By  on January 24, 2005

NEW YORK — Talks of a merger between Federated Department Stores Inc. and May Department Stores Co. had retail investors in a tizzy last week as the sector undulated from the news.

But by Friday, investors settled into weighing the effect of rising interest rates on consumer spending, as well as tougher earnings comparisons on the results of the first half of 2005. Accordingly, the WWD Composite Stock Index plunged 3.3 percent to 1124.36, while the S&P 500 finished down 1.4 percent for the week to 1167.82.

Regarding a merged Federated-May entity, the one looming question centered on the real estate prospects.

Randy Woodle, managing director for the mall group CB Richard Ellis Inc., an international real estate services firm, predicts that “there is a lot of valuable real estate that could be put in play soon.”

“[The merger] could be a big landlord opportunity,” Woodle said. “If they consolidate real estate in today’s market and close up shops, there would be opportunities for landlords to further diversify their tenant mix at the property. Obviously if you go into a particular city and close half the anchors in the shopping centers it would be tough, but on a case-by-case basis, to receive real estate back would not be a bad thing.”

The industry is also keeping an eye on the possible sale of Federated’s and May’s credit card businesses. One contender is GE.

Speaking of GE, its Consumer Finance division teamed up with Discover Financial Services on a deal with Wal-Mart Stores Inc. to launch a Wal-Mart Discover card. The card, which is expected to be available in March, will have no annual fee and is not limited to use just in Wal-Mart stores. It also offers up to 1 percent back from GE on all purchases, Discover Financial Services said in a Friday statement.

It is Discover’s first deal for a third-party credit card to be processed on its systems since Mastercard and Visa settled a $3 billion antitrust case in 2003. Wal-Mart was one of the lead plaintiffs in the case, claiming the two credit card giants used their market dominance to extract higher processing fees from retailers on certain types of cards.Since that settlement, Wal-Mart has used its clout to negotiate reduced fees, or in some cases, stopped accepting certain debit cards from Mastercard and Visa. Sam’s Club accepts only Discover and its own store credit card.

On the factoring front, “Go West” has been the mantra that most factoring firms have lived by in recent years. But now there’s been some movement back to the East.

Hana Financial, a Los Angeles-based factor, is opening the doors of a new Midtown Manhattan location. An open house is scheduled for Feb. 3.

Hana entered the market in 1994, making it one of the youngest players in the industry, as well as a standout in a decade defined by consolidation. According to the company, Hana is one of L.A.’s largest commercial finance firms, with assets of more than $109 million and factoring volume of $775 million.

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