The end of Filene's?

[Cotuit]

A Federated-May merger could erase Filene's name

Several closings are also possible

By Keith Reed, Globe Staff | January 21, 2005

A possible merger between Federated Department Stores and May Department Stores Co. could lead to the disappearance of the Filene's name as well as the closing of several stores, retail specialists said yesterday.

The giant retailers are in the early stages of discussions of a potential buyout of May, parent of Filene's and 11 other department store chains, by Federated, which owns the Macy's and Bloomingdale's chains, the Wall Street Journal reported yesterday.

If both sides and federal regulators agree to a deal, it would create the nation's biggest department store chain with 944 stores and unmatched clout over apparel makers and shopping mall owners.

Such a deal would likely play out as other Federated acquisitions in recent years, analysts said. Federated owns the Bon, Burdines, Rich's, Lazarus, and Goldsmith's department store chains, and began attaching the Macy's name to each of the chains shortly after it bought each of them. In the case of Rich's, an Atlanta-based chain, the old name will start to disappear next month.

"What will undoubtedly happen is what happened here in Atlanta," said Ken Bernhardt, marketing department chair at the Robinson College of Business at Georgia State University. "We had Rich's stores and over time, they merged those stores with the brand name Rich's-Macy's and later they took away the Rich's name."

A spokesperson for Filene's referred calls to May. Officials from Cincinnati-based Federated and St. Louis-based May declined to comment.

The possible merger comes as department stores are being squeezed at the high end by specialty shops and luxury chains such as Neiman Marcus, and at the low end by discounters such as Wal-Mart Stores Inc. and Target Corp. Such forces led Sears, Roebuck & Co. to merge with Kmart Holding Corp. last year.

May itself struggled this holiday season, delivering some of the industry's weakest same-store sales, a key measure of the performance of stores open at least one year. May's same-store sales declined by 3.5 percent in December, traditionally the biggest revenue month of the year for most retailers. And just last week, Gene Kahn, its chairman and chief executive, resigned.

Bernhardt and others said it would not be surprising if Filene's stores that are in the same malls with Federated stores are closed or converted into other brands like Bloomingdale's, in an effort to prevent one store from cannibalizing another's business.

If the two companies merge, that problem could be exacerbated in states like Massachusetts, where six of the 22 existing Filene's stores are in malls where Macy's is also an anchor tenant, according to the companies' websites. For example, Filene's flagship store is directly across from a Macy's in Boston's Downtown Crossing.

Filene's is based in Boston and has 47 stores nationally. It also operates Pittsburgh's Kaufmann's chain of 55 department stores.

May bought Filene's in 1988, and in 2002 also acquired the Priscilla of Boston upscale bridal chain. May also has six Lord & Taylor stores, four David's Bridal stores and six After Hours Formalwear stores in Massachusetts.

Federated operates nine Macy's stores and one Bloomingdale's in Massachusetts.

Overall, there are 101 malls that have both a Federated store and a May store as an anchor tenant, according to a research report from Citigroup retail analyst Michael Bilerman. The report, which mentions Natick Mall as an example, said the retail real estate market could be hurt over the long term if the companies merge and close stores.

Madison Riley, a principal at retail consultancy Kurt Salmon Associates in Boston agreed, saying that when department stores close in malls, they leave vacancies that often can't be filled.

"It's a difficult situation for mall landlords," he said. "This consolidation forces them to be creative because there aren't other department stores that can take their place."

Riley said a merger is unlikely to cause an immediate headache for mall landlords because most retail leases include terms that protect them against tenants shutting down early.

A combined Federated and May would be a formidable company not just for landlords to deal with, but suppliers, too, said John Macht, founder of Boston retail consultancy the Macht Group.

May has 485 stores and Federated has 459. In 2003, the companies tallied a combined $28.6 billion in sales in 2003, according to the latest companies' figures. A merged entity would allow the company to wring bigger discounts out of apparel suppliers and other companies it would do business with, Macht said. "In their niche, they clearly would be the dominant player," he added.

That combined strength could hurt the deal if the federal regulators who must approve it felt that such a dominant company would stifle competition.

Bernhardt said there is little chance that regulators would view the merger as anticompetitive.

"The apparel business has such a splintered marketplace with specialty stores and the Internet, that this should survive the regulators' scrutiny," he said.

From The Boston Globe

[PghUSA]

Filene's is based in Boston and has 47 stores nationally. It also operates Pittsburgh's Kaufmann's chain of 55 department stores.

