Texas chain, other regional department stores will take Macy's name after merger

10:21 AM CST on Tuesday, March 1, 2005

By MARIA HALKIAS / The Dallas Morning News

Foley's and other regional names with rich histories will disappear as Federated Department Stores Inc. creates a bigger company dedicated to keeping the department store business alive.

AP

The new company would focus on Macy's. Federated has been converting its regional chains to that banner.

All 50 Foley's stores in Texas will be rebranded as Macy's.

Macy's coast-to-coast footprint will be the most visible change to come out of Federated's $11 billion cash and stock deal for May Department Stores Co.

Federated chief executive Terry Lundgren said the acquisition puts both companies on stronger footing.

"We're very committed to the department store business. And we believe passionately that department stores have an important place in the ever-changing and very competitive retail environment," Mr. Lundgren said Monday after the long-rumored deal was confirmed.

Federated will pay $35.50 for each share of May outstanding and assume $6 billion in debt. The merger, which is expected to close in the third quarter, will form the second-largest U.S. department store company behind Sears Roebuck and Co. and ahead of Plano-based J.C. Penney Co.

Federated estimates that the merger will cost it about $1 billion over three years, but it has identified annual savings of up to $450 million a year.

The combined company will have annual sales of $30 billion, and stores in 49 states – and in 64 of the top 65 U.S. markets.

Federated is already converting its own regional chains – Bon-Marche, Burdine's, Goldsmith's, Lazarus and Rich's – to Macy's in a process that will be completed this month. May has a longer list of 12 regional names that includes Houston-based Foley's.

Mr. Lundgren said during a conference call that the name changes will happen next year.

"We'll listen closely to our customers and do our research but, ultimately, we expect to change names to Macy's and Bloomingdale's," he said.

The decision to drop the Foley's name has already been made, said Carol A. Sanger, vice president at Federated.

The tougher name to erase will be Marshall Field's in Chicago, which predates both Federated and May.

Cheryl Holland Bridges, associate director at Texas A&M University's Center for Retailing Studies, said the difficult department store name change in Texas already happened when Dallas-based Sanger Harris became Foley's in the 1980s.

In that decade's round of department store bankruptcies and mergers, Foley's ownership shifted from Federated to May.

Ms. Bridges said some customers will be saddened by the name change, "But, really, I think it will bring some excitement back into the stores. A lot of people will come to see what the changes are about, what's new."

Analyst Walter Loeb, president of Loeb Associates in New York, said the merger will lift the department store profile as Macy's advertises nationally and younger customers discover the shopping venue.

"We had a sick department store company," Mr. Loeb said. "It's a bold move to merge, and the end result will be more vitality in the department store business."

Mr. Loeb said he knows of no other deals in the works, but he believes this merger will inspire smaller chains to consolidate.

Department stores have lost significant market share to specialty stores and to discounters such as Wal-Mart Stores Inc., Target Inc. and Kohl's Corp. that expanded and improved their apparel offerings.

Allen Questrom, former CEO of Federated in the 1990s and the recently retired CEO of J.C. Penney, said this merger is good for the department store industry, which is still suffering from overexpansion during peak mall construction in the 1980s.

"No company wanted to be left behind, and the industry built too many stores. Then they were trying to figure out what the other guy was doing every day," Mr. Questrom said. "Now Terry can focus the attention on making the stores better."

Federated recently centralized its home merchandise division, but Mr. Lundgren said Monday that other parts of the store need to have a regional flavor.

"Home is a different business, but I feel very strongly about women's, men's apparel and accessories," he said. "Each market has a very different weather, different style preferences in Atlanta vs. New York and in Miami vs. San Francisco."

Longtime colleagues and observers of 52-year-old Mr. Lundgren say he is the right person to take on the job of putting these long-time foes together and reinvigorating department stores.

He has spent most of his career at Federated, moving up the ranks in both operations and merchandising. He was also CEO of Dallas-based Neiman Marcus in the early 1990s.

"Look at his experience," Mr. Questrom said. "Plus, he's survived everybody."

E-mail mhalkias@dallasnews.com

FEDERATED

Headquarters: Cincinnati and New York

CEO: Terry Lundgren

2004 revenue: $15.6 billion

Stock: $56.45; 52-week high and low: $59.91-$42.80

Employees: 111,000

Founded: 1929

Operations: 450 department stores in 34 states, Guam and Puerto Rico; macys.com and Bloomingdale's catalog

Store names: Macy's and Bloomingdale's; converting regional brands Bon-Marche, Burdines, Goldsmith's, Lazarus and Rich's to Macy's

MAY

Headquarters: St. Louis

CEO: Gene Kahn resigned in January

2004 revenue: $14.4 billion

Stock: $34.51; 52-week high and low: $36.48-$23.04

Employees: 132,000

Founded: 1910

Operations: 491 department stores, 239 David's Bridal stores, 449 After Hours Formalwear stores and 11 Priscilla of Boston stores; operations in 46 states, Washington, D.C., and Puerto Rico

Department store names: Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's and The Jones Store

SOURCE: Dallas Morning News research