FEDERATED MERGES RICH’S, LAZARUS INTO $2.2B UNIT
Byline: David Moin
NEW YORK — In another massive consolidation, Federated Department Stores will fold the operations of Lazarus in Cincinnati into those of Rich’s in Atlanta, forming a $2.2 billion division and eliminating 700 jobs.
This is the second major consolidation move made by Federated since its takeover of R.H. Macy & Co. on Dec. 19.
It has already begun consolidating Abraham & Straus into Macy’s East, triggering 650 layoffs through December at the soon-to-be-shuttered A&S central office in downtown Brooklyn. A&S stores will be renamed Macy’s, Stern’s or Bloomingdale’s. Sears, Roebuck & Co. has bought two A&S units.
Unlike the case at A&S — where one of retailing’s oldest names will disappear — Federated said the Lazarus and the Rich’s nameplates would be retained.
“We feel it is very important at this particular time to maintain individual division identities in these markets,” said a Federated spokeswoman.
The five Goldsmith’s stores included in the 25-unit, $1 billion Rich’s division in the South will not undergo any name change. The $1.2 billion Lazarus has 50 stores in the Midwest.
“Rich’s has a larger better business we can take on the road to Lazarus stores,” said Russell Stravitz, chairman and chief executive officer of Rich’s, who will run the combined division. “There are opportunities in men’s wear, women’s and hard goods. Demographically, in terms of population and income, it’s a pretty good fit. There’s a big opportunity in expense savings, which is important. The challenge is to work on sales and margins.”
Rich’s sales have been running at about a 5 percent growth rate, which it hopes to continue through 1995. It is Federated’s best division in terms of operating profits, and is said to be around 10 percent, exceeding Bloomingdale’s 9 percent rate last year.
Stravitz would not provide figures.
In a statement, Allen I. Questrom, Federated chairman and ceo, characterized Rich’s as “one of Federated’s most successful department stores, backed by an exceptionally strong and experienced merchandising organization.” The Atlanta economy has also been one of the stronger in the country, and Dillard’s is planning to open a store in that market. (See story, page 2.) Bloomingdale’s and Nordstrom are also interested in moving in.
There has been speculation that Federated plans to put the Macy’s sign atop many of its stores, including Lazarus and The Bon in Seattle, which market sources believe could be merged into the San Francisco-based Macy’s West.
Federated has a three-tiered strategy for the second half of the Nineties to focus on Macy’s, Stern’s and Bloomingdale’s divisions. Asked if any of the other division names will be dropped, the spokeswoman replied, “I don’t think we have addressed that issue. There are no plans to do so.”
Lazarus and Rich’s are both full-line department stores with similar resource structures catering to more conservative customers seeking classic and traditional merchandise in moderate to upper moderate prices.
However, Rich’s is stronger in the upper price ranges, and the plan is to broaden the scope of Lazarus offerings, without giving up its strength in lower prices. Lazarus has also been more promotional than Rich’s.
“Lazarus ratcheted down too far,” said one source, noting that in past years, the division has carried some bridge and designer goods.
Federated hopes to realize $27 million in annual savings through the consolidation, beginning in 1996. One-time costs related to the move are expected to total about $50 million, and will be charged in the fourth quarter of fiscal ’94 and in fiscal ’95.
The 700 Lazarus jobs in Cincinnati will be cut in the first half of this year in the areas of merchandise buying, advertising, marketing, human resources and finance. In Atlanta, about 150 new jobs will be created.
Susan Kronick, Rich’s president, will continue in her role. Jeremiah J. Sullivan, president of Lazarus, will remain in his job “for the immediate future” helping in the transition, Federated said.