Arkansas
Association of
Family and Consumer
Sciences

For those involved in the observation and study of the world of fashion retailing in the United States, the massive changes in the ownership of fashion retailers in the past 20 years are astounding. A brief review of the history of retailing, in general, in the United States helps to bring these changes into perspective.

Retailing in America grew directly out of the frontier beginning with general stores, peddlers, and mail-order sellers in the 1800s (Stone, 2004). The birth of retailing in American in the early 1820s in the form of general merchandise or dry goods stores which sold mainly staple and utilitarian products was a far cry from our fashion retailing world of today. Around 1850, the general stores grew into department stores which provided the general populous with fabrics and findings for the making of apparel and accessories (Jernigan & Easterling, 1990). Peddlers filled the gap for those located in remote areas and in the late 1800s, mail-order companies serviced the rural areas in America (Stone, 2004). Since that time, the face of fashion retailing in America has continued to evolve.

Today, some 150 years later, department stores, specialty stores, and discount stores are often considered as the traditional retailers of fashion goods while, off-price retailers, factory outlet stores, category killers, boutiques, and nonstore retailers (e.g., direct selling, catalog retailers, TV home shopping, and Internet shopping sites) are considered to be more contemporary in nature coming into prominence in the last 30 years or so. These stores may be run as sole proprietors (e.g., mom & pop stores), chain operations (e.g., The Limited, J.C. Penney), franchises (e.g., Athlete’s Foot, United Colors of Benetton) and/or have leased departments (e.g., furs, jewelry and shoes) within the store. With all of these types of retailers and organizational structures, the differences between today’s retailers are not as easily defined as in the past. As noted by Stone (2007), "It has, for example, become increasingly difficult to distinguish a department store from a chair operation, a discounter from an off-pricer, a franchiser from a chain" (p. 281).

Unlike the early department stores, the majority of which were family owned and operated single unit stores, today’s retailers are most often part of a store ownership group. Store ownership groups originated in 1929 when stores owned by Abraham & Straus of Brooklyn, Filene’s of Boston, F&R Lazarus & Company of Columbus and Bloomingdale’s of New York consolidated under one corporate parent, Federated Department Stores, Inc.(Jarnow & Guerreiro, 1991). According to Jernigan & Easterling (1990): Store ownership groups are corporations that own a number of autonomous retail stores. Many of the stores owned by an ownership group are multiunit retailers such as department and specialty stores with branches. Often, department stores owned by ownership groups were once independently owned. When the individual stores retain their own names, the general public is seldom aware of their group affiliation (p. 386).

Following Federated, other ownership groups formed in the 1930s including R.H. Macy & Company (e.g., Macy’s stores, late 80s entered specialty store retailing as well with Aeropostale , Charter Club, Fantasies), Allied Stores Corporation (e.g., Brooks Brothers, Bon Marché, Bonwit Teller, Catherine’s Stout Shoppe, Jordan Marsh, Mass Brothers, Stern’s), and Associated Dry Goods Corporation (e.g. Caldor, Inc., J.W. Robinson Co., Loehmann’s, Lord & Taylor).

As the trend continued, Dayton-Hudson Corporation (e.g., Dayton’s, Hudson’s combined into Dayton-Hudson Department stores in 1983, Mervyn’s, Target Discount Stores), Carter Hawley Hale Stores, Inc. (e.g., Bergdorf Goodman, Broadway Stores, Neiman Marcus) and May Department Stores Company (e.g. Famous Barr, Filene’s, Foley’s, The Hecht Company, The May Company) joined the group (dePaola & Mueller, 1986; Jarnow & Guerreiro, 1991). By the 1980s, numerous other ownership groups existed for department and specialty stores (e.g., Batus Retail Group, Mercantile Stores Company, Inc., The Limited, Inc., The Gap, Inc., United States Shoe Corporation, F.W. Woolworth Company, Melville Corporation, Hartmarx, etc.) (Jernigan & Easterling, 1990). This article deals for the most part with the changes in department store ownership groups where mergers and acquisitions have had the most dramatic effects since the 1980s rather than with the specialty store ownership groups. The specialty store groups have undergone changes, but none have been as drastic as those of the department store groups.

Towards the end of the 1980s, the era of mergers and acquisitions began, and so much change has occurred in the fashion retailing landscape since that time it is almost impossible to keep track of all the players today. At this time, chain organizations with the purchasing power afforded to them with their highly developed centralized buying procedures made it extremely difficult for department stores to compete. In response, department stores realized they needed to develop more simplified, efficient organizations for the buying, shipping and merchandising of their goods. Mergers and acquisitions allowed for this efficiency while one or more internal divisions joined together to create parent organizations which eventually resulted in department stores themselves merging with one another and becoming part of the expansion boom. With changes in ownership came new images and often new names as well. When the impact of consolidations, bankruptcies, alternative distribution channels, and foreign investments are added to the mix, the effects of all this change are overwhelming (Stone, 2007). The remainder of this article will attempt to explore these changes and their impact on the world of fashion retailing today which this researcher has tracked since the early 1990s.

