Last week Allen Questrom, Federated’s ambitious chairman, said he had bought rights to a big–$449.3 million–chunk of Macy’s debt and wants to buy the company itself as it emerges from bankruptcy. Such a deal would create a $13 billion department store behemoth, the nation’s largest. it would also represent a neat triumph for Federated, which went bankrupt itself in 1990 and was forced to sell some of its treasures to Macy’s. Even if Federated doesn’t pull it off, the move put a gloss on Questrom’s image, undercut Macy’s chief Myron Ullman and kicked off a frantic week of meetings and maneuvers, as some creditors of Macy’s tried to provoke a bidding war. One possible bidder: the latest power brokers out of Arkansas, retail magnates William Dillard and his son.
Ullman declined to comment, but he’ll probably fight to keep Federated from snatching his prize–and giving him a secondary role. “Neither of us are guys who like to run someone else’s store,” says Questrom. Ultimately, the verdict rests with powerful bankruptcy judge Burton Lifland. Whoever gets Macy’s–or parts of it, if it ends up dismembered–will score big. Macy’s is “the biggest enchilada in retailing,” says consultant Alan Millstein. With 90 stores from New York to San Francisco. “it’s the only billion-dollar baby that’s got branches north, south, east and west under one name.” (It also owns upscale West Coast retailers I. Magnin and Bullock’s, once Federated properties.) And Macy’s is a name familiar even to those who don’t shop there; its Herald Square store in New York is a tourist attraction. With Federated and Macy’s dominating shopping malls across the country, a merger could set off a domino effect of small mergers or sales.
While retail executives may feel the ground trembling, shoppers have little to fear. This is only the latest eruption in a decade long shakeout in retailing, which consolidated thousands of stores into more efficient networks. While many stores closed, and familiar names faded into history, retailing remains fiercely competitive. Department stores that have to fend off everyone from Victoria’s Secret to Lands’ End know they must court the customer. Bloomingdale’s, renowned for rude, dismissive clerks, recently put friendly-faced “greeters” at store doors and introduced a cloak-and-package room. Department stores have a new advantage: while young people cruise the malls, aging baby boomers prefer one-shop stopping.
Still, the number of big stores will continue to shrink. Consultant Millstein predicts department stores will “go the way of big-city dailies, where there’s one left to service the needs of a particular city.” All the more reason to play hard for every last square foot.
