Macy’s is Name of the Game: Consolidating Its Brand, Federated Will Ask Shareholders to Vote on Adopting Flagship Moniker

By Keiko Morris, Newsday, Melville, N.Y.

Feb. 28–After Federated Department Stores Inc. launched a major re-branding of the Macy’s name and changed the nameplates of more than 400 stores acquired in a merger to Macy’s, retail experts said they were waiting for the next logical step.

Retail giant and Macy’s parent company Federated Department Stores made such a move yesterday, announcing that its board of directors will ask shareholders to change the parent name to Macy’s Group Inc.

“My first reaction is it’s about time, because nobody understood what Federated meant,” said Brit Beemer, chairman and founder of America’s Research Group, in Charleston, S.C., a consumer behavior and marketing-research firm. “It’s very unusual for a retail company to have a different name on Wall Street than with their own customers.”

Federated, which operates more than 850 stores under the Macy’s and Bloomingdale’s names, announced the name-change proposal along with a flurry of other news that included a quarterly dividend, a $4-billion increase in the company’s stock buyback program and a 5-percent increase in 2006 fourth-quarter earnings.

Terry J. Lundgren, Federated’s chairman, president and chief executive, said the name change, if approved at its annual meeting May 18, would increase the company’s visibility with its customers.About 90 percent of Federated’s sales involve the Macy’s brand. The Bloomingdale’s brand will remain, Lundgren added.

The Federated name was chosen in 1929 by a group of family-owned department stores that had joined under a corporate holding umbrella, the company said. In 2005 the company acquired rival May Department Stores.

Conversion of the former May stores to Macy’s will save money on supplies, advertising and promotions, said Howard Davidowitz, chairman of the Manhattan-based retail, consulting and investment banking firm Davidowitz & Associates Inc.

“Now that you’ve done that, what else can you do to increase the power of the brand?” Davidowitz asked. “One thing you can do is put your name on the New York Stock Exchange. … What Federated is trying to do is get the consumers to have more and more of an association with this national name. It makes sense to me.”

Federated reported fourth-quarter profits of $733 million, or $1.40 a share, compared with last year’s $699 million, or $1.26 a share. But its sales — which the company said were affected by the closing of about 80 duplicative store locations — dropped 4.3 percent, going from $9.57 billion in the same period in 2005 to $9.16 billion this past quarter.

Federated also pointed out that sales at stores open longer than a year rose by 6.1 percent — a figure that does not include the stores acquired in the May merger, retail experts were quick to note.

Moody’s Investors Service downgraded Federated’s long-term credit rating partly because of the buyback and the “weaker performance of the acquired May stores.”

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Copyright (c) 2007, Newsday, Melville, N.Y.

Distributed by McClatchy-Tribune Business News.

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