Retail:

The Unfolding of a New Department Store Landscape
by Ann Merrill, Managing Director, Gordon Brothers Group - Retail Division and Bradley W. Snyder, Principal and Managing Director, Gordon Brothers Group - Retail Division

Federated Department Stores, which acquired the May Department Stores Company in August 2005, has now transitioned all May Company nameplates (including Filene's, Robinson-May, Hecht's and Marshall Fields) to Macy's. As a result of this historic transaction, which has transformed the department store sector, Federated is positioned to enjoy a multitude of opportunities. Major among them are:

Synergistic Opportunities:
Macy's is now a true "National Department Store" chain which will enable it to realize significant synergy benefits. The company's management has publicly projected savings of $175MM in FY '06 and an additional $275MM in FY '07.

Supply Chain and Enhanced Margins: Federated aims to differentiate its merchandise assortments from their competitors' through enhanced private label offerings and exclusive designer collections. The "new" Federated vendor matrix has obviously forced numerous prior May Company suppliers to seek alternative distribution channels. Also, increased private brand penetration should result in greatly enhanced margins.

Advertising: With their expanded store base, Federated now reaps the benefits of national scope advertising with decreased emphasis on local print advertising.

Store Productivity: With the blending of two 400+ department store chains into one major entity, Federated now has the optimal agenda of creating platinum level "best practices" for each and every store and its associates throughout the new store base.

Disposition of Non-Core Assets:
In further support of its focus on "national branding," Federated recently completed the sale of its Lord and Taylor division and reports indicate it expects to close the sale of its David's Bridal chain sometime during the Fourth Quarter of '06.

The retail world continues to watch and learn from the recent transitions in Federated. Within the last several weeks, there is growing interest in news reports of Carl Icahn acquiring a significant stake in Federated, which may challenge the company to accelerate the merger's effectiveness, efficiencies and synergies even more than its existing plans. In any event, this transaction has changed the department store landscape in extraordinary ways.

Gordon Brothers Group, LLC was proud to serve as the exclusive agent for Federated Department Stores to support the divestiture of over 80 duplicate store locations by facilitating clearance sale events and the resulting transitions in store operations and merchandise assortments, fixed asset redeployment and overall management of the store level and customer transfer processes.