NEW YORK — Federated is wasting no time digesting May.
Converting Marshall Field's to Macy's in fall 2006 is at the top of the list. Other moves the retailer revealed Tuesday include selling off the May's bridal group of over 700 specialty stores, cutting 6,200 jobs by eliminating May corporate and divisional headquarters and determining the fate of Lord & Taylor by the end of the fiscal year in late January.
It's widely expected that Lord & Taylor, obtained through the acquisition with May Department Stores Inc., will also be sold off. While trading up over the last four years and exhibiting a more focused assortment, L&T hasn't performed up to expectations. Shedding L&T would enable Federated Department Stores Inc. to further concentrate on its ongoing rollout of Macy's and Bloomingdale's into national retail brands.
Federated also disclosed that four May sites will become Bloomingdale's, though Bloomingdale's is expected to pick up a few additional locations via the $17 billion deal, which was completed Aug. 30. The Field's integration will result in Macy's being virtually national, with 850 stores and a particularly strong presence on both coasts.
May's private labels will be discontinued, except for two, Karen Scott and John Ashford. They will be sold at Macy's beginning next fall.
More significantly, Federated will roll its private labels, notably INC, Alfani and Charter Club, into Field's stores around the same time they become Macy's units. Federated's private label program is much stronger than May's, representing 18 percent of the total inventory; May's was closer to 10 percent.
As a result of the consolidation, Federated expects to realize approximately $175 million in cost synergies in 2006 and $450 million in annual cost synergies in 2007 and beyond. Expenses associated with corporate and division consolidations and nameplate changes are included in the previously announced estimate of approximately $1 billion in one-time costs spread over three years beginning in 2005.
The toughest decision was perhaps the one to drop the Field's nameplate, since it means the famed Marshall Field's flagship on Chicago's State Street — considered the most architecturally grand flagship in the country, with its soaring atrium and generous spacing — will become a Macy's. The decision is not too much of a surprise, however, since many observers had predicted that Federated would use the May acquisition to establish a major footprint for Macy's in Chicago. The Midwest has been a major hole in the map for the Macy's chain.
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