Skip to content
Field's acquired, but name to stay
Marshall Field's is getting a new owner, but its name and its Frango mints will live on.
Capping a three-month bidding war, Target Corp. said Wednesday that it would sell its Chicago-born Field's chain and nine of its Mervyn's stores to May Department Stores Co. for $3.24 billion, a price one retail observer called "astronomical."
May, the St. Louis-based parent of Lord & Taylor, outbid Federated Department Stores Inc. Had Cincinnati-based Federated won, many industry observers expected it to rebrand all 62 Field's stores as part of its Macy's or Bloomingdale's chains.
Without Field's, Minneapolis-based Target is free to focus on its more profitable namesake discount chain. Wall Street has long hounded Target to sell Field's and Mervyn's, two chains squeezed between discounters such as Wal-Mart Stores Inc. and luxury retailers such as Nordstrom Inc.
May is happy to take Field's, which finds itself with a new owner for the second time in 14 years. The addition of the 152-year-old Field's chain brings May immediate expansion, more purchasing clout with suppliers and new opportunities to cut costs.
May Chief Executive Gene Kahn called Field's "a dynamic franchise with a lot of wind in its sails."
"This combination will produce excellent economies of scale, improved buying power, and an expanded distribution network," he said.
Field's gives May a major presence in the upper Midwest among relatively upscale consumers, particularly the 40- to 60-year-olds critical to traditional department stores.
"May has a similar base, but its customers are not nearly as upscale, with the exception of Lord & Taylor," Kahn said.
Kahn said he planned to keep open side-by-side locations of Field's and Lord & Taylor, such as in Water Tower Place. Lord & Taylor carries only apparel and accessories while Field's is a full-line department store stocking furniture and other home goods.
Kahn also said he plans to maintain the innovations added at Field's 800,000-square-foot State Street store. Last year, the State Street flagship allowed specialty retailers, from clothier Pink to Italian scooter maker Aprilia, to open "mini-shops" in about 10 percent of the store in a bid to attract new shoppers.
In fact, Kahn said he may roll out the concept to other Field's locations.
"The State Street store is one of America's most exciting stores," Kahn said. "We'll do nothing to take away from that."
The store instantly becomes May's largest. A Lord & Taylor store in Manhattan tops out at 611,000 square feet.
After completing the deal and integrating Field's, May expects to save $85 million in fiscal year 2005, $140 million in 2006 and $180 million annually thereafter. The acquisition also is expected to contribute to earnings starting in fiscal 2005.
It had been assumed that Federated had the inside track for Field's. Business has been humming at Federated, with sales at stores open at least a year up 2.9 percent last month. But May, which also owns Filene's, Kaufmann's and David's Bridal, needed a jump-start. Its latest monthly sales fell 3.8 percent.
"May needs to do something to raise itself out of the doldrums," said industry analyst Kurt Barnard, president of Retail Forecasting in Upper Montclair, N.J. "Its same-store sales have been less than scintillating."
May had sales of $13.3 billion in 2003 while Federated had $15.2 billion. But now the two companies will be together at the top of the department store sales rankings. Field's had 2003 sales of $2.58 billion.
Some analysts also point out that Field's stores are, in a way, a better fit for May, which isn't quite as upscale as Federated's Bloomingdale's and Macy's.
While Field's is venerated by generations of Chicagoans for its Frango mints, green bags and Christmas displays along State Street, outside of this area it is largely regarded as a middle-of-the-road chain.
"Marshall Field's is in a lot of B malls, and May sells to the masses not the classes," said Howard Davidowitz, of New York investment banking firm Davidowitz and Associates. "May also was worried that Federated was getting ahead of it in size."
But the pursuit of Field's also made sense for Federated, Davidowitz and others say.
"Neither has a big upper Midwest presence," said Eric Beder, senior equity analyst for J.B. Hanauer & Co. in New York. "It's May's last chance to get into the upper Midwest at some level of size."
The key markets for Field's are Chicago, Minneapolis and Detroit. It also has stores in five other upper Midwest states.
Davidowitz, who had been expecting Field's to sell for about $2 billion, called the $3.2 billion purchase price "astronomical."
Beder had forecast $2.3 billion to $2.7 billion.
"May really wanted it," he said. He called the purchase price "top dollar."
The deal comes as Field's has picked up the pace in a department store sector that had been struggling until recently. Last month, sales at Field's stores open at least a year rose 1.7 percent.
Field's had been headquartered in Chicago until its 1990 acquisition by Dayton Hudson Corp., now Target. Most of its operations were then moved to Minneapolis.
Ditching the Field's name would have enabled Federated or May to save money. But now May will count on reducing costs through management cuts and efficiencies, Beder said.
Field's is one of the few remaining large department store chains.
"This is a consolidating industry, but there's little left to consolidate," Davidowitz said.
Dillard's is doing poorly and is twice the size of Field's, he said. But the family members who run the Arkansas-based chain are reluctant to sell.
Also, Target is still reviewing its options for the 257 mostly West Coast Mervyn's stores that it did not sell to May.
Besides keeping the Field's name, May also said that Linda L. Ahlers will remain as Field's president and that the division will remain based in Minneapolis.
More important to Chicagoans, May said it will "maintain the product exclusives--such as Frango mints--that are longstanding traditions at Marshall Field's."