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Federated Department Stores,
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 retailer,
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
"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 retail.
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
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
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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