Getting the same press over here. It's a shame both stores have long and glorious histories, hope someone comes to their senses and saves those names.

[Cotuit]

What's a shame is that Macy's (in New England at least) totally blows. The best illustration of that fact is in Downtown Crossing Boston, where the Filene's flagship sits across the street from Macy's. The Filene's is stunning, the Macy's is a crapbox (literally, but I won't go into that).

I would be surprised if they didn't close Macy's and rebrand Filene's.

[Garris]

What's a shame is that Macy's (in New England at least) totally blows. The best illustration of that fact is in Downtown Crossing Boston, where the Filene's flagship sits across the street from Macy's. The Filene's is stunning, the Macy's is a crapbox (literally, but I won't go into that).

I would be surprised if they didn't close Macy's and rebrand Filene's.

<{POST_SNAPBACK}>

What a shame. Macy's has been going downhill for as long as I can remember. I never shop there anymore. Filene's, in my mind, is far superior. Too bad...

- Garris

[Cotuit]

May-Federated Deal Talks Hit Snags

February 1, 2005

NEW YORK (Reuters) - Price is emerging as the primary sticking point as Federated Department Stores Inc. explores the possible acquisition of May Department Stores Co., the Wall Street Journal reported on Tuesday.

The newspaper, citing people familiar with the discussions, said Federated Chief Executive Terry Lundgren met May's acting chief executive officer, John Dunham, last Wednesday in St. Louis to discuss a possible deal.

According to the article, there is no sign suggesting a deal is imminent, and the two differ over the price May would accept for a takeover offer. The article said it is not clear how far apart the two sides are on price.

The talks are complicated by May's search for a new CEO, according to the newspaper, which said its board is assessing potential candidates to see if their turnaround plans can offer more value than a Federated offer. Should the board not feel comfortable with the candidates' proposals, it is likely to move ahead with a sale, the article said.

While May shares have soared during the past few weeks, Federated's have not moved much, the article said, and as a result, the stock market now is valuing May at about $500 million more than Federated. Federated is considering paying largely in stock but adding a cash component to ensure it controls more than half of the combined company, the newspaper said, citing people familiar with the matter.

Federated and May could not immediately be reached for comment.

From The Boston Globe

[M. Brown]

I never shop at any of them.

[Cotuit]

The Macy's store at Boston's Downtown Crossing. The $11 billion Federated-May deal could lead to nearly 100 store closings. (Globe Staff Photo / Janet Knott)

Federated to turn most May stores into Macy's

By Chris Reidy, Globe Staff | March 1, 2005

Federated Department Stores Inc. said yesterday it will convert most of May Department Stores Co.'s regional stores, which include Filene's, into Macy's stores as part of its proposed $11 billion merger to create a formidable national retailer.

The deal between Federated and May also could lead to nearly 100 store closings and thousands of layoffs, with much of the impact felt in the Northeast where the two chains have the most overlap, retail analysts say.

Federated, which owns Macy's and Bloomingdale's, and May, which owns Filene's and Lord & Taylor, operate 70 department stores in New England. The chains' brands go head to head at eight Massachusetts locations, including Boston's Downtown Crossing.

''They'll pare the flock," said Ben Starr, a broker at Atlantic Retail Properties in Boston, which handles retail space in strip malls. ''They'll close the weaker ones."

Executives at Cincinnati-based Federated and St. Louis-based May did not provide details about the closings and layoffs, but Federated said yesterday that most of May's regional department stores -- 491 in all -- will ultimately be converted to Macy's. That includes 40 Filene's in New England. Federated doesn't plan to change any names until next year, but if that happens, New England would lose a name that has been synonymous with shopping since William Filene, an immigrant from Germany, opened his first store in Boston in 1851.

''We have had considerable success in rebranding our own regional stores as Macy's so obviously we anticipate continuing this strategy to some extent with our new stores," Federated chairman and chief executive Terry J. Lundgren said in a statement yesterday.

By phasing out regional department store names such as Filene's, Federated will be able to mount national marketing and advertising campaigns, said Madison Riley, a principal of Kurt Salmon Associates, a retail and consumer consulting firm.

''They'll be able to market the Macy's name nationwide, and it will give Federated more bargaining power to advertise on national TV," Riley said. Newspapers could lose out if Federated shifts more of its marketing dollars to TV. In 2003, advertising from department stores accounted for about $5 billion, or 11 percent, of total advertising revenues for US daily newspapers, according to the Newspaper Association of America.

