Federated Navigates Choppy Waters

Many of the legacy May nameplates, Johnson says, "have proven to be a tougher nut to crack" than Federated may have anticipated.

"It's still early yet," he says. "You can't turn the Queen Mary around in a day."

For some areas, the Macy's change-over isn't just keeping shoppers from the former stores, but it's also provoking anger. Loyalists to the former Marshall Field's store in Chicago have organized a boycott against the changeover to Macy's. Chicago resident Pat Craven says the hostility isn't limited to the Windy City.

"People all over the country have taken it upon themselves not to shop Macy's," Craven wrote in an email. "Here in Chicago, we are very proud of our city and Marshall Field's Stores, but now the quality and vendors we loved are gone. If Federated CEO Terry Lundgren really believes that by changing their group name will bring us back to shop there, sorry to say, they have made another big mistake."

The Chicago Tribune reported recently that the Macy's changeover has benefited the company's high-end rivals, such as Neiman Marcus and Nordstrom(JWN), which are now carrying designers that formally were exclusive to Marshall Field's.

Federated spokesman Jim Sluzewski says the company's product line is always evolving and that new lines and labels are coming into the stores all the time.

"We're doing very well," he says. "Performance in those stores continues to improve. While we understand the emotional reaction about changing those names, the status quo of those stores was not working."

Sluzewski says that May's regional department stores were created in a different atmosphere than the one that exists today, in which discounters like Wal-Mart(WMT) and Target(TGT) are luring away customers with done-to-the bone prices.

"The regional department stores have been performing poorly for many years," he says, "and groups like Marshall Field's were among the poorest performers."

Kurt Barnard, president of Barnard's Retail Consulting Group, agreed, saying the Federated takeover of May wouldn't have even taken place if the regional stores were doing well.

"You can't run a business on the basis of nostalgia," he says. "You may like to, but it ain't gonna happen."

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