NEW YORK — The retail ceo landscape here continues to change.
Following management displacement at Saks Fifth Avenue and Bergdorf Goodman, Federated Department Stores Inc. said Tuesday that Hal Kahn, the 58-year-old chairman and chief executive of its Macy’s East division, will retire on Feb. 15. He will be succeeded by Ronald Klein, currently chairman and ceo of the Rich’s/Lazarus/Goldsmith’s-Macy’s, the Atlanta-based division of Federated.For the 55-year-old Klein, it's a return to Macy’s East, where he once served as vice chairman — and his biggest challenge. He has been chairman of the Atlanta division since July 2001.Federated also made several other announcements Tuesday, saying sales for January rose 5.5 percent on a comp-store basis, that the company was raising its earnings guidance for 2003 and the home categories have been centralized under a newly formed Macy’s home store division, based in New York. All home furnishings buying for all divisions, except Bloomingdale’s, will be made out of this central organization. Also, Michael G. Krauter, 46, currently executive vice president and director of stores at Rich’s/ Lazarus/Goldsmith’s-Macy’s, will assume a new position as president and chief merchandising officer of the Atlanta-based division. Krauter will join with David L. Nichols, who will remain as president and chief operating officer of the division, a position he has held since August 2000. No one has been named to the chairman and ceo slots.“The challenges for Ron are to pick up and continue the momentum created by Hal in parts of the stores that are working well, and to drive top-line sales,” said Terry Lundgren, chairman, president and ceo of Federated. “A very important part of that is to manage the transition of the new home store structure. The home business is extremely important, making that a high priority for Ron.” While Kahn’s move appeared surprising, his departure is seen as reflecting a desire by Lundgren to build a new team for the future. It also reflects some issues that Kahn, a brooding, independent sort, reportedly had personally and professionally, including Federated’s increased centralization. Recently the number of stores under his control was decreased when the Macy’s stores in the Atlanta area and in Florida were put under the supervision of the Burdines-Macy’s and Rich’s/Lazarus/Goldsmith’s-Macy’s regional divisions. Kahn has been running Macy’s East since 1994.“In the last couple of years, I made a change in my personal life [he separated from his wife] and I have been thinking about my professional life,” said Kahn on Tuesday. “I love Federated, the Macy’s brand and the organization. But I made a decision to leave and rethink my options, and I leave the company in good hands and in excellent condition. The profit performance has reached a level that I personally never thought it would reach.” Reportedly, Macy’s East exceeded 10 percent in operating profits. It also topped all divisions in total profit dollarsin 2003, which is less surprising since it is the largest of Federated’s divisions. However, sales were hurt by lousy weather, but better merchandising into higher margin businesses, expense reductions, margin control and stock balancing pushed up the bottom line.“My contract was up, I made the decision a while ago to finish the year and this is not a surprise to me or anyone else at Federated,” said Kahn. “The complexity of the job wouldn’t have been as great in the future as it was in the past. I want to take on another challenge.” “Hal is a talented merchant and I doubt if this is his last stop. If he wants to work, he will wind up in something special,” said Robert Kerson, the executive search consultant. “Being a top flight Macy’s merchant means having good fundamentals — buy it, sell it, promote it.” Kahn is also credited with pulling off some difficult divisional mergers at Federated, including integrating the former Abraham & Straus division and Stern’s into the Macy’s group. He has been on a mission to try to differentiate the merchandise at Macy’s and get better suppliers selling competitors to also sell Macy’s.Lundgren did say he had numerous discussions with Kahn about Macy’s southern stores integrating into the regionals, adding, “The stores were competing head-on against each other. It didn’t make a great deal of sense that way.” The Atlanta stores were integrated a year ago; Florida in the past few months.Klein has long been regarded as a rising star in the Federated organization and has a strong background in men’s wear. “He’s very bright. He’s a good manager of people. He’s objective and clear and tells it like it is. Everybody I have spoken to likes to work for him,” said Elaine Hughes of E.A. Hughes & Co. executive search.With more than $4 billion in volume and 104 stores, Macy’s East is by far Klein’s largest