Federated's proposed acquisition of rival May comes as mass-market department stores struggle to survive. The Macy's and Filene's of the world are losing market share to discounters Wal-Mart Stores Inc. and Target Corp. at the low end and upscale retailers Neiman Marcus and Coach at the high end. Already, Sears, Roebuck & Co. and Kmart Corp. said they have agreed to merge to become the third-largest US retailer behind Wal-Mart and Home Depot Inc.

Though the Federated-May transaction would create a retail behemoth with about 950 department stores, $30 billion in annual sales and 243,000 employees, the new company would still be smaller than Wal-Mart, which last year posted $285.2 billion in sales, and Target, which rung up $46.8 billion in sales.

''There is no industry more competitive than retail," said Jon Hurst, president of the Retailers Association of Massachusetts, a trade association that represents many of the state's mom-and-pop stores. ''Consumers have thousands of options. They can buy at brick-and-mortar stores, buy from a catalog, or go on the Internet."

The marriage of Macy's and Filene's will give the chains more buying clout with vendors and increase efficiencies. Federated said it expects to save $450 million in ''cost synergies by 2007," resulting from the consolidation of central functions and division integrations.

Shares of Federated fell 34 cents yesterday to close at $56.45 on the New York Stock Exchange, while shares of May fell 84 cents to $34.51.

The deal is expected to close in several months, contingent on regulatory review and shareholder approval. A spokeswoman for Massachusetts Attorney General Thomas F. Reilly said Reilly's office is reviewing the proposed transaction. (Filene's Basement, part of a different company, is not involved in the deal.)

Nationwide, there is little overlap of Federated and May stores. May stores, including the Marshall Field's chain, beef up Federated's presence in the Midwest and will bring Federated into 15 new states. Federated currently operates stores in 34 states.

But there is overlap between the two companies in the Northeast, said Jeff Stinson, an analyst with FTN Midwest Research.And when there is overlap, the chains are likely to close underperforming stores and sell or lease the real estate to another retailer. Analysts expect Federated to shutter between 75 and 100 stores.

''In the Boston area, you're dealing with some of the highest concentration of overlap," said Stinson. ''The majority of overlapping stores are likely to be closed and sold to a third party."

Target, Nordstrom, or JCPenney -- chains that have shown interest in expanding in the Northeast -- could move into the vacated spaces, said Bill Dreher, a senior retail analyst with Deutsche Bank Securities Inc.

The closings, coupled with consolidation of administration of operations, will lead to significant layoffs. ''At least a couple of thousand people could lose their jobs, maybe more," said Bob Gottlieb, president of Sceptre Marketing Group, a Maynard firm whose clients include retailers.

While Federated said the proposed merger is good for consumers because it will allow it to offer better merchandise at more competitive prices, some are wary.

''It's not as much fun shopping in one place," said Sandy Pimentel, a 62-year-old retired consultant who was shopping yesterday at Boston's Downtown Crossing. ''You'd be less apt to come shopping to a place where you don't have choice."

From The Boston Globe

[StevenRocks]

It's sad. We need real options in retail and all we're getting is more of the same.

[CoreyPortlandME]

'Tis a shame indeed.

Maybe some new up-and-coming company will have a chance to capitalize on this? (Until they are bought out by Macy's )

[StevenRocks]

Maybe some new up-and-coming company will have a chance to capitalize on this? (Until they are bought out by Macy's )

<{POST_SNAPBACK}>

Funny you should say that. Proffitt's is trying some new and innovative things in Birmingham, Alabama at a store they bought from Macy's. An of course Federated is looking to snap up Proffitt's parent company!

Here's a link to the article on Proffitt's:

steve's blog | proffitt's gets interesting at riverchase

[pdxstreetcar]

My guess is that the current downtown Boston Macys would either go higher end and become a Nordstroms or go lower end and become a Sears.

[StevenRocks]

My guess is that the current downtown Boston Macys would either go higher end and become a Nordstroms or go lower end and become a Sears.

<{POST_SNAPBACK}>

I hope it's Nordstrom; Sears is on shaky ground these days.

[Cotuit]

Actually, I'd like to see a Sears in Providence Place, but that seems unlikely.

[pdxstreetcar]

^

I would too.

I wish Sears in the states was like Sears in Canada, where they are much nicer and higher end yet still have the best of Sears like appliances, electronics and tools.

