NEW YORK — As far as comps go, it was a top-notch year for Federated Department Stores, but the same can’t be said for May Department Stores, the rival retailer Federated is said to be eyeing for acquisition.
Federated finished its fiscal year with a gain of 2.6 while May came in with a decline of 2.4.
An analysis of same-store sales of the two department store companies showed that from the beginning of 2004, both were on the same positive track, hitting gains in comp sales for the first three months.
However, May stumbled in April, posting a 8.1 percent comps decline, while rival Federated saw same-store sales rise 5.4 percent. After that, except for a blip in June, May remained mired in negative territory.
“What went wrong was that May had a huge overhang of inventory from the year before that they couldn’t give away,” explained retail consultant Kurt Barnard. “May was able to get rid of some of the inventory in early 2004 through markdowns, and that boosted sales and comps, but not margins.”
Barnard said the merchandise that’s been hitting the sales floor, however, “hasn’t been the kind of stuff people would buy at any price. They’ve marked them down, and marked them down even more, but still no one’s buying and that’s why comps have gotten worse. It’s the reason why Gene Kahn [chief executive officer, until last month] is no longer at May.”
Meanwhile, anticipated consumer spending might not provide much of a boost to May’s nameplates for February.
Retail Forward’s Future Spending Index downshifted in February, indicating that a moderate period of consumer spending is in store for the month. The Index declined to 100.9 from 104.9 in January. Last month, the Index bounded to its highest level in six months, according to Retail Forward.
“Following the healthy post-holiday bounce in spending, consumers appear ready to take a break in February,” said Steve Spiwak, economist at Retail Forward, in a statement.
Spiwak added that the pause in spending was “expected,” reflecting the fading stimulus of holiday gift cards and the recent retreat in the stock market.
But for Barnard, neither the month’s Valentine’s Day nor Presidents’ Day sales events will help May.
“Valentine’s Day is primarily a holiday for the younger set. The problem for May is that its targeted customer doesn’t shop there anymore, and the ones that do — women way over 50 years old — eventually die. The young people stay away from May and that is one clear difference between May and Federated,” Barnard said.
The consultant credits Terry Lundgren, Federated’s chairman, chief executive and president, whom he referred to as a “master of good merchandising,” for that retailer’s success.
“While May is now a rudderless chain, Federated has the younger shopper in its stores. Terry recognized early on that the youth represents Federated’s future,” Barnard concluded.