Federated Department Stores

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Federated Department Stores, Inc.

Type	Public (NYSE: FD)
Founded	Columbus, OH (1929)
Headquarters	Cincinnati, OH
Key people	Terry J. Lundgren, CEO & Chairman
Industry	Retail
Products	Clothing Jewelry Watches Dinnerware Furniture
Revenue	$22.390 billion USD (2005)
Employees	112,000 (2005)
Subsidiaries	Bloomingdale's Macy's
Website	www.fds.com

Federated Department Stores, Inc. is a department store holding company founded in 1929 in Columbus, Ohio. Federated's stores specialize mostly in retailing clothing, jewelry, watches, dinnerware, and furniture. The company is currently headquartered in Cincinnati, Ohio, and operates almost 900 stores in the United States. Federated's Macy's locations and related operations account for 90% of the company's revenue, while luxury-oriented Bloomingdale's stores and associated ventures represent the balance of the company's business.

1 History
- 1.1 May Department Stores Acquisition
- 1.2 Macy's, Inc.
2 Store counts
3 Criticism
4 See also
5 References
6 External links

[edit] History

Federated Department Stores was founded in 1929 in Columbus, Ohio, as a department store holding company for Abraham & Straus, F&R Lazarus & Company and William Filene's Sons. Bloomingdale Brothers joined the organization in 1930. In 1945 Federated moved its corporate offices to Cincinnati, Ohio.

Federated company headquarters building in Cincinnati.

Over the next few decades, Federated expanded nationwide, adding Rike Kumler of Dayton, Ohio, Shillito's of Cincinnati (merged in the 1980s as Shillito-Rike's), Burdines of Miami, Florida, Rich's of Atlanta, Georgia, Foley's of Houston, Texas, Sanger Brothers of Dallas, Texas, A. Harris of Dallas, Texas (which was merged with Sanger Brothers to form Sanger-Harris), Boston Store of Milwaukee, Wisconsin, MainStreet of Chicago, Illinois, and Bullock's-I. Magnin organization.

Federated is the successor to the Lazarus operation begun in Columbus, Ohio, in 1851. Lazarus family members served in prominent positions within Federated through the 1980s. In the mid 1930s, a modern merchandising standard was set when Fred Lazarus (son of Simon) arranged garments in groups of a single size with a range of style, color and price in that size, rather than the other way around. Lazarus based this technique upon observations made in Paris. Fred Lazarus Jr. also convinced President Franklin D. Roosevelt that changing the Thanksgiving holiday from the last Thursday of November to the fourth Thursday, extending the Christmas shopping season, would be good for the nation's business. A 1941 Act of Congress perpetuated the arrangement.

To support its huge retail operations, Federated has centralized its back-office functions into several large divisions, covering financial services, marketing, merchandising, logistics, and data processing systems. Other retailers' branded credit cards are usually issued and serviced by a third-party bank; Federated is so huge that it runs its own private bank, FDS Bank, which for many years issued and maintained the majority of its own consumer credit card portfolio with a portion at one time owned by General Electric Credit Corporation, an arrangement inherited from when R.H. Macy & Co. sold their credit portfolio in an attempt to prevent filing for bankruptcy. In 2005 Federated finalized an arrangement with CitiGroup to sell its consumer credit portfolio, reissuing its cards under the Federated-CitiGroup Alliance name Department Stores National Bank (DSNB) and allowing Federated to continue servicing the credit accounts from its Financial, Administrative and Credit Services Group (FACS Group Inc.)

The exterior of a Macy's department store in downtown Cincinnati.

In 1990, Federated went bankrupt after its hostile takeover by Robert Campeau's Allied Stores; then, it took over Macy's in 1994 while that company was still emerging from its own bankruptcy in 1992. Federated entered e-commerce late in 1998, and FDS Bank was one of the last credit card banks to allow its cardholders to access account information online (around 2004). The department store chain Stern's, a division of Federated, ceased operations in 2001, and most of its stores became Macy's stores. In 2003, Federated changed the nameplates of their non-Macy's stores, except Bloomingdale's, to include the Macy's name, a rebranding process referred internally to as Project Hyphen. For example, The Bon Marche, a Washington state-based store, became Bon-Macys; Goldsmith's, in Tennessee, became Goldsmith's-Macys; Lazarus, Burdines, and Rich's also added "-Macys" to their name. A year later, the original hyphenated names were dropped in favor of just Macy's, a rebranding process referred internally to as Project Star.

