By Alexander Coolidge
Cincinnati Post staff reporter
As Federated Department Stores looks to trim stores next year, analysts say several nontraditional rivals could end up taking over stores it plans to sell.
With the closure on Tuesday of its acquisition of St. Louis-based May Department Stores, the Macy's parent has doubled its size to become a $30 billion company with nearly 1,000 department stores. After the Christmas season, Federated's next move will be to shrink the chain by selling 75 overlapping stores at malls where it has too many locations.
Though analysts believe Federated's takeover of its largest rival leaves it a much stronger player, its retail segment is consolidating, which could translate into big boxes or other retailers' snapping up locations targeted for sale.
Many of the stores Federated is selling are at malls where the retailer has multiple stores. None of the stores targeted for divestiture are in Greater Cincinnati.
"Department store chains have come under immense pressure, I wouldn't be surprised if other retailers are looking at (Federated's) mall space," said Kim Picciola, an analyst with Morningstar in Chicago.
She predicted Target and Best Buy would join the likes of J.C. Penney to cherry pick the best of the stores being divested. She also said mall owners might purchase the locations to redevelop them for smaller tenants, such as restaurants or other specialty retailers.
But don't count out department store chains such as Penney's and Dillard's, said Phil Zahn, an analyst with Fitch Ratings in Chicago. He said Federated would welcome an old rival to its old turf, rather than risk a store remaining empty, which would hurt surviving stores.
"Everybody lives off each other's traffic," he said. "They don't want to see them stand empty because that would hurt their stores still open at those malls."
Company officials stressed they are holding off on sweeping changes as they prepare for the all-important Christmas shopping season. Federated said it continues to review its portfolio of stores for further divestiture.
Federated reiterated its pledge to minimize layoffs, which it said won't even start until March. The company has said it will offer all managers in good standing jobs, as well as many associates.
Close to 15,000 associates work at the 75 stores targeted for divestiture.
Federated also has said its plans to rename May's regional chains to Macy's won't happen until the fall of next year. The company did not provide any additional insight on whether it plans to rename the storied Marshall Field's chain.
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