This is a depressing day of news. Here's an article about the CEO of May Company getting the boot, and how Federated Dept. stores of Cincinnati might be looking to buy May company. That would be a HUGE blow.



St. Louis Post-Dispatch: Rumors Swirl about May Co. Buyout

Oy gavault.

STLtoday business front page is now reporting that preliminary talks have begun between May and Federated regarding a Federated purchase of May.







That didn't take long....

May sale seems unlikely, experts say

By Mary Jo Feldstein

Of the Post-Dispatch

01/20/2005



St. Louis shoppers shouldn't start looking for Macy's at the Galleria just yet.



Despite rumors that May Department Stores Co. is negotiating a sale to its chief competitor, Federated Department Stores Inc., several retail experts said Thursday they doubt an agreement will be reached.



"We are skeptical that a deal could be done between the two department store giants," said David E. Griffith, a retail analyst with Tradition Asiel Securities Inc. in New York. "We would place the likelihood of a combination between the two companies at about one in four."



Gene Kahn resigned a week ago as chief executive of St. Louis-based May, whose chains include Famous-Barr and Lord & Taylor. His departure sparked speculation about what's next for the nation's largest department store chain.



Both May and Federated said they will not comment on rumors, and May has launched a search for a new chief executive.



But May could sell its 500 department stores to Federated. The Cincinnati-based chain owns Macy's and Bloomingdale's.



"I think there are some major obstacles," Griffith said. "No. 1 is whether or not it's a good idea."



Kahn's resignation and rumors of a possible sale have driven up May's share price, making the company a less attractive acquisition. Federated likely would buy May through a stock transaction.



On Jan. 13, one day before Kahn resigned, May shares closed at $27.73. On Thursday, shares closed at $34.25, a 9 percent jump for the day and a 24 percent rise for the week.



Bob Buchanan, a retail analyst with A.G. Edwards & Sons, questioned whether Federated would be willing to pay the premium price.



If Federated bought May at $35 a share, it would have to cut the combined company's operating costs by $100 million to keep from losing money on the deal, Griffith said.



He and other analysts figure Federated could save more than $100 million by cutting back at the corporate level and streamlining information systems and other departments.



But if May's stock hit $40 a share, Federated would need to find $250 million in cost savings, "a much tougher hill to climb," Griffith said.



Federated also could face opposition from government regulators, questioning whether the deal would limit competition. If Federated bought May, it would own about 1,000 department stores, nearly half of the nation's total. The combined revenues could exceed $30 billion.



Such a concentration of retailing power could have implications for shoppers as well as clothing manufacturers.



Most retail experts said it's unlikely clothing prices would rise. But having one buying team control the offerings at so many stores could lead to less selection. Federated and May are the two largest customers for dozens of popular designers, including Ralph Lauren and Liz Claiborne.



"Whenever you eliminate a competitor, somebody's going to lose," said Ed Nakfoor, an independent retail consultant based outside Detroit.



Part of Federated's plan likely would include updating May's private label brands and making the stores' more upscale and fashionable, he said.



"With the May Co., it's the case of an identity crisis," Nakfoor said. "I think they're trying to compete too much with the middle market. I think people want a little flavor when they shop, a little verve."



Federated and May own stores in many of the same markets. Analysts estimate about 30 percent of their stores overlap. That could force Federated to pay for as many as 100 stores it eventually might close.



"I think you probably have to spin off those stores, divest them somehow," Griffith said.



Federated's in the process of changing all its regional store names to Macy's and leaving Bloomingdale's intact. If a sale happens, most analysts think Federated would rebrand most of May's stores as Macy's, with the possible exceptions of Marshall Field's and Lord & Taylor.



Creating a single, more upscale brand could be a life preserver for the declining department store category, which has struggled to compete with discounters and more specialized retailers.



"It certainly could eliminate some of the clutter," Nakfoor said. "At the same time, how well does a particular brand play in different parts of the country? What does Lord & Taylor mean to a Denver shopper?"

I like how that article makes sure to say that a Macy's won't be at the Galleria as opposed to downtown...

^LOL!



So true.



Macy's usually only go where other upscale stores are located though. So Galleria or Frontenac would be their target.

<A HREF="http://publicbroadcasting.net/kwmu/news ... 39578">WSJ: Talks are Off Between May & Federated</A>

AP/KWMU



The Wall Street Journal reports today that merger talks between St. Louis-based May Department Stores and rival Federated are off.



