X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

NEW YORK CITY-In the short term, the $11 billion merger of Federated Department Stores and May Department Stores could hurt some of the chains’ vendors, if an expected 150 units out of its 950-store portfolio close, according to a SG Cowen & Co. report. The good news for some apparel vendors and other suppliers, though, is that the merger, expected to close this quarter, will benefit them in the long run, it says.

The possible store closures could reduce vendors’ sale and operating margins. Companies “with large reliance on the combined [Federated-May] entity face significant challenges likely to pressure margins and financial returns [long term],” the report says.

But the closure of underperforming stores could also speed up inventory turnover, especially for some companies like watch and accessory seller Fossil, the report says. Estee Lauder could also benefit from the elimination of underproductive beauty products departments.

In the footwear department, more vendors could have opportunities to sell products at the Federated-May stores because executives at the new entity would not likely want to rely on a small number of suppliers. Kenneth Cole, Timberland and Wolverine World Wide could all strengthen sales after such a move.

Promotion levels for some vendors could be reduced as well, especially if, in the cases of malls where a Federated and May store are currently competing, one of the units were to close. Another upside SG Cohen points out, among other areas, is the chance for vendors to concentrate more in international sales due to the consolidation of US retailers. “International distribution allows management to more effectively leverage design, marketing, and production costs across one larger brand,” the report says.

Federated operates about 450 stores in 45 states under the Macy’s and Bloomingdale’s name. St. Louis-based May, meanwhile, operates 487 department stores under the Famous-Barr, Filene’s, Foley’s, Hecht’s, Kaufmann’s, Lord & Taylor, L.S. Ayres, Marshall Field’s, Meier & Frank, Robinsons-May, Strawbridge’s and Jones Store names. The company also owns 243 David’s Bridal stores, 452 After Hours Formalwear units and 11 Priscilla of Boston shops in its Bridal Group.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt. NET LEASE Spring 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt. NET LEASE Awards 2021Event

These awards honor the industry's most influential and knowledgeable real estate executives from the net lease sector.

Get More Information
 

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.