NEW YORK — Federated Department Stores is anticipating major cutbacks in New Jersey, stemming from what the retailer’s chairman called “onerous” corporate-tax increases passed last week and retroactive to Jan. 1, 2002.
In a letter faxed Tuesday to New Jersey Gov. James McGreevey, Federated chairman and chief executive James Zimmerman also called for the repeal of the taxes: “I can tell you unequivocally that we cannot and will not absorb a $5.7 million New Jersey tax increase without taking commensurate measures to reduce expenditures there,” he wrote.
Among the measures, 50 to 60 union employees at a distribution center are expected to be let go by the end of the summer, Zimmerman said, citing “significant disappointment and deep concern over the onerous corporate tax increase.”
Beyond that, store closings and limited seasonal hirings are anticipated, while store openings and remodels may be scrapped. “We are reviewing each of our stores and other facilities in New Jersey to determine which of those no longer make sense for us to operate in the state’s new economic environment,” Zimmerman wrote. Bloomingdale’s, for example, plans to open a home store in Bridgewater, N.J., by November 2003, next to its apparel store in the Bridgewater Commons mall.
“On the hiring side, we will be limiting additional employees strictly to ‘must-fill’ positions,” Zimmerman wrote.
The new tax legislation brings Federated’s Jersey corporate tax nut to $10.1 million. That consumes 17 percent of Federated’s profits in New Jersey, where the retailer runs 32 Macy’s, five Bloomingdale’s and various logistics operations, and has over 10,000 employees. Federated has more market share in the state than any other retailer.
The tax liability transforms New Jersey from “one of our most desirable states in which we do business to one of the least desirable states,” Zimmerman said in the letter.
Federated’s tax worries cross state lines. “Our concern is that other states will do the same thing,” said Carol Sanger, vice president of corporate communications and external affairs. Other states are also experiencing huge deficits.
In New Jersey, Zimmerman noted, besides the corporate tax, Federated pays out $33 million in local and state taxes, and remits $40 million in New Jersey sales tax — which cost Federated $1.2 million to collect.
This story first appeared in the July 10, 2002 issue of WWD. Subscribe Today.
As of press time, there was no response from the governor.