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What Federated, May merger may mean

Carole Sloan, Senior Contributing Editor -- Furniture Today, March 6, 2005

The long courtship between Federated Department Stores and May Department Stores finally ended last week, with the former set to acquire the latter. The deal includes a bonus for Federated: It gets the marquee Marshall Field's stores that May bought last year by outbidding Federated.

There are those who feel this was inevitable, given the bigger-is-better mentality these days. Many are predicting more such deals, and not just in the department store channel, which has been losing market share in almost every product category in recent years.

Still, as Federated Chairman and CEO Terry Lundgren put it at a press conference, $30 billion is a lot of business. In furniture and bedding, the combined Federated-May would be the No. 1 retailer at nearly $1.4 billion, based on 2003 revenues, slightly ahead of Wal-Mart. And throw in another $135 million in sales at Marshall Field's.

Perhaps more importantly, the deal bodes well for furniture since Lundgren is a fan of free-standing furniture/bedding/rug stores. But folks in furnitureland shouldn't hold their breath waiting for a major rollout of such stores. There's lots of other stuff that will take priority over furniture.

The impact of the merger likely will be felt more immediately in how Federated, May and Marshall Field's approach the furniture business — in sourcing, styles, price points and marketing. One reason May bought Field's was to benefit from that retailer's expertise in fashion merchandising.

Federated continues to face challenges in developing its now year-old Macy's Home Store program. Add to this May and Field's and it will involve a major effort in execution.

And don't forget the other big merger about to happen. Sears and Kmart will add another new dimension in retailing, especially in furniture.

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