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Posted by Stephen Green  ·   1 March 2005

There's consolodation in the retail world:

NEW YORK - "The winner here will be the customer," said Federated Chairman, President and Chief Executive Terry Lundgren of his company's plans for newly acquired May Department Stores. His plans for the combined company, which consists of almost 1,000 stores, include lower prices for consumers--at the expense of suppliers and mall owners--a better selection of merchandise and upsize fitting rooms.

This buyout couldn't come at a better time for department stores, which have been on the decline. Their market share has dropped to 18.2% while specialty stores and discounters such as Target (nyse: TGT - news - people ) and Wal-Mart Stores (nyse: WMT - news - people ), have been growing. Online retailers such as Amazon.com (nasdaq: AMZN - news - people ), which reported record growth over the holidays, are on the rise as well. And as all these retailers compete for attention, the company that can best serve shoppers will win their dollars. Customers may truly turn out to be the winners.

What is it that makes some boards think that one big business in the declining field is automatically better than two small ones? Surely, consumers will benefit, but a troubled industry (in this case, department stores) is still a troubled industry.

And if you think one big company will more easily weather a storm, just think of the HP/Compaq buyout.

Comments

Does anyone shop at Department Stores anymore? I can understand shopping at Nordstroms, because of their reputation for customer service, but the mid-range stores - Hechts, Macy's, Lord and Taylor? Since my Wedding registry, I've had no real need to shop at a Department Store.

They're hard to navigate, hard to find customer service, and usually expensive.

Posted by: Eric at March 1, 2005 01:53 PM

what eric said.

i never go into one anymore.

Posted by: Mr. Bingley at March 1, 2005 02:01 PM

I haven't shopped in one in forever. Women get 2 choices..."Baby Prostitute" clubwear for teens (scary)or "50 and Fabulous" mom-wear (hellno)...and that's even assuming that you have the time to spend FINDING those areas!! Department stores are only good as entry points to the REAL stores.
This merger isn't going to do anything unless they COMPLETELY revamp the entire way department stores are set up...I don't see that happening.

Posted by: C'est Moi at March 1, 2005 02:16 PM

There's a reason Target got out of the department store business, probably several years later that they should have. On the other hand, their sale of Marshall Fields was pretty deft; snookering 3.2 billion from May was several hundred million above value, which is what cost May's chairman his job, leading to this merger with Federated.

Of course no merger/snooker will ever compete with AOL/TimeWarner, in which Steve Case performed brilliantly for AOL's stockholders, and convinced TimeWarmer's board to hand over the keys to the company for essentially nothing.

Posted by: Will Allen at March 1, 2005 02:28 PM

C'mon! This Federated/May consolidation is necessary if they're to counter-balance the new K-Mart/Sears conglomerate.

Oh, there's some saying Sears bought K-Mart ... but look who gets more directors on the new board.

Sears of course is the retailer that quit the mail order business then turned around and bought Lands' End. K-Mart is the retailer that just two years back was closing failing stores left and right and nearly abandoned Texas and other states entirely -- due largely to the impact of the ad campaigns centered around Martha Stewart and Rosie O'Donnell.

This is probably a good time to invest in Dollar General ...


Posted by: pouncer at March 1, 2005 02:28 PM

I don't know if Federated can fix what May has broken. I worked at Marshall Field's through the Target-> May conversion and still keep up with some old co-workers, May's focus on value was killing customer service (spending money to train staff on DOWNgraded computer systems is a bad sign). If Federated can shape some of May's stores up to Macy's/Bloomingdale's standards, I can see the company carving out a good niche.

Posted by: Gus at March 1, 2005 03:00 PM

I despise Tar-jay for what they did to Field's.

What a tin ear they have.

I agree w/the clothes statement, get some good stuff in and in petite sizes and I'm there.

Nordy's petite section is horrible.

Lord and Taylor has better prospects than Field's.

Posted by: Sandy P at March 1, 2005 03:17 PM

IIRC, JC Penney had a really good 2004.

Posted by: denise at March 1, 2005 04:11 PM

Couple of things:
I have worked for both in my life (Kaufmans[May] in NY and Lazarus [Federated]in Ohio). Neither is spectacular, but of the two, I can clearly say that May will come out better if Federated brings the May stores up to Federated standards. The Lazarus/Macy's that I go to here in Cincy is great. Do I go there weekly? Not a chance. When I need a specific wardrobe item (special occasion dress, suit, kick-butt-Condi boots), I head there. Plus, there is the makeup counters (can't get Estee Lauder at Tar-jay). There is a purpose on earth for this type of store and there always will be as long as there is a retail consumer who is slightly more discerning than JC Penny.

Posted by: Becky in Ohio at March 1, 2005 05:12 PM

C'est Moi,
Really, the Lazarus/Macys that I shop here in Cincinnati has raised the bar in the area. Very well laid out, plenty of help, signs mounted on the ceilings directing you to different departments on each floor. Little more expensive, yes. Better quality, yes. Do I shop for my kids there? Heck no. Do I shop for my "professional" clothes there? Have gotten some beauts there (Condi boots included).

Posted by: Becky in Ohio at March 1, 2005 05:19 PM

Relevant link

Posted by: triticale at March 1, 2005 07:32 PM



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