By  on June 17, 2005

NEW YORK — Does Lord & Taylor fit into Federated's future?

As Federated Department Stores nears completion on its $17 billion purchase of May Department Stores — which is expected to close in the third quarter of the year — speculation is intensifying over which of May's nameplates Federated will keep and which it will either dispose of or convert to Macy's or Bloomingdale's. And at the top of the list is Lord & Taylor.

Terry Lundgren, the chairman and chief executive officer of Federated, has been careful not to tip his hand about plans for the May chains. But he's repeatedly stated that the company's objective is to focus its operations on the Macy's and Bloomingdale's names. Even as far

tip his hand about plans for the May chains. But he's repeatedly stated that the company's objective is to focus its operations on the Macy's and Bloomingdale's names. Even as far back as September 2004, prior to the merger announcement, Lundgren said: "Macy's has been gradually trading up to higher quality products to position ourselves as America's department store. We think we can accomplish that."

Deborah Weinswig, a retail analyst at Citibank Smith Barney, who caused a stir on Monday with a research note that placed a $384 million price tag on the Lord & Taylor flagship on Fifth Avenue, said that if Federated wanted to hold on to the chain, the major obstacle would be the government.

"There is no way the FTC [Federal Trade Commission] will allow Federated to keep Macy's, Bloomingdale's and Lord & Taylor," she said in an interview, noting that a ruling is expected in two months. "Federated would become too dominant a presence. From a performance standpoint, L&T doesn't measure up. The L&T banner is not going to be the one that survives. Marshall Field's has been chosen as the one to survive."

L&T units overlap with Bloomingdale's or Macy's stores mainly in Southern California, Boston and Manhattan. May has closed 25 of the 32 underperforming L&T units it was planning to darken. The chain now stands at about 54 stores.

But even if Federated keeps L&T, observers believe the future of its Fifth Avenue flagship is cloudy. The flagship is underperforming the New York flagships of Saks Fifth Avenue and Bloomingdale's, which do sales of about $1,000 per square foot. L&T's sales per square foot are said to be lower, retail experts said.

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