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Game Changer

James Zimmerman reflects on Federated's acquisition.

Appeared In
Special Issue
WWD Milestones issue 09/06/2008

By the time rapper Jay-Z got into fashion, there was another Jay-Z already making the scene.

James Zimmerman got his (Wall) Street cred not by busting rhymes, but by executing the nuts and bolts of Federated’s 1992 emergence from bankruptcy and the 1994 acquisition of Macy’s.

Zimmerman succeeded Allen Questrom as chairman and chief executive officer of Federated in 1997, after nine years as chief operating officer, and retired in 2003, leaving behind a department store universe radically different than the one he entered.

The Macy’s deal turned out to be a game-changer for both Federated and the industry as a whole.

“Are we glad we did it? The answer’s not ‘Yes,’ but ‘Hell yes,’” says Zimmerman, speaking by telephone recently.

Despite having the industry on pins and needles for nearly seven months, Zimmerman recalls he felt pretty sure the deal would go through when Federated entered into negotiations to buy Macy’s, which was in bankruptcy at the time.

“We would not have initiated the actions that we took if we weren’t pretty confident that this was a good enough deal for both parties—that it eventually would happen,” he says.

During the talks, Federated bought a significant chunk of Macy’s secured debt, becoming both creditor and suitor.

Zimmerman remembers the backroom meetings with the Macy’s brass, led by then-chairman and ceo Myron E. “Mike” Ullman 3rd, who now heads J.C. Penney Co. Inc., as professional and without much ego.

“This was not dialogue between strangers,” he says, noting the players knew each other. “We just kept talking. I do remember a critical day when we were invited to come to a Macy’s board meeting to make our case—that was clearly a critical event.”

In the end, he says the deal just made sense. Together, the two companies together could simply serve the customer better.

In fact, the Macy’s of today, which also includes the Bloomingdale’s chain, was built by a series of such combinations.

“It’s a hundred different individual brands and family businesses merged into two nameplates and one company,” says Zimmerman, now 64. He lives in Cincinnati, and serves on a number of corporate and nonprofi t boards.

Out of all those businesses and nameplates, why is it that Macy’s has endured to become America’s largest department store?

“The one best nameplate was Macy’s,” says Zimmerman. “The customer recognition of the Macy’s name was measured and was found to be significant—the fireworks, the parade, 34th Street, all the history that Macy’s had, in part because of its success and in part because of its location in New York City.”

The company also owns superior private label names such as INC International Concepts and Alfani and a good bench of retail talent.

“I’m very proud of what was done then and what has been done since,” says Zimmerman. “The department stores that are left other than Macy’s are not of the same size or brand strength or financial strength…compared to Macy’s. That battle has been fought and is now completely, irrevocably over. The new chapter is, how does this entity continue to thrive and change with the times and serve the customer well enough to continue to be the winner?”