During the late 80s and early 90s, there was a big cycle of retail mergers. Cater Hawley Hale Stores, Inc., started selling off stores in 1985 as a result of persistent poor sales results and two hostile takeover attempts by The Limited in 1984 and 1986 (Carter Hawley Hale Stores, 2007). In 1987, Carter Hawley Hale split off its desirable specialty store business as Neiman Marcus Group, Inc. (encompassing the Neiman Marcus, Bergdorf Goodman and Contempo Casuals stores) and became a publicly listed company under the ownership of General Cinema later to become Harcourt (Neiman Marcus, 2007). Carter Hawley Hale fell into Chapter 11 bankruptcy in 1991 and completed reorganization of the newly name Broadway Stores, Inc., in 1992 (Carter Hawley Hale Stores, 2007).

In 1986, Associated Dry Goods Corporation was acquired by and merged under May Department Stores Company (Jarnow & Guerreiro, 1991). At the same time, R.H. Macy’s & Company was taken private in a leveraged buyout (LBO) by then Chairman and CEO, Edward Finkelstein. In 1988, Finkelstein entered into a takeover battle for Federated Department Stores, Inc., with Campeau Corporation which ended up with Macy’s purchasing Federated’s California based Bullock’s (fashion-oriented stores), and the high-end Bullocks Wilshire and I. Magnin divisions. This was followed by a reorganization of its divisions into Macy’s Northeast, Macy’s South/Bullock’s and Macy’s California, the later including an I. Magnin/Bullocks Wilshire organization. The Bullocks Wilshire stores were renamed I. Magnin in 1989. Due to financial difficulties, R.H. Macy’s & Company filed for bankruptcy in 1992. Macy’s was condensed into two divisions, Macy’s East and Macy’s West with two-thirds of the I. Magnin chain sold or shut down (Macy’s, 2007).

A Canadian retailer/entrepreneur, Robert Campeau, purchased Allied Stores Corporation in 1987 and Federated Department Stores, Inc., in 1988. The two were merged and their corporate name was changed to Federated/Allied (Jarnow & Guerreiro, 1991). This was the beginning of several major changes in the U.S. fashion retail business as a result of foreign investors entering this market. In January of 1990, Chapter 11 petitions were filed for Allied Stores and Federated Department Stores by Campeau Corporation. This provided a prime example of how healthy retailing operations can be dragged down by excessive debt of the parent company ('Textiles, apparel, and home furnishings,' 1990). The Chapter 11 reorganization of these two groups, completed in early 1992, resulted in these stores being housed under the corporate name of Federated Department Store, Inc., once again (Rosenberg, 1991).

The absence of the Batus Retail Group during this time can be attributed to the selling off of its retail holdings in order to fight off a hostile bid for the group in 1987 by investor, Sir James Goldsmith. By 1990, Saks Fifth Avenue was sold to Investcorp, a group of Arab investors. The other crown jewel of Batus, Marshall Field’s, was merged with the Dayton Hudson Corporation yet the stores were allowed to retain their name under this acquisition. The one other retail holding of Batus was Ivey’s. This Charlotte, NC, based department store was acquired by Dillard’s Department Stores ('Textiles, apparel, and home furnishings,' 1990).

The swirl of mergers and acquisitions continued throughout the late 1990s and is still prevalent today. The focus has seemingly shifted towards streamlining operations and developing more precise images for the ownership groups which have emerged. When Saks Fifth Avenue merged with Proffitt’s, Inc., in 1998, the company was renamed Saks Incorporated. By 2005, Saks Incorporated decided to sharpen its focus on luxury-oriented retail goods equivalent to the image of its Saks Fifth Avenue stores. As a result, in July of 2005, Saks sold its 47 southern based McRea’s and Proffitt’s stores to Charlotte, NC, based Belk. Then in November 2005, 142 of its northern based Carson Pirie Scott, Bergner’s, Boston, Herberger’s, and Younkers stores were sold to Bon-Ton Stores, Inc. By August of 2006, Saks Incorporated announced it would sell 38 Parisian stores and two regional distribution centers to Belk. According to insiders, the company’s activities in the last 12 months seems to point towards the return of Saks Fifth Avenue to an independently-operated brand for the first time in more than 30 years. At the same time, industry experts predict that Saks Incorporated may be positioning itself for a buyout at some later point (Saks Incorporated, 2007).