The newspaper says May's board was prepared to negotiate a deal, with May's interim chief executive John Dunham phoning Federated CEO Terry Lundgren, but adds the two were unable to agree on a price.



<A HREF="http://publicbroadcasting.net/kwmu/news ... _ID=739578">>>> read more</A>

That's definitely good news.



Here's a good article on the topic from the most recent issue of BusinessWeek. Hopefully, the folks at Federated read it:



Federated Is Better Off On Its Own

Buying downmarket rival May could undo the gains Federated has made



Speculation has been rife in recent weeks that Federated Department Stores Inc. (FD ) is in discussions to acquire weakened rival May Department Stores Co. (MAY ). Neither company, respectively No. 1 and No. 2 in the department store world, will confirm that they're talking. But should the deal go through, it would create a retailing colossus with nearly 1,000 stores across the nation and $30 billion in sales. Advertisement



The question is: Would such a combination help Federated regain market share lost to specialty retailers? While buying May likely would boost Federated's earnings in the short run, it could derail the company's strategy of heading upmarket. What's more, Federated could wind up sinking money into May that it could better use itself. "The end result," predicts Daniel Hess, CEO of researcher Merchant Forecast LLC, "will be further market share erosion for the combined Federated and May."



It's not as though buying May makes no sense at all. The department-store sector has been losing share for a decade. In theory, by acquiring May, Federated would gain heft, giving it more clout with suppliers, advertisers, and landlords.



But a May acquisition could potentially undo the gains Federated has made over the past few years. Since taking the helm in 2003, CEO Terry Lundgren has moved Federated aggressively upmarket. By offering more unique and higher-priced merchandise at its Macy's and Bloomingdale's Inc. divisions, Federated managed to boost same-store sales 3.3% over the last 12 months. That's a whole lot better than the story at May, where same-store sales fell 1.6% in the same period. But it's nowhere close to recouping Federated's same-store sales decline over the previous three years.



UNFORTUNATE OVERLAP

Analysts believe Federated would take May upmarket, too -- likely converting its Kaufmann's, Filene's, Lord & Taylor, Marshall Field's, and Robinsons-May stores into Macy's. That's easier said than done. May has long catered to the mid-market. More than half of its stores are in the middle of the country, where not enough people can afford Macy's $100 to $200 designer denim to make an upmarket strategy fly. By contrast, most of Federated's stores are on the generally more affluent East and West Coasts.



Making matters worse, most of May's and Federated's overlapping stores are on the coasts. As a result, UBS Securities (UBS ) estimates that Federated could be forced to jettison nearly 100 of May's most productive stores. That would further crimp Federated's ability to take May upmarket. In addition, it could leave a potential opening for upscale retailer Nordstrom Inc. (JWN ) to move into those malls, giving Federated's best Macy's and Bloomingdale's stores stiffer competition.



Finally, while Federated could get the usual savings by cutting duplicate operations, it would be tough to wring out further efficiencies. That's because May already runs leaner than Federated, with sales and administrative expenses that run 29% of sales, vs. 31%. If anything, analysts believe May has cut expenses too much -- particularly by slashing staff. As a result, says UBS analyst Linda Kristiansen, "Federated would likely have to invest more into May at the store level."



For all of these reasons, Federated might be better off flying solo -- continuing to steal business from May while honing an upscale strategy to fend off specialty stores. Sometimes walking away from a deal is the smartest move.

AND then there is the Post Dispatch. The very NEGATIVE leaning - anti-city, anti-St. Louis Post Dispatch.



Every newspaper I have read in th country have said the deal and talks is now OFF. The Post though (almost hoping for a buy out for another chance to give STL readers a negative STL story - this is my opninon)

write this article instead calling the deal:

"cooled"

"May shares on a seesaw"



Rumors put May shares on a seesaw

By Mary Jo Feldstein

Of the Post-Dispatch

02/15/2005



Shares of May Department Stores Co. closed higher Tuesday after falling about 2 percent in early trading on conflicting rumors about the company's future.



Analysts have speculated whether May, of St. Louis, would be bought by its chief rival, Federated Department Stores Inc. of Cincinnati. One news story published Tuesday said talks had cooled. Another



continued:

Rumors put May shares on a seesaw

I'm telling ya!



The PD continuously writes about the Lambert Int. Airport status and in EVERY - and I mean - EVERY article about the airport they run (and there have been copious amounts to naseau) they will say this line (almost exactly to the words everytime):



"American Airlines slashed its schedule in November 2003."

