NEW YORK — As the industry digested the news of the Federated-May combo, one question whirled through offices on Tuesday: Who’s next?
The industry has been rife with speculation in the last few months over who’s buying or merging with whom. Observers said that, whatever the eventual size, shape and makeup of the new Federated Department Stores group, one thing is certain: The deal is likely to accelerate the takeover tango.
It will involve vendors as much as retailers. Already there has been speculation that Liz Claiborne Inc. was in talks to buy Ann Taylor Stores, and that the likes of Jones Apparel Group, Kellwood and VF Corp. remain on the prowl for smaller brands to gobble up and develop into megalabels.
And with the American consumer only lukewarm on apparel and Wall Street’s insistence on growth, it’s not that farfetched that two major vendors could join forces in as dramatic a move as Federated’s $17 billion acquisition of May Co. to create a $30 billion giant, executives said.
As Kellwood Co.’s chairman and chief executive officer, Hal Upbin, noted of the Federated-May fallout: “At the end of the day, we certainly don’t become any stronger.”
Though not speaking of Kellwood specifically, Upbin agreed that more vendor consolidation is a possibility.
“There’s always an opportunity there,” he said. “What troubles me a little bit is, even if one were to put a couple of fairly large-sized companies together, I wonder does it really put [them] in a different place vis-à-vis their relationships with Federated and May?”
Rather, there are other reasons to combine. A merger between vendors would take cost out of the supply chain and give the manufacturers more leverage over their own suppliers, he said.
That could set off a seemingly endless scenario of bigger fish-swallows-littler fish until there are only a handful of large retailers and vendors left in the U.S. It already was a joke making the rounds in the industry on Tuesday, with some executives claiming that, in the end, there would be only four retailers and four vendors left to serve them. The coming year has repeatedly been described as “interesting times” by industry executives, who clearly are nervous about the whirlwind of consolidation hitting retailers and manufacturers.
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