Federated sells bridal unit

Firms Split Bridal and Tux Business

By Cotten Timberlake and Dana Cimilluca
Bloomberg News

November 17, 2006, 10:20 AM CST

Federated Department Stores Inc., the second-largest U.S. department-store company, agreed to sell its bridal division in two separate transactions for a total of $850 million.

Buyout firm Leonard Green & Partners LP will acquire 269 David's Bridal wedding gown stores, as well as 10 Priscilla of Boston locations, for about $750 million, Federated said today in a statement. Men's Wearhouse Inc. is buying 511 After Hours Formalwear tuxedo stores for $100 million.

Federated decided to sell the unit to concentrate on its more than 800 Macy's stores. The company acquired the bridal chains through the $11 billion takeover of May Department Stores Co. last year. The Cincinnati-based company converted 400 former May stores to the Macy's name in September.

``It certainly helps Federated move towards the next step of the integration process,'' said Arun Daniel, an analyst with New York-based ING Investments LLC, which manages $40 billion in assets including Federated shares. The value of the deal was in line with investor expectations, he said.

Federated missed its own deadline to announce an agreement by August after putting the stores on the auction block more than a year ago. The company said it expects to complete the transactions in the first quarter of next year.

The Conshohocken, Pennsylvania-based bridal division had sales of $704 million in 2004, the most recent year available. Federated didn't release sales figures today. After Hours is the biggest U.S. formalwear chain.

Federated, which also owns 37 Bloomingdale's stores, rose 6 cents to $42.05 at 9:45 a.m. in New York Stock Exchange composite trading. Before today, it rallied 27 percent this year, more than double the 12 percent gain in the Standard & Poor's 500 Index.

Private-equity firms have agreed to buy about 67 U.S. retailers and restaurant companies so far this year, according to data compiled by Bloomberg.

In the biggest deal, Michaels Stores Inc. agreed in June to a $6 billion buyout by Bain Capital LLC and Blackstone Group LP. Luxury retailer Neiman Marcus Group Inc. was bought a year ago for $5.1 billion by Texas Pacific Group and Warburg Pincus LLC.

Federated sold May's Lord & Taylor division to a group of investors including Apollo Real Estate Advisors LP for $1.2 billion in October.

Federated has been using the proceeds of asset sales, including the disposal of its credit-card accounts to Citigroup Inc., to repay debt incurred in the May acquisition and to repurchase shares.

The sales are part of a consolidation push in the department-store industry that's been driven by sluggish sales. Saks Inc. in September sold its 38-store Parisian chain to Belk Inc., which had bought its Proffitt's and McRae's chains in July 2005.

Bain Capital, Kohlberg Kravis Roberts & Co. and Vornado Realty Trust agreed to buy Toys ``R'' Us for $6.6 billion in March 2005.

Credit Suisse and Banc of America Securities LLC advised Federated on the bridal-business sale.

Copyright © 2006, Chicago Tribune

News Flash!

Macy's brand a tough sell in Chicago
Federated's chief says Field's change difficult

By Sandra Jones
Tribune staff reporter

November 14, 2006

Two months after changing Marshall Field's name to Macy's and facing the start of the critical holiday shopping season, Federated Department Stores Inc. Chairman and Chief Executive Terry Lundgren acknowledged Monday that winning over Chicagoans may be more difficult than originally anticipated.

Video: Macy's Christmas displays

"I've been here a lot because I know we have more work to do," Lundgren said in a speech Monday evening to the Turnaround Management Association at the Standard Club in downtown Chicago.

Lundgren, who visited Macy's State Street flagship earlier in the day, added that other markets in which the local department store chain's name was changed to Macy's have been "much easier to break into."

Federated purchased Field's from former parent May Department Stores Co. for $11 billion last year and converted about a dozen regional department store chains across the country to Macy's in September, doubling the number of Macy's nationwide to more than 800.

In a wide-ranging talk, Lundgren spoke of the "risky" but necessary decision to create one national department store brand name.

