By  on July 29, 2005

NEW YORK — Macy's will balloon next year to 730 units that will occupy almost every major U.S. market.

Federated Department Stores Inc., owner of Macy's and Bloomingdale's, disclosed a game plan Thursday for its $17 billion merger with May Department Stores Co. that calls for the giant retailer to convert 330 May stores to Macy's nameplates in fall 2006.

The fates of two of May's best-known divisions, Lord & Taylor and Marshall Field's, haven't been decided, but Lord & Taylor will not be converted to Macy's, the company said. In addition, Terry Lundgren, Federated's chairman, chief executive and president, said in an interview that five to 10 May stores may become Bloomingdale's.

Federated identified 68 duplicate locations [in 66 malls] to be divested starting next year. That includes 41 May stores operating in 12 states under various nameplates, and 27 Macy's in 14 states. Dillard's, Nordstrom and J.C. Penney are likely to be among the rival chains most interested in many of the sites.

The company said stores to be shed represent $2 billion in volume, which means the combined Federated-May empire will have about $28 billion in sales. Sears is considered the nation's largest full-line department store chain with over $30 billion in sales; Macy's becomes the second largest. About 50 percent of the May sites are company owned; 50 percent are leased.

Ever since Federated purchased Macy's in 1994, rescuing it from bankruptcy, management has sought to catapult the brand into a national chain that gives Macy's greater buying clout and the ability to advertise nationally, roll out private label brands such as INC and Charter Club, cut millions in expenses and have a wider web for luring talent.

Among the challenges will be keeping the chain's fashion edge and servicing the increased debt from the merger and integrating management and technologies.

"Being merchant-driven has been the mantra, but fast response and taking fashion risks doesn't typically find a home in large and inevitably bureaucratic retail organizations," said Isaac Lagnado, president of Tactical.org., a consulting firm. "How do you keep creativity and experimentation within the context of a multibillion-dollar entity?"

Federated operates 450 department stores. Last year, the retailer had sales of more than $15.6 billion. May had sales of $14.4 billion.

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