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Federated stands today as the nation's
largest department store retailer. Federated celebrated its 75th birthday
in 2004, but its retailing roots extend far beyond that, stretching back
to the middle of the 19th century when most of its department store franchises
were founded. The company built on those traditionally strong franchises,
calling on the experience and innovative retail strategies of each division
to contribute to Federated's overall success. As a result, Federated understands
and meets the needs of American consumers in ways unmatched by any other
Seventy-seven years ago on the morning of March
6, 1929, millions of Americans opened their edition of The New York Times
to find a headline that would send the business and retail world into a
spin of excited chatter and speculation
"Abraham & Straus and Filene's to Unite."The announcement marked the
beginning of the evolution of what was to become one of the largest and
most influential corporations in retail history.
Federated Department Stores was born through the
combination of Abraham & Straus of Brooklyn, Filene's of Boston, F&R
Lazarus & Co. of Columbus, OH, and Bloomingdale's of New York. Each
of these retailers was an established, prominent presence with a rich history
of its own. In joining together, they agreed to maintain their separate
identities while linking their financial interests. These pioneers recognized
the immense opportunity that lay before them and on November 25, 1929, Federated
Department Stores was incorporated as a revolutionary new company in American
As Federated emerged in the years of the Great Depression
and World War II, it became apparent that the corporation was equipped with
both resilience and flexibility. It adapted to the times by implementing
innovative retail firsts, such as "pay when you can" credit policies
and arranging merchandise by size rather than color, brand or price. Not
surprisingly, one of the best and boldest ideas of the time belonged to
Fred Lazarus, the retailing legend and president of F&R Lazarus. He
became concerned in 1939 upon realizing that Thanksgiving would fall on
the last day of November. This meant fewer shopping days in the coveted
holiday shopping season between Thanksgiving and Christmas, a circumstance
that could push many retailers from the black to the red. Mr. Fred, as he
came to be called, proposed a brazen solution when he suggested to President
Roosevelt that in the future, Thanksgiving be anchored to the fourth Thursday
in November. The President supported this proposition, and within two years
it passed through Congress into law.
When the war came home to America in 1941, Federated
responded with the resolve of a company dedicated to community and civic
support. Selling war bonds, volunteering with the Red Cross, helping in
Victory Gardens and participating in U.S.O. events became part of its daily
business. Thirteen percent of Federated's workforce fought in the war, and
56 died in action.
As the nation went on to recover from the strife
of a long war, Federated surged forward into a new era of the company's
history. It was about to embark on a new venture sparked by another epiphany
credited to Mr. Fred. During a trip to Houston, TX, in 1944, he was astonished
to find that the sizeable city had not a single department store. It became
obvious to him that Federated had to begin acting on such opportunities
that were there for the taking. Upon his return, he convinced Federated's
directors that remaining a holding company was no longer conducive to achieving
the kind of success possible in the country's booming retail industry. He
suggested a bold transition to an operating company that could take advantage
of the incredible growth and expansion opportunities that lay ahead. After
much debate and some resistance, the directors agreed and Federated was
reconstituted as an operating company in 1945, with Fred Lazarus as its
president and Cincinnati as its headquarters.
Federated's first priorities as an operating company
were expansion and acquisitions that spanned the late 1940s to the early
1960s. By 1964, it was prospering at an extraordinary pace. Its number of
divisions had expanded from the original five to an impressive 14, and annual
sales for the first time had skyrocketed to more than $1 billion. The growth
continued steadily into the 1970s as Federated mirrored the population trend
of expansion to the suburbs. New malls and shopping centers were springing
up everywhere, and Federated was there to satisfy the new demand for a retail
presence in suburbia. This new trend played a major part in the growth of
Federated between 1964 and 1979, when its number of stores increased 400
percent and annual sales quadrupled to $4.8 billion.
It also was during this era of powerful and positive
change that Federated shifted its concentration from growth through acquisitions
to expanding the company's retail formats. Mr. Fred had stepped down as
CEO in 1966 and passed the reins to his son. Ralph Lazarus recognized retail
trends that shifted demand toward better merchandise and more brands, leaving
the door wide open for Federated to satisfy consumers whose demand for lower-priced
retailers was not being met. So by the 1970s, Federated had started a number
of discount divisions that operated in Florida, Texas and California. At
the same time, Lazarus also set his sights on real estate development through
a wholly owned subsidiary, Federated Stores Realty. This resulted in a new
string of regional shopping malls with Federated stores as their anchors.
Federated ended the decade of the '70s on a high note as it celebrated its
50th anniversary with the acquisition of Rich's in Atlanta, construction
of a new corporate headquarters building in Cincinnati and a total of 20
divisions and 364 stores.
It became apparent in the 1980s, as the tone of
the industry changed dramatically, that Federated's endurance and resolve
as a retail powerhouse was going to be tested. Howard Goldfeder took the
reins of CEO from Ralph Lazarus in 1982 amid a period of changes. As divisional
consolidation was taking place between the company's Rike's and Shillito's
operations, Federated planned for a new retail concept called MainStreet,
which it promoted as a "junior" department store. The company
also reinforced its longstanding tradition of giving back to the community
with the establishment of the Federated Foundation in 1980, setting aside
$15 million in earnings to create the corpus of this charitable trust. Things
looked stable for the corporation until 1988 when a Canadian real estate
developer named Robert Campeau turned his sights on Federated. A takeover
ensued, and just two years later Federated was forced to file for bankruptcy.
In perhaps the most difficult period of its history,
Federated's strong operations and determined leadership rebuilt the corporation
into an even stronger company. By 1992, Federated emerged from the ashes
as a new public company. Within three years, Federated had doubled in size,
acquiring Macy's in 1994 and Broadway Stores in 1995. It dove into the Internet
and e-commerce with macys.com and the acquisition of Fingerhut, a company
that was building a sophisticated e-commerce infrastructure. When the e-commerce
bubble burst and the acquisition of Fingerhut became a very public failure
shortly thereafter, Federated responded with candor. Chairman and CEO Jim
Zimmerman declared that the company remained confident in its resolve to
take prudent risks rather than choosing to stand still.
The new millennium saw Federated make the bold move
of acquiring long-time department store competitor, May Company. Both companies
had very similar histories and cultures, and both represented decades of
roll-ups of local family-owned department stores. Each had similar sales
volume and stores.
United, a retail powerhouse was created with Macy's
stores in 63 of the top 65 markets. We truly are "America's Department
Store." The acquisition was completed in August 2005, nearly doubling
the size of the company and making Federated the fourth largest non-food
retailer in the country.
Seventy-seven years after its founding, Federated
is one of the nation's most successful and respected retail institutions.
The company continues to prosper by adapting and flowing with new demands
on department stores in an ever-changing society. Embracing the words and
philosophy of one of its founders, Fred Lazarus Jr., Federated succeeds
by striving to be "a living mirror of our civilization in which we
see the constant changing needs and wishes of our people."
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