But it was a risk Federated had no choice but to take, Lundgren said.

"The regional department store chain had to change, it just had to," he said. "It was losing market share at every turn."

In response to a question from the audience, Lundgren recounted the day he came to Chicago last year to announce that Field's would be changed to Macy's, saying it took an emotional toll on him.

"The [media] just hammered me all day long," he said.

Lundgren said he looked for ways to keep the Field's name but decided it couldn't be done and still accomplish his goal of creating a viable national department store with the economies of scale to save costs on merchandise, TV advertising and even shopping bags.

Lundgren pointed to Field's failed attempts to expand into Texas and Ohio years ago.

"We looked at the Field's brand, we kept on thinking it through," said Lundgren. "[But] ultimately we decided we cannot expand the Marshall Field's brand." Talking to reporters after the speech, Lundgren declined to characterize the sales trend at former Field's stores, saying only, "It's a marathon."

And what about the Frango mints? Will production move back to Chicago as Lundgren pledged when he announced the name change?

"I'm going to do it," he said.

----------

smjones@tribune.com

Copyright © 2006, Chicago Tribune

AMEN!

Richard Roeper wrote in the Chicago Sun-Times

Macy's in your face

Thought I would drop in on Marshall Field's-I-mean-Macy's to pick up a few items and to see how the transition was going. At first I thought they were paying tribute to Chicago with an "Under Construction" theme -- but then I realized they're still in the midst of overhauling things.

I was about 10 feet into the store when I was greeted by the first cheery salesperson, inquiring as to my well-being.

That was the first of at least a half-dozen such greetings in 10 minutes. I hadn't paused to look at a single item, and I was already tired of saying, "I'm fine," "I'm good," "I'm OK," etc. They literally drove me out of the store with all the how-you-doing.

There's a difference between service and serial harassment. Message to Macy's: Calm the f - - - down. Please.

Stock Room Nightmare: On occasion we have to go into the stock room to try to find something, rather than try to call a stock locator, which takes forever. Futile at best

OSHA Nightmare: This is our stock room, note the trollys and rods paicked in there...right in front of the fire exits

Shit I have to deal with: do people live like this at home? thats almost $600 of designer stuff on the floor

Shit I have to deal with: fitting rooms full of stuff

Tell Us What You Think

>From: Marshall Field's Customer Service

>To: customer Name
>Subject: Tell Us What You Think
>Date: 11/4/2006 2:03:18 PM -0500
>X-OriginalArrivalTime: 04 Nov 2006 19:03:18.0970 (UTC)
>FILETIME=[E3E6A1A0:01C70043]
>X-JunkMail: NotJunk
>X-MFData: [4.815277 v2.3:3 n185 s2880 g22241 b22058
p0.004131 sN11 t1,494730]
>
>Dear customer Name
>
>
>Thank you for taking the time to share your thoughts about
your
>recent shopping experience at Macy's Water Tower Place. I
am pleased
>to hear that we provided you with a positive shopping
experience. I
>look forward to sharing your kind remarks with my entire
store team.
>They take great pride in offering our customers
well-presented
>quality merchandise in a friendly easy to shop store.
>
>We realize you have many shopping options and trust you
will allow
>us the opportunity to make Macy's your favorite store!
>
>Sincerely,
>
>Cynthia Nedeau
>Store Manager,
>Macy's Water Tower Place
>
>Customer Comments:
> First Name:
> Last Name:
> Address:
> City: Chicago
> State: IL
> Zip:
> Country: USA
> Phone:
> Email:
> Division: mno
> Location: 640014
> Source: Macys.com
> Overall: Outstanding
> Store Env: Satisfactory
> Assoc Behav: Outstanding
>Comments: First visit to the Water Tower store
>since change-over to Macy's.
>
>Associate Comments:
>
>Name: Me
>Assc. Number: Mine
>Dept: Mens
>Comments: Very helpful and courteous.