy's may be too optimistic given the headwinds facing U.S. shoppers such as high inflation and rising gas prices.
"It kind of is in their interest to be as optimistic as possible and to try to persuade investors that Macy's is actually operating from a position of strength," Kodali added.