By  on September 21, 1994

NEW YORK -- In an announcement that had been widely expected, Federated Department Stores said Tuesday it will merge its Abraham & Straus and Macy's East divisions and has put Harold D. Kahn at the helm of the combined operation.

The consolidation is expected to occur late this year or early 1995 depending on the consummation of the Federated/Macy's merger.

It will create a $4.3 billion chain -- Federated's largest -- with department stores in 16 states from Maine to Florida. The new division will be run at Macy's Herald Square offices and will result in another round of massive layoffs, this time at the A&S central office in downtown Brooklyn, where there are about 350 employees including 90 buyers.

The consolidation of Macy's and A&S will be a huge project, eased somewhat by the fact that both divisions use the same SABRE merchandise information system.

Beginning in fiscal 1996, Federated expects to realize expense savings of over $50 million annually from the consolidation of the two divisions, excluding one-time costs. These savings represent a significant portion of the $71 million total savings expected to result from the Federated/Macy's merger in fiscal 1995, and of the $122 million annual expense savings expected from the merger, beginning in fiscal 1996.

Kahn, chairman and chief executive officer of A&S, is considered shrewd, street smart and one of the top merchants in the industry. He will hold the same titles at the new division. Kahn joined A&S last February after serving as president of Montgomery Ward, and has been jumpstarting the two-year-old consolidation of Jordan Marsh into A&S.

In his new post, Kahn becomes the fourth highest ranking official at Federated, behind Allen I. Questrom, chairman and ceo, James Zimmerman, president, and Terry Lundgren, head of Federated Merchandising.

In an interview, he said his first priority is to put together a new team by mid-November so spring planning won't be delayed. Some key appointments have already been made. David Suliteanu, 41, will be president and director of stores for the consolidated Macy's East, a post he's held at Macy's East since August 1993. Leonard Marcus, president of A&S, will become president of Stern's, a post that's currently vacant.

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