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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 retailer, anywhere.
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 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 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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