2006 Retrospective: Department Stores: Federated, Gottschalks
The final chapter is being written on the 2005 Federated Department Store merger with the May Co. It had the reputation of being history’s biggest department store merger, and Cincinnatibased Federated is encouraged by its most recent sales results.
On Nov. 30, Federated stated it would boost its same-store guidance for the crucial holiday month of December, after it reported that same-store sales increased 8.5 percent for November.
The company’s previous December guidance forecast a 3 percent to 5 percent increase. The retailer said that its comparative- store sales would be up 5 percent to 8 percent in December. Federated Chief Executive Terry J. Lundgren planned to spread the news of the merger’s early successes and how its nameplate, Macy’s, could change the retail landscape.
In 2006, Macy’s debuted a national advertising campaign for the first time. If a region was not already the home of a Macy’s, the region’s shoppers were definitely going to hear about Macy’s brands and fashions.
However, the gargantuan merger—with more than 800 stores and $27 billion in annual sales—also experienced some turbulence. Shoppers loyal to department stores closed during the merger, such as Marshall Fields, were angry about the loss of their long-cherished emporiums.
According to a recent study published by the University of St. Thomas in St. Paul, Minn., Federated still had a lot of work to do to convince Marshall Fields shoppers that Macy’s was a great place to shop.
Gottschalks, the regional department store chain of more than 61 stores based in Fresno, Calif., experienced a tougher 2006. The company reported a net loss of $6.2 million for the first three quarters of fiscal 2006, despite attempts to change the store’s fortunes, such as the fall 2005 debut of the Gottschalks Lifestyle Center, based at the Riverside Park mall in Fresno.
On Dec. 11, the company announced that it had retained UBS Investment Bank to help it explore various options to navigate its future. According to a company statement, different options range from the sale of Gottschalks to a revised business plan and a recapitalization. The company has not set a definitive timetable for choosing its new path. —A.A.