"In November 2003, American slashed departures from Lambert Field almost by half."



SO IS THIS REALLY NEW NEWS? OR JUST NEGATIVE NEWS - I think negative! In fact this line: "American Airlines slashed its schedule in November 2003." was just printed in the article "Lambert gets a Makeover" article in the Feb 9, 2005 edition. The PD couln't just focus on the NEW NEWS that Lambert IS trying to improve the image of the airport terminals/concourses and go forward with this article. In fact, it never mentioned that Lambert has added 2 new carriers and 85 new flights since the American Cuts in 2003.... no no no - they took the article into a negative angle and posts American Airlines slashed its schedule in November 2003." WE KNOW ALREADY!!! FOR 16 MONTHS WE HAVE KNOWN !





My favorite is this one posted by the PD in November 2003:



"St. Louis lost its status as a hub city. American slashed departures from Lambert Field almost by half.



Which is partly UNTRUE reporting. STL is still AA 3rd largest hub in the USA. Dallas, Chicago, St. Louis, Miami are the three largest hubs for them. ST LOUIS is still a HUB city. STL still has a Hub office and Management system, offers connecting HUB flights, etc... AA still offers some 250 flights daily from the city and most are non-stop service to their more than 85 cities served from STL Int.





This is why I cannot wait for this paper to be in new hands and hopefully a NEW editor!



PS: I am sure they will pick up this current study too:



St. Louis Ranks Fifth on America's 'AhH-Choo! Index

released FEB 13, 05



yet never picked up this story:



St. Louis ranks the top city for single workers

released FEB 11, 05 in the Biz Journals

I would guess that the P-D's negativity is an attempt to sell more papers. In the case of the May deal, they probably left the door open so that they could write more articles about it in the days ahead. If they had written that the deal is off, like the WSJ did, then basically their story is dead.



I can see why they may do the things they do, but it sure doesn't help this region's inferiority complex.

I hate consolidated mergers - that almost create monopolies.



But, as for "talks on" again... The Post Dispatch probably took them to dinner and made them call each other... LOL



AS FOR St. Louis' flagship Famous Barr downtown, I would hate to see the name or the store disappear. I would hope that this beautiful store and its restaurtants remain open. The store is busy during the weekdays (and has gained a lot since downtown is turning mecca). I would hope that Federated would see that this store is on the forefront of downtown and the new downtown of the city... as well as tradition in STL. Federated does have a store (Lazurus) in downtown Cincy as well - that is not nearly as historic or unique as Famous Barr downtown here. If the deal does go through... it is the one thing I hope Federated will keep committed too (and why wouldn't they) and if they (most likely will) remove the Famous Barr name - I will take a MACY'S Downtown. But, let's hope this does not happen at all!

I hate to tell you, but if Fed buys May, I'm pretty sure the downtown store's days will be numbered. It would follow the plight of May Co headquarters in general, because a large portion of sales are coming from the people working on top of the store.



As far as "the store has gained alot since downtown is turning mecca". This is not true. Sales have continued to decline as downtown population grows. Perhaps this is because the hours are suited more towards the daytime office pop, which is also declining. Also, I think the store does a poor job of advertising towards that daytime pop (I bet half the office workers downtown don't even know Famous-Barr has two restaurants in there).



Anyway, it really sucks, but probably true.

Sales have continued to decline as downtown population grows

Actually;

I will try to find it (article)... but the downtown store actually has had better profits in the past few years than prior. This last Christmas Holiday sales were the highest downtown than prior as well.



I just remember reading that in an article that was talking about the new renovations and escalators put in last year.



I hope that they remain committed if sold... better scenario: May doesn't sell.

I bet half the office workers downtown don't even know Famous-Barr has two restaurants in there

Actually, I completely disagree. First off there are 4 food options in the Downtown Famous: Deli, 2 Sit Down, and brown bag cafeteria - If they are "undiscovered", why are they completely full every lunch hour - all of them?

Actually, I did go to the place on the 6th Floor the other day and was suprised by how many people were in there. I guess I feel like people don't know Papa Fabarre's is there because it is off the radar of my friends (young) that work downtown. It is more of an old-school, onion-soup place. Very busy if it rains.



As far as the store goes, sales were lower still for 2004, and have been lower each year now for over 15 years. Beginning to stabalize...but very low.

I appreciate the updating May is doing with the downtown store, but the fact of the matter is that the selection there is kind of crappy compared with their other stores. I've been there both for my shopping and with my girlfriend for her to shop, and we just plain couldn't find what we were looking for. I'm not talking exotic, hard to find things either. I'm talking the basics.



