By  on January 11, 2006

NEW YORK — Don't count Lord & Taylor out just yet.

While most analysts and competitors expected L&T's new owner, Federated Department Stores, to abandon the nameplate, the company now is understood to be weighing the possibility of operating a "pared-down, core group" of Lord & Taylor stores stretching from Boston to Washington, a source said.

Regardless of which option Federated chooses — others it's considering include selling or shuttering L&T — it's apparent that the rapid pace of retail consolidation seen in 2005 isn't slowing in 2006. A decision on the department store's future is expected before the end of the month and would come hot on the heels of Saks Inc.'s move Monday to sell its Parisian division. A sale seen in 2005 isn't slowing in 2006. A decision on the department store's future is expected before the end of the month and would come hot on the heels of Saks Inc.'s move Monday to sell its Parisian division. A sale of Saks Fifth Avenue also is seen as possible after the management shake-up there.

Analysts and retailers portray Lord & Taylor as not fitting into Federated's strategy to build a solid national presence for Macy's and Bloomingdale's. They indicate selling Lord & Taylor is a tough proposition, considering it already was downsized under its previous owner, May Department Stores; it hasn't been performing well lately, and more alluring retail properties, such as Parisian, are on the market.

Lord & Taylor is under deep analysis. According to sources, Goldman Sachs was hired by Federated to gauge the prospects for a Lord & Taylor sale, and determined it would be tough to sell at the price Federated wants. "The analysis suggests that Federated would not get good value by selling the chain as a whole," said a source. Goldman Sachs declined comment.

Separately, there are reports a Federated team is conducting an analysis of the 50-plus Lord & Taylor stores and their viability for the future, involving potential liquidation value, real estate values and what could be gained by continuing to run the operation — in other words, what outcome gives the best financial results. The team is expected to report to Federated's executive committee around the middle of this month and will recommend to the Federated board the best option. Lord & Taylor averages about $20 million in volume per store, with the Fifth Avenue flagship said to post about $140 million in annual volume.

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