[StevenRocks]

I wish Sears in the states was like Sears in Canada, where they are much nicer and higher end yet still have the best of Sears like appliances, electronics and tools.

<{POST_SNAPBACK}>

I would prefer something more like the Canadian Sears operation here, too.

[Cotuit]

Well Sears and KMart are merging, so they're in for a change. I doubt a merger with KMart will lead to a more high-end operation, but they are both obviously doing something wrong, something's gotta give.

The Sears in the Cape Cod Mall was renovated and expanded a few years ago, it's the nicest Sears I've ever been in. Maybe that store is their new direction.

[Cotuit]

Target eyes Macy's site, Menino says

By Thomas C. Palmer Jr. and Jenn Abelson, Globe Staff  |  May 11, 2005

Executives at Target Corp. are interested in occupying the site of Macy's department store in Downtown Crossing should it become available, according to Mayor Thomas M. Menino.

''I'm a big fan of Target," Menino said. ''It would bring a lot of vibrancy to that area."

Menino said he discussed the possibility of an expansion in the Boston area with a Target executive while they were both in Istanbul attending a conference of the International Council of Shopping Centers last month.

''It's just common sense," Menino said of a chain like Target moving to downtown.

The Macy's building, while currently occupied, could be available soon. Federated Department Stores Inc., which operates the Macy's chain, agreed to buy May Department Stores Co., parent of Filene's, in February for $17 billion. That would leave the newly merged company with two stores -- Macy's and a Filene's--facing each other downtown.

Federated has not said what its plans are for places like Boston where it will have adjacent stores, but industry specialists expect regional names like Filene's to disappear, giving way to Macy's, which is better known nationally. Under such a scenario, Macy's could vacate its Downtown Crossing store and take over Filene's location across the street. A combined Federated-May could also install another one of its own upscale retail stores, such as Bloomingdale's or Lord & Taylor.

Across the country, big retailers are looking to revitalized urban areas as new growth markets, especially as the suburbs become saturated with large discount stores.

''As real estate in urban centers becomes more difficult to secure, Target is looking for ways to develop stores in cities," said Target spokeswoman Paula Thornton-Greear.

''While we're very interested, it's premature to say a Target is definitely coming to that site or speculate on an opening," Thornton-Greear said. ''But we love Boston, and we're looking for new ways to develop stores to fit that particular urban downtown."

In the past few years, Target has opened stores in New York, Minneapolis, Chicago, Los Angeles, and Atlanta.

Target is a discount store that has become known for its fashion and quality. Macy's and Filene's are both more traditional department stores, selling apparel to men, women, and children, as well as household items.

To fit in the dense city landscape, Target has made two-story stores at some locations, with escalators built for carts so shoppers can navigate both levels.

Continue reading at: Boston.com

[StevenRocks]

A Target at Downtown Crossing would be awesome. It's no substitute for Filene's but that's life, I guess.

[Cotuit]

Investor team in talks to buy downtown Boston Filene's site [Boston.com]

[Cotuit]

Changes to Filene's will face hurdle. City likely to confer landmark protection on the entire block. [Boston.com]

[Cotuit]

Shoppers swarm Filene's clearance. But even amid this retail circus, many voice nostalgia and sadness over the end of an era. [Boston.com]

[HartfordTycoon]

Shoppers swarm Filene's clearance. But even amid this retail circus, many voice nostalgia and sadness over the end of an era. [Boston.com]

Personally I say welcome Macy's. I was never really satisified with Filene's and always enjoyed having the opportunity to shop a Macy's stores since we didn't have them in my area. I really would like to see Bloomingdales open in greater Hartford. I was at the clearance this weekend, not really anything left. I'm sure it depends on what type of clothing you are looking for, but Filene's always left something to be desired to me, maybe it was just our local stores though.

[StevenRocks]

This is a telling quote:

Some customers say the loss of Filene's is especially difficult because unlike other store closings, the Filene's brand was still thriving and simply the casualty of corporate takeovers.

[Cotuit]

Personally I say welcome Macy's. I was never really satisified with Filene's and always enjoyed having the opportunity to shop a Macy's stores since we didn't have them in my area.

I feel exactly the opposite, every Macy's I've been in from Herald Square New York to Downtown Crossing Boston to the Cape Cod Mall has been crap. I always prefered Filene's or Bloomingdale's when I was living in New York.

[Temeteron]

This is a telling quote:

Steven is there a forum on here that you dont go into? lol