If May was serious about making money at that store, they need to do a better job of stocking the shelves. With the new critical mass of downtown residents (Not to mention soulard, benton Park, ONSL, etc), they have the potential to build up a big, loyal customer base.



As far as the buyout is concerned, though, I'm still praying it doesn't happen.

STL Shoes, I completely agree. Even when you want to shop there, it is hard to find something to buy.

This might slow things or (hopefully) kill any "deals" if agreed on. I ABSOLUTELY have been saying this from day one. It would be MACY land from coast to coast.



FTC keeps eye on May-Federated talks

By Mary Jo Feldstein

Of the Post-Dispatch

02/23/2005



The Federal Trade Commission is looking into whether a union between the nation's two largest department store chains would hurt competition, a spokesman for the California attorney general's office said Wednesday.



Federated Department Stores Inc., of Cincinnati, is reportedly in discussions to buy St. Louis-based May Department Stores Co. Neither company has commented on the rumors.



The office of California Attorney General Bill Lockyer is providing information about the state's retail market, spokesman Tom Dressler said.



"We are providing assistance to the Federal Trade Commission's review," Dressler, said. He said he did not know when the investigation began or whether other states were involved.



The FTC, which regulates mergers and acquisitions, could not be reached for comment.



A spokeswoman for May declined Wednesday to comment on the FTC investigation. Federated could not be reached for comment.



New York Attorney General Eliot Spitzer also is rumored to be watching the May-Federated negotiations. Spokesman Brad Maione declined to comment saying, "There's been no definitive word that a deal is going to happen."



It would not be unusual for the FTC or state regulators to examine such an acquisition.



A marriage between the two retailing giants could create a national department store chain with 1,000 stores.



In about 90 malls, the combined chain would occupy more than one anchor spot, a concentration that would likely raise concerns about competition, analysts said. Much of the overlap would be on the East Coast and in California.



"That doesn't prevent a deal," said David E. Griffiths, a retail analyst with Tradition Asiel Securities Inc. in New York. "It just adds some complexity."



He's skeptical a deal will happen, but thinks price will be the hurdle.



The number of stores Federated would need to close is unknown. But the revenue loss and costs associated with those closures might have an impact on how much the company would be willing to pay for May.



Decisions about which stores to close could depend on what Federated wanted to do with the properties and with May's brands.



Analysts have speculated that Federated would turn many of May's stores into Macy's stores, which could increase the number of necessary closures.



Possible exceptions to the Macy's makeover could include Marshall Field's and Lord & Taylor. All of Federated's stores, expect Bloomingdale's, are undergoing a similar transformation.



Retail is changing and regulators would likely consider the emergence of discounters and specialty stores when evaluating the deal.



Even if the combined chain had a substantial market share among department stores, regulators would look at the company's influence when Wal-Mart Stores Inc., Target Corp. and other retailers were added in the mix, analysts said.



Goldman Sachs Group Inc., a New York investment firm, originally thought Federated could be forced to close up to 100 stores. Now it thinks that number could be far lower, possibly as few as 35. The difference adds an estimated $1.5 billion in sales to the hypothetical, combined chain.



"It remains unclear what approach regulators will take should a transaction take place, however our checks with antitrust specialists suggest a Republican administration may take a more liberal (no pun intended) view in defining a prospective market," Adrianne Shapira, a Goldman Sachs analyst, wrote in a recent research report.



Her analysis shows 92 malls with overlap. Twenty-three of those malls would have three stores owned by the combined chain and one property would have four.



Of the 23 malls with three stores, 11 do not have a competing shopping center within 10 miles and would likely face the greatest scrutiny from regulators, Shapira wrote.



She said the remaining stores are in "high-quality" malls and could be converted into other stores. Nordstrom has been mentioned as a possible buyer for some of those properties.



Griffiths points out there's another side to the competition. If Federated buys May, the two companies would become the dominant customer of several large suppliers like Jones Apparel Group, Liz Claiborne and Ralph Lauren.



That could put pressure on those vendors to lower prices, but it's unclear how much of the savings would be passed on to shoppers.



Reporter Mary Jo Feldstein

E-mail: mjfeldstein@post-dispatch.com

Phone: 314-340-8209

Bad news. The AP is reporting that a deal was reached over the weekend. Now we have to hope for some other road block.



Story

Hopefully they will respect STL. and the STL downtown store.