May Co. sale could turn E.V. malls inside out - East Valley Tribune: Business

May Co. sale could turn E.V. malls inside out

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Posted: Tuesday, March 1, 2005 1:46 pm | Updated: 9:33 am, Fri Oct 7, 2011.

The $17 billion marriage of Robinsons-May and Macy’s parents announced Monday could literally blow the roof off aging East Valley malls.

"It allows us to be more creative quickly," said Tracey Gotsis, senior vice president for mall-owner Westcor. "It could jump-start our plans to invigorate Fiesta Mall."

The expected consolidation and subsequent store closings also will affect Scottsdale Fashion Square and Paradise Valley Mall in east Phoenix. Those centers, like Mesa’s Fiesta Mall, house both of the merging companies’ midscale department store chains.

Gotsis said having anchor stores move out would free up space for new retailers not typically seen at a traditional enclosed mall, and that could spur complete redesigns of the centers themselves, possibly turning them into indoor-outdoor shopping plazas.

In an announcement that surprised nobody, Federated Department Stores, parent of Macy’s, Bloomingdale’s and other regional department store chains, said Monday that it will purchase the May Department Store Co., parent of Robinsons-May, Lord & Taylor, several regional department store chains, David’s Bridal stores and After Hours Formalwear stores. Cincinnati-based Federated said it will buy May for $11 billion in stock and cash and assume May’s $6 billion debt.

The deal is subject to shareholder and regulatory approvals and is expected to close in the third quarter.

The May Co. purchase will net Federated presence in 64 of the top 65 U.S. metro markets.

Unlike the pending merger of Kmart and Sears, which combines a typical mall retailer — Sears — with an off-mall retailer — Kmart — this merger allows Federated to expand into new metro areas without building stores, said Patrice Duker, spokeswoman for the International Council of Shopping Centers.

Federated chairman Terry Lundgren said no changes are expected until 2006, but he spoke of an aggressive plan that would consolidate headquarters operations and convert May stores into Macy’s, saving the merged company $450 million by 2007.

In most markets there is little overlap of the two chains, Duker said, so consumers shouldn’t see more than a store name change at their local malls.

But in the Valley, three shopping centers — Fiesta Mall, Scottsdale Fashion Square, and Paradise Valley Mall — feature Macy’s and Robinsons-May stores.

With no options for attracting new traditional department stores in a consolidating industry, Westcor has been anticipating changing the malls themselves to adapt to industry changes, Gotsis said.

Fiesta Mall and Paradise Valley Mall could become indoor-outdoor centers combining "big-box" giants such as Target, Circuit City or Costco with traditional mall stores, similar to plans announced for San Tan Village in Gilbert, she said.

Westcor is already working on major redesigns to meld the store line-up at indoor Scottsdale Fashion Square and outdoor Biltmore Fashion Park — two upscale shopping centers four miles apart. With two Macy’s and one Robinsons-May between them, emptying out a couple of those stores quickly could accelerate that shake-out as well, Gotsis said.

Gotsis hopes Federated, which actually owns the store buildings at each of the malls and therefore will have a strong incentive to re-use the space or sell it, will reconsider moving a new upscale brand into the market.

Westcor has long hoped for a Bloomingdale’s — a department store with

merchandise, price points and customers similar to Nordstrom’s.

Faith Hope Consolo, chairman of Prudential Douglas Elliman’s retail leasing and sales division, said that’s a possible outcome of the merger.

And it’s an outcome that could inspire other upscale Valley stores to improve as well.

"Bloomingdale’s is expanding again," she said. "If any stores are resting on their laurels, they will have to shape up if Bloomingdale’s comes in. They are cutting edge."

Even more likely, Consolo said, is that Lord & Taylor will target the local market.

Federated-May merger

The merged companies:

950 department stores 700 bridal and formalwear stores 243,000 employees $30 billion annual sales Operations in 49 states, District of Columbia, Guam and Puerto Rico Presence in 64 of the top 65 U.S. metro areas Top chains: Macy’s, Bloomingdale’s, Robinsons-May, Lord & Taylor, Filene’s, Marshall Field’s, David’s Bridal, After Hours Formalwear

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