[edit] May Department Stores Acquisition

On July 18, 2005, Federated Department Stores announced that they would acquire May Department Stores company for $11 billion in cash and stock. Also part of the buyout was the bridal and formal unit of May, consisting of David's Bridal and After Hours Formalwear. Federated would also assume $6 billion of May's debt, bringing total consideration to $17 billion. The deal would create the nation's largest department store chain with over 1,000 stores and $30 billion in annual sales. To help finance the deal, Federated agreed to sell its combined proprietary credit card business (but still administrated by FACS Group, a subsidiary of Federated) to Citigroup. The merger was completed on August 30, 2005, after an assurance agreement was reached with the State Attorneys General of New York, California, Massachusetts, Maryland and Pennsylvania.

Federated has announced plans to sell 80 store locations in 2006, having pledged in its settlement to sell most of them as viable businesses, with preference being given to a group of thirteen competitors. This number could fluctuate pursuant to Federated's negotiations with various mall landlords and its final decision regarding using former May locations for its luxury Bloomingdale's operation. Madeline's has announced that it will sell the May Company division Lord & Taylor brand to a conglomerate of investors.

On September 9, 2006, May Company division stores Famous-Barr, Filene's, Foley's (the prior two are former Federated stores in their own right), Hecht's, The Jones Store, Kaufmann's, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, and Strawbridge's brands ceased to exist as Federated replaced most of them with the Macy's masthead, and none converting to the Bloomingdale's brand.

One of the consequences of this rebranding is that over 80 U.S. malls will have two Macy's department stores.^{[citation needed]} In Downtown Boston, Federated is liquidating an acquired Filene's because it already has a Macy's (formerly a Jordan Marsh) across the street. The two stores have a combined floorspace of more than 1.4 million square feet, more than two-thirds the size of Macy's flagship store in New York City.

On November 17, 2006, the bridal and formal unit was sold. David's Bridal and Priscilla of Boston were sold to Leonard Green & Partners, L.P. After Hours Formalwear was sold to Men's Wearhouse.^[1]

[edit] Macy's, Inc.

Macy's Group proposed logo

On February 27, 2007, Federated announced that its Board of Directors will ask shareholders to change the company's name to Macy's Group, Inc. By March 28, the company revised its plans for the new name, opting to eventually become Macy's, Inc. A vote to amend the corporation's charter to accommodate the new name will be conducted in conjunction with Federated's Annual Meeting on May 18, 2007.

The name change will be effective, if approved, on June 1, 2007. Reasoning for the proposed name change, according to Terry Lundgren — Federated's chairman, president and chief executive officer — hinges on the large-scale conversions throughout the company toward the Macy's nameplate. "Today, we are a brand-driven company focused on Macy's and Bloomingdale's, not a federation of department stores," Lundgren said in the company's press release heralding the proposed name.^[2] If Federated's stock ticker symbol on the New York Stock Exchange will become "M" if the name change is approved by share holders. This would making the new Macy's Group one of a handful of single-letter ticker symbol companies.^[3]

[edit] Store counts

A Bloomingdale's department store in Atlanta's Lenox Square, originally housing Davison's.

Bloomingdale's - 36
Macy's - 850

[edit] Criticism

Federated settled an SEC investigation for $14.46 million in 1998 due unethical debt-collection practices. Federated forced debtors to sign an agreement that legally bound them to repay their outstanding balances instead of having the debt discharge via bankruptcy. Federated failed to file reaffirmation agreements with bankruptcy courts. As a result, the changes in the agreements were not legally binding.^[4]^[5]^[6]

[edit] See also

[edit] References

^ Federated Agrees to Sell Bridal Group, Federated Department Stores, Inc., November 17, 2006.
^ Federated Plans Corporate Name Change, Federated Department Stores, February 27, 2007.
^ Federated Plans 'M' Stock Ticker, AP, March 28, 2007.
^ "Federated Settles for Millions," BCD News and Comment. Vol. 32:1. 3 March 1998.
^ "Federated Department Store Settles FTC Action for 8 Million," Consumer Financial Services Law Report. Vol. 3:1. 11 June 1999.
^ "FTC and Federated Settle Reaffirmation Claims," Consumer Bankruptcy News, Vol. 8:19. 17 June 1999.