- The Washington Times - Thursday, January 12, 2006

Federated Department Stores Inc. announced yesterday it plans to sell its Lord & Taylor division, likely eliminating another chain of stores acquired in its August purchase of May Department Stores Co.

Lord & Taylor has stores in nine area shopping malls, including Tysons Corner Center, Columbia Mall, White Flint, Mazza Gallerie, Fair Oaks Mall and Lake Forest Mall.

“After a thorough review, we have concluded that Lord & Taylor does not fit with our strategic focus for building the Macy’s and Bloomingdale’s national brands,” said Terry J. Lundgren, Federated’s chairman, president and chief executive officer.

Yesterday’s announcement is the latest in a series of steps the Cincinnati company has made to strengthen its existing brands — Macy’s and Blooomingdale’s — by shedding the chains it acquired in the $11 billion purchase of May.

“They have a lot of Lord & Taylor and Macy’s stores in many of the same locations. It makes a lot of sense [to sell]. They had a lot of overlap,” said Ivan Feinseth, managing director of Matrix USA, a New York investment consulting company. “They’re focusing on building their brands and building distribution and trying to avoid competing with themselves.”

Federated plans to turn 400 May stores, including Hecht’s and the Midwest’s Marshall Field’s stores, into Macy’s stores this year.

Lord & Taylor’s 55 stores, located mostly in the Northwest and Midwest, reported sales of $1.57 billion in 2004.

Federated, the second-largest department store operator in the country after Sears Holdings Inc., said it plans to sell the chain by the end of the year.

The Lord & Taylor chain, which was founded in 1826, is worth about $745 million after taxes, according to Deborah Weinswig, a Citigroup Investment Research analyst.

“We believe a private-equity buyer could purchase Saks Fifth Avenue and Federated’s Lord & Taylor and rebrand them under the Saks Fifth Avenue name,” Ms. Weinswig wrote in a report, according to Bloomberg News.

If the stores are sold in one block, the Lord & Taylor name could remain intact. If the chain is broken up and sold in chunks, the name probably would be wiped out.

But no natural buyers emerged yesterday.

“I can’t think of any particular retail chain at this time that would be interested in that block of stores. I don’t think people will be lined up for that,” said Mark Millman, president of Millman Search Group, a Baltimore retail and shopping center consulting firm.

The area shopping malls with Lord & Taylor anchors would have to search for replacements.

“There are not too many spaces where people want to jump into malls these days, not in a big-box way,” Mr. Millman said. “That’s a challenge these developers are going to have.”

Shares of Federated rose $1.32 yesterday to close at $72.95 on the New York Stock Exchange.

Federated said fourth-quarter earnings from continuing operations will be cut by about 10 cents a share because Lord & Taylor will be treated as a discontinued operation.

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