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More Muscle for Macy’s: Federated Rebranding Builds $13.5B Chain

Federated Department Stores plans to change all its regional units to the Macy’s nameplate, leaving it with only Macy’s and Bloomingdale’s...

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In January 2003, when Federated said it would use the Rich’s-Macy’s logo, Lundgren acknowledged some customers would be sad, at least temporarily, to see the Rich’s nameplate disappear. “We’re being sensitive to that,” Lundgren said then. “Change for people is a little uncomfortable. The real test is in terms of consumer response and we’ll understand that a year from now.”

“We view this as the natural progression in a process Federated started in late 2002 when it began hyphenating its regional nameplates,” said Shari Schwartzman Eberts, an analyst with J.P. Morgan Securities, in a research note. “We see the announcement as a positive as Federated continues to leverage its strong brand names nationwide; the move is likely to result in minor cost savings over time, but the real upside could be on the top line as marketing and the power of its exclusive merchandising improves.”

With the switchover, Bloomingdale’s and Macy’s become the only retail nameplates under Federated’s wing, unless the company decides to buy another retailer. Lundgren reiterated the Federated stance that the company is open-minded about exploring acquisitions and does that on a regular basis.

“We look at everything,” he said. “We are very disciplined in our approach. We walk away from substantially more than we transact. Obviously, we have been an acquirer in the last several years, with the acquisitions of Macy’s and Broadway, in 1994 and 1995, and Liberty House, in 2001.” Federated also bought Fingerhut in 1999, but ultimately sold off its assets, in the end losing millions on the deal.

As a result of the Fingerhut debacle, the company is very cautious with acquisitions. As Lundgren said, any acquisition “has to be a good fit, must add value to Federated and must make financial sense….When that all comes together, we certainly become interested.

“But we are also in a position where we really don’t have to buy anything,” Lundgren added. “We have got a very solid business plan,” which he said largely revolves around “the headquarters strategy” to maximize the Macy’s brand.

With Macy’s as well as Bloomingdale’s, Federated has been trading up and dominates the better department niche on the East and West Coasts. However, the company lacks stores in much of the Midwest, and does not operate in the discount or luxury arena, though Bloomingdale’s does sell some designer goods in a handful of markets.
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