assignment, where he will be faced with serious challenges, including how Macy’s continues to differentiate and upgrade its merchandise, improve top-line growth, which has been difficult, continue to wean itself off the vicious cycle of price promoting, provide better service, and integrate the new home store central structure.Kahn, a native of Brooklyn, began his retail career in the executive training program at Abraham & Straus in 1970. He joined R. H. Macy & Co. in 1975, rising to vice president of merchandising in 1979. In 1981, Kahn was named president of Macy’s former Atlanta-based Davison’s division, and four years later was named chairman of Macy’s California. He returned to Atlanta in 1989 as chairman of the-then newly formed Macy’s South/Bullock’s division, remaining in that position until 1992, when he left to become president of Montgomery Ward.Lundgren said under the new management structure at Rich’s/Lazarus/Goldsmith’s-Macy’s, both the merchant and operations principals will report to Susan D. Kronick, the Federated vice chair responsible for all department store operations. Klein, in his new capacity as chairman of Macy’s East, also will continue to report to Kronick, as did Kahn. As chairman of the division operating 77 Rich’s-Macy’s, Lazarus-Macy’s and Goldsmith’s-Macy’s stores in nine southern and Midwestern states, Klein presided over the 2003 integration of Rich’s and Macy’s stores in Atlanta, and the co-branding of all Rich’s, Lazarus and Goldsmith’s department stores with the Macy’s nameplate. Klein was named executive vice chairman of Macy’s East in early 2001, following two years as chairman of Federated’s now-closed Stern’s division. Klein began his retail career in 1974 as a buyer for Bloomingdale’s, serving in merchandising positions of increasing responsibility in several Federated divisions prior to being named vice chairman-director of stores for Macy’s East in 1998. According to Lundgren, “We were fortunate to have had Hal at Macy’s for as long as we did, and for him to leave it in such good condition. This makes it an easy transition for Ron. Ron has worked at the Macy’s East division on two separate terms, as director of stores, and as vice chairman over stores, visual, special events and other areas.”Klein started at Federated Merchandising in men’s as a gmm, moved to supervise the home store at Federated Merchandising, then became director of stores at Macy’s East.Lundgren noted that Rich’s, too, had a good performance last year.As for the new home organization, Lundgren said: “Our intent is to assemble one very powerful talented organization in New York, fielded by top talent from all of our divisions and outside help from national and specialty chains. We appointed Eric Salus president of the home store. Unlike women’s apparel and accessories and men’s, the home business is not terribly different from division to division. In apparel, there is seasonality, weight factors and consumer preferences for fashion that are very different from one region to another. Home is a business that has been the most challenging, because the product is simply not differentiated enough. The sameproduct is found in discounters, department stores and specialty stores. There is too much inventory out there and not enough demand. Our mission is to create this powerful, central home store business, where Federated becomes a very important buyer.” Federated’s better-than-expected 5.5 percent gain in its January’s same-store sales was far ahead of the 1 percent gain or decline predicted earlier. In December, Federated reported comparable-store sales of 1.2 percent, reversing two months of negative comps.Said Lundgren in a statement, “We saw improvement across all merchandise categories and all parts of the country, driven by a continued comeback in career apparel and accessories. While January is a clearance month, we believe the recent trend bodes well for the coming year.” As a result, management upped its fourth-quarter earnings guidance to $2.45 to $2.47 a share, including the effect of a onetime reduction of $38 million, or 20 cents, in net deferred income tax liabilities as a result of anticipated lower effective income tax rates in the future. Excluding the impact of the adjustment, earnings are forecast between $2.25 to $2.27 a share. For the fiscal year, Federated increased its 2003 annual earnings guidance to $3.67 to $3.69 a share, including the effect of the onetime tax adjustment.Excluding the benefit, annual earnings would be $3.47 to $3.49 a share. In addition, the firm expects comps for the year to increase 1.5 to 2 percent. For the first and second quarters, the firm expects comps to increase 2 to 2.5 percent and 1 to 1.5 percent, respectively. For the first half, comps are forecast to increase 1.5 to 2 percent.
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