Field's buyout getting cold shoulder

Marshall FieldConsumersSears, Roebuck and Co.

Gene Kahn is like "the dog who instinctively chases the car but isn't sure what to do with it when he finally catches it."

That's one Wall Street analyst's take on the chief executive officer of May Department Stores Co., which last week bought Marshall Field's for $3.24 billion.

Many retail observers believe Kahn overpaid for the Chicago-born department store chain, which has experienced declining sales every year since 1999.

And at least one analyst listening to May's Internet conference call last Thursday was disappointed with the 75-minute event, saying executives "merely skimmed the surface" of their plans for Field's.

"May failed to communicate a compelling strategic rationale for this purchase, let alone justify the price, except to call it `the chance of a lifetime,'" Gimme Credit research director Carol Levenson wrote in a June 14 report. Plus, "only one slide showed some meager financial projections."

In that slide May projected that Field's 2005 earnings before interest and taxes will be $200 million on $2.6 billion in sales. In 2006, earnings are expected to rise to $265 million on sales of $2.7 billion. Field's had 2003 sales of $2.58 billion.

In the conference call, May said most savings would come from consolidating information technology functions. Executives reiterated that no layoffs are expected and that Marshall Field's Minneapolis headquarters will remain intact, led by existing management.

"This raises the ugly prospect of potentially disruptive systems changeovers," Levenson said of the IT plans. "No layoffs, no store closings, the maintenance of Field's as an independent division--these seem to rule out the usual sources of merger-and-acquisition cost savings. This deal seems to be about getting bigger, nothing more."

On Monday, Fitch Ratings downgraded May, citing higher debt levels and the challenges of taking on Field's.

During the conference call, another analyst asked how May could justify retaining Field's management, given the chain's poor track record.

Kahn assured Wall Street that executives at May's St. Louis headquarters, including merchandising managers, "will help steer Marshall Field's in a course that will allow them to improve their results."

Sears revamping: Oakbrook Center is where struggling Sears, Roebuck and Co. is testing consumer reaction to two renovated departments.

Sales in the home fashions department, where the Hoffman Estates retailer has done everything from roll out a new towel line to change the floor plan, are 14 percent higher than sales for the average Sears store's home fashions department.

The status report was in a handout that Sears executive Bill White gave last month to members of the National Association of Retired Sears Employees.

The children's department has new merchandise and layouts, resulting in Oakbrook sales exceeding Sears' national average by 7 percent.

A Sears store at Harlem and North Avenues is the site of new merchandise and design for Sears' electronics department, where sales are 4 percent higher than at the retailer's average store.

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E-mail byerak@tribune.com.

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