By MICHAEL BARBARO
Lord & Taylor, the 180-year-old New York department store chain whose flagship location in Manhattan established Fifth Avenue as a mecca for American retailing, is to be sold to a private equity firm, the companies said today.
The buyer is a partnership between the principals of two real estate companies, Apollo Real Estate Advisers and the National Realty and Development Corporation. The seller is Federated Department Stores, the owner of Macy's and Bloomingdale's. The price is about $1.2 billion.
For now, at least, the new owners say they plan to continue operating the chain's 50 stores, including the one on Fifth Avenue. There had been widespread speculation that that store and some others in very valuable locations would be immediately closed and resold.
Still, real estate rather than the power of a venerable brand name seems to be at the center of the deal. Lord & Taylor, once a preeminent department store that supplied couture to New York's white-glove set, lost much of its prestige over the past 25 years as it tried to appeal to a broader range of consumers. But its giant limestone and granite store at the corner of 39th Street and Fifth Avenue is worth an estimated $300 million to $400 million, and it also has stores in prime locations in wealthy suburbs like Manhasset and Scarsdale, N.Y.
"I am not sure we want to operate Lord & Taylor without a Fifth Avenue location," Richard Baker, president of the new firm, called NRDC Equity Partners, said in an interview at his Manhattan office this afternoon. "We might."
More likely, he said, would be reducing the size of the 600,000-square-foot flagship, which is about triple the size of a typical Lord & Taylor location. "It would perform better if it were smaller," he said.
The future of the Fifth Avenue store has been the subject of intense speculation in the retail industry, with executives saying that chains like Nordstrom, which now has no store in New York City, would be interest in taking it over.
The sale of Lord & Taylor is the latest example of investors snatching up fashion companies as the retail industry undergoes a wave of consolidation. In the past year, private equity groups have bought Neiman Marcus and Tommy Hilfiger, and several are said to have their eyes on Jones Apparel, the owner of Barneys New York.
NRDC Equity Partners has quickly emerged as a major player in the retail industry, with bids for Toys R Us, the Pathmark grocery chain and Burlington Coat Factory in the past year. It first major retail acquisition was Linens & Things in February.
Federated, which acquired Lord & Taylor last year when it bought May Department Stores last year, said Lord & Taylor did not fit into its strategy for turning Macy's into a national brand. The company will convert all of the old May regional department stores, including Marshall Field's in Chicago and Hecht's in Washington, into Macy's stores in September.
Mr. Baker and his team expressed confidence in the management team in place at Lord & Taylor, including the chief executive, Jane Elfers, who will keep her job after the acquisition. Over the past three years, Lord & Taylor has tried to climb back up the fashion ladder, introducing clothing labels like Ellen Tracy and Lauren by Ralph Lauren, to attract more style-conscious shoppers.
Mr. Baker said the closing of rival department stores over the past decade has created a broader customer base for Lord & Taylor.
"Consolidation," he said, "equals less competition."