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Federated Could Make Barneys Play

NEW YORK — Federated Department Stores is looking for an acquisition candidate, but the question is whether Barneys New York is a good enough fit.<BR><BR>Although representatives for both firms declined comment, some industry sources said a...

NEW YORK — Federated Department Stores is looking for an acquisition candidate, but the question is whether Barneys New York is a good enough fit.

Although representatives for both firms declined comment, some industry sources said a Federated play at Barneys is workable.

Indeed, there were strong rumblings in the market that Federated was taking a very close look at Barneys and in possible discussions with the retailer. But other sources downplayed the possibility of Federated making a run at Barneys.

Investment bankers told WWD that even if there might be limitations on expansion opportunities for Barneys’ Co-Op concept, it still could be a good move for Federated “if the price was right.”

The initial deadline for bids on Barneys is Aug. 17, and it is too early to tell which firms might actually step up to the plate.

Christine Augustine, retail analyst at Bear Stearns, said, “I think that they absolutely have looked at it. Why not? They look at everything. It all depends on price. The issue with Barneys is what locations make the most sense.”

Augustine noted that with all the interest in retail real estate, she could foresee Barneys’ assets being split up with some real estate going to one player and the flagships sold to another party.

Walter Loeb of Loeb Associates believes Federated is planning to stick with what it knows best while continuing with its “reinvent” strategy. That initiative includes upgrading all of its department stores with better customer services, new technologies and differentiated merchandise. It is an evolution of Macy’s into a national chain with regional nameplates all taking on a hyphenated form, such as Rich’s-Macy’s.

But there’s another indication that Federated, while eyeing expansion opportunities, might be concluding that there’s really nothing in the market worth buying. What it is buying is its own stock.

The company said on Wednesday that it expects to buy back between $700 million and $900 million of its stock this year, on top of the repurchased stock worth $351 million year-to-date.

“Federated is looking to make an acquisition for growth. However, the board’s authorization of additional share repurchases could be a way of them saying that there’s nothing out there that’s very compelling right now,” Augustine said.

— Vicki M. Young