Federated Puts May Execs in Key Spots
By George Anderson
Merging two large organizations, never mind two the size of the Federated and May department store chains, is never easy. But Federated may have done itself a favor by keeping on key May veterans to lead its Midwest division.
Last week, Federated named William McNamara as the CEO of the division headquartered in St.Louis. Mr. McNamara was formerly the chief merchant for May’s stores.
The company also announced that Brian Keck, another former May executive, would take over as the senior vice president of human resources for the Midwest.
Experts in the area of mergers and acquisitions say that Federated’s hires show the company is focusing its efforts where it needs to be.
Howard Davidowitz, chairman of Davidowitz & Associates, told the St. Louis Post-Dispatch, that Federated made the right choice in putting McNamara in charge of its Midwest business.
“Federated has got to work on merchandising, merchandising, merchandising,” he said.
Linda Nash, president of Resilience Strategies, was impressed by Federated’s decision to focus on human resources’ issues with its appointment of Mr. Keck.
“It is the human resources, the people, that drive the organization,” she told the Post-Dispatch.
A spokesperson for Federated, Jim Sluzewski, said the company’s strategy included having two individuals, one with merchandising experience and the other with a background in human resources, finance or store management, run each of its divisions.
Moderator’s Comment: What are the keys to successfully managing the merger of large organizations such as Federated and May? What is your assessment
of how Federated is handling its acquisition of May to this point? –
George Anderson – Moderator
Merging bland, promotional, regional chains into a national bland, promotional chain isn’t going to take much expertise; just follow the Federated Five Point Plan so skillfully applied at Lazarus, Rich’s, Burdine’s, Bon Marche, and others:
1) Shutter the downtown stores
2) Close all the restaurants and similar customer amenities
3) Carry nothing not available at any other department store
4) Eliminate all professional sales people
5) Advertise and promote nothing but discounts, never fashion
I was in Chicago this week and nearly cried while shopping in Marshall Field’s State Street to envision what havoc Federated is going to wreak with that iconic store and brand. The nation’s last grand department store, doomed. Are we going to have to go to London to shop?
Every business, big or small, has its internal politics. People feel easier working with people they know. Many “mergers” are really annihilations, with conquerors wiping out the vanquished. If Federated is able to keep the best people in both organizations, this merger will be one of the few winners.
I am a Chicago native and literally grew up shopping at the iconic Marshall Field’s. As countless Chicagoans have indicated, I too feel that changing our beloved store into a Macy’s is one huge mistake. Therefore, the idea that Federated is going with one brand (bland, as a previous respondent noted) image makes them just another store. If I wanted that, I’d just go down the street to Carson’s.
Marshall Field’s has done a tremendous job in recent years of playing off of their traditional big store heritage, and the equity of their “Field’s” evergreen color. Ditching this effort to now sport a Macy’s red just seems wrong.
I realize I’m way too close to this issue, but even from a professional perspective — there are lots of folks loyal to Chicago institutions such as Marshall Field’s.
History shows that, regardless of the industry, mega-mergers usually fall short of their expectations. It is people that will make the merger succeed and it is people that will make it fail. Not only is it important that the executives in place have the right skills, but they must also have the right leadership capabilities to lead the two organizations into one.
Starting from the premise that department stores have it tough these days, I give Federated credit for 1) going slow; 2) appointing May execs in key spots; and, 3) assuring associates that they won’t be summarily jettisoned, at least not short-term. As a previous commentator noted, most mergers are all about cutting costs, and this one is too. But, at least they are sending some signals to May execs and associates that they and their input has some value..
As harsh as this is, no one really can defend the idea of keeping the senior management at May within a reconstituted Federated, since they have done such a spectacular job of being mediocre merchandisers.
It was their ultra-conservative approach to retailing (I think they called it May-onaising) that allowed this once-great company to slide into the land of bland, and with the grossly overpriced Marshall Field’s acquisition, they basically wrote their own obituary.
Sad as that is, Federated’s stubborn and ill-conceived strategy to promote an equally forgettable and white bread-boring Macy’s brand all over the country is just as foolish. With all do respect, Mr. Lundgren appears to be living in a bubble, mostly made up of MBA’s and money people who honesty have no feel for retailing, branding or merchandising, since they see nothing wrong with killing storied and rich regional stores to replace it with Macy’s (also a once great brand, merged and diluted to mean nothing to anyone outside of NY and SF).
I keep reading about all the ‘synergies’ that will emerge from a combined company and all the great ad focus they will get out of one brand. Somehow with department stores, especially with their home-grown regional origins, these strategies seem completely ignorant of this important customer identity…they were ‘your’ hometown or regional store.
Let’s go back about twenty years folks….the great leveraged buyouts and hostile takeovers of the 80’s and 90’s started this horrible trend, which has only accelerated with the advent of the MBA/Wall Street crowd controlling everything in most business arenas. These people have no use for such esoteric concerns such as customer loyalty, unique brand image, tailored merchandising, in-store services or anything that can’t be quantified on a balance sheet. These are the geniuses who ran the stores into the ground by slicing off all the departments that were too bothersome or not profitable enough to deal with, eliminated the senior buyers and people with a flair for fashion, alienated their traditional customer base, eliminated special services and events, and then cutting back the staff to the point where shopping anywhere where someone showed a customer some attention just made more sense.
Lundgren and Federated are just the latest and largest practitioners of this trend. It’s a shame, but the way it is going, their won’t be a department store chain left in another twenty years. They’ve lost their way and seem to have no clue how to get back. Becoming Target-like with a star logo, rather than a bull’s-eye isn’t going to do it either. They need new blood and thinking, and not from accountants. They need people with a sense of fashion, trends and timing…an eye for what will enchant and entice a customer (look at Selfridges in London!) and in America they should do it with some regional focus. Also, if they can’t build that on such rich brand names as Marshall Field’s and Lord & Taylor, that just says it all then.
I wish them well, but if recent history is any indication, we are going to have a lot more dead real estate to re-think over the next several years.
Davidowitz thinks Macy’s has something to learn about merchandising from the May Company? That’s a unique perspective.
In my opinion, possibly the biggest retailing strategy error of all time was changing Dayton’s to Marshall Field’s. Nowhere were there ever more store name loyal folks than those in Minnesota. It was a great opportunity they literally handed to Herberger’s to pick up market share. Probably the next most loyal group of customers is Chicagoans who love of Marshall Fields. ‘Nuff said…