In 2000, the Dayton Hudson Corporation changed its name to the Target Corporation stating that this was a more appropriate name for the company whose major profits were generated by their Target stores. Other stores included Mervyn’s, Dayton-Hudson’s, and Marshall Field’s. Then, in 2001, Target Corporation renamed the Dayton-Hudson stores with the more nationally known Marshall Field’s nameplate. By 2004, Target Corporation announced the sale of its Marshall Fields and Mervyn’s divisions to May Department Stores (Dayton’s, 2007).

With this deal, May Department Stores secured a coveted nameplate in fashion retailing and a strong presence in the Detroit, Minneapolis and Chicago markets, where there was little overlap with May stores. This was also May’s first major acquisition since acquiring Associated Dry Goods in the 1980s. Other regional nameplates operated by May Department Stores at this time were Lord & Taylor, Filene’s, Hecht’s and Famous Barr (Moin, 2004).

In May 2005, the Neiman Marcus Group was the subject of a leverage buyout (LBO) as it was sold to two private equity firms, Texas Pacific Group and Warburg Pincus (Young, 2005). Today, the company comprises 38 Neiman Marcus units and two Bergdorf Goodman stores, and the Direct Marketing segment, Neiman Marcus Direct (Neiman Marcus, 2007).

Federated Department Stores, Inc., was a major player during this time period after coming out of Chapter 11 reorganization in 1992. In December of 1994, Federated Department Stores merged with R.H. Macy, Inc., as Macy’s came out of Chapter 11 bankruptcy. Federated proceeded to shut down the remainder of the I. Magnin chain, converting several to Macy’s or Bullock’s stores (Macy’s, 2007). This move resulted in Federated having a net worth of over $14 billion. The largest of any ownership group at that time (Moin, 2004).

In August of 1995, Federated acquired Broadway Stores, Inc., with plans to convert these units into Macy’s, Bullock’s and Bloomingdale’s stores. The Broadway chain was dissolved in 1996 as Federated consolidated the former Broadway, Emporium and Weinstock’s stores along with its own Macy’s California and Bullock’s chains to form Macy’s West. With this acquisition, Federated also brought its Bloomingdale’s chain to the West Coast all of which established a presence in California which Federated was previously lacking (Carter Hawley Hale Stores, 2007).

Plans were announced by Federated in July of 2005 to acquire May Department Stores Company for $11 billion in cash and stock. The deal created the nation’s largest department store chain with over 1,000 stores and $30 billion in annual sales resulting in a $ 17 billion company (Macy’s Inc., 2007). As Federated had successfully done with so many other acquisitions, plans were announced to convert 330 regional department stores owned by the May group to the Macy’s nameplate. This included May’s Famous-Barr, Filene’s, Foley’s, Hecht’s, The Jones Store, Kaufmann’s, L.S. Ayres, Meier & Frank, Robinson-May, and Strawbridge chains. These changes were met with negative reactions in those regions because the department stores were considered as local institutions in these areas. Where Macy’s stores were in close proximity to May stores, some redundant stores would be closed while others would be converted to Federated’s luxury Bloomingdale’s chain.

In September of 2005, Federated announced that all of its Marshall Field’s stores (including the legendary State Street store in Chicago) would bare the Macy’s nameplate by the end of 2006, becoming the new Macy’s North division. This announcement was meet with even more negative publicity as Marshall Field’s had long been considered a Chicago institution.

Federated announced, in January of 2006, the company’s intention to divest May’s Lord & Taylor division by the end of 2006. Federated had concluded that the chain did not fit with their strategic focus for building the Macy’s and Bloomingdale’s national nameplates. Sale of the Lord & Taylor division was completed in October 2006 to NDRC Equity Partners, LLC (Macy’s, 2007).

Then, in February 2007, Federated announced plans to change its corporate name from Federated Department Store, Inc., to Macy’s Group, Inc. This change took affect on June 1, 2007. Terry Lundgren, Chairman, President, and CEO of Federated, noted that the reasoning for the name change resulted from the company’s large-scale conversions to the Macy’s nameplate. As stated by Lundgren, "Today, we are a brand-driven company focused on Macy’s and Bloomingdale’s, not a federation of department stores." (Macy’s, Inc., 2007, p. 7).

The facts that have been presented and briefly detailed in this paper point to the volatile nature of the world or retailing in the U.S. during the last 20 years. In contrast to the large number of department store ownership groups which existed by the mid 1990s, today’s landscape is extremely small. Due to the large number of mergers and acquisitions during this time, the definition given by Jernigan & Easterling in 1990 for store ownership groups is no longer accurate. Today’s department store ownership groups are rarely composed of multiunit retailers which retain their own names. For the most part, stores bare the names of the ownership groups themselves and the question of who owns whom is not nearly as hard to discern as it was in the past.