Federated's top executive Terry Lundgren says the company's upscale 55-store Lord & Taylor chain doesn't mesh with plans to build the Macy's and Bloomingdale's brand, yet remains a desirable specialty retailer with "a great name, many outstanding locations, an experienced management team and a strong customer following."
Lord & Taylor, based in New York, operates stores in New Jersey, New York, Illinois, Massachusetts, Connecticut, Maryland, Virginia, Michigan, Pennsylvania, Missouri, Delaware, Florida and the District of Columbia. The division's 2004 sales topped $1.56 billion. Goldman Sachs and JPMorgan Chase are advising the public company in the divestiture process.
In acquiring May Co., Federated added 490 department stores and 720 bridal and formalwear stores to its existing stable of 460 department stores. Federated previously announced its intention to divest May's bridal group business and convert all of May's regional chains to the Macy's brand. May credit card accounts and related receivables will be sold to Citigroup by the end of August.
In addition, the company plans to divest 83 of the department stores--48 from the May portfolio and 35 from the Federated portfolio--as it integrates the new stores in the company and reduces duplicate and underperforming locations.
In further explaining the Lord & Taylor divestiture, a company source tells GlobeSt.com that most every place there is a Lord & Taylor store is also home to a Macy's or a Bloomingdale's store. In addition, Lord & Taylor stores are typically in the 120,000-sf to 140,000-sf rage, while Macy's are typically in the 220,000-sf to 240,000-sf range.
Most of the acquired May department stores--including Hecht's, Meier & Frank, Robinsons-May and others--will be converted to the Macy's nameplate in September 2006. The result will be some 850 Macy's stores across the country.
May's Bridal Group specialty stores come in under three different brands. The portfolio includes 245 David's Bridal, 454 After Hours Formalwear and 11 Priscilla of Boston stores in 47 states and Puerto Rico.
Federated says it now will account for Lord & Taylor as a discontinued operation in its monthly sales and quarterly earnings reports. This is expected to reduce fourth quarter 2005 earnings from continuing operations by approximately 10 cents per share.
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