Federated Consolidates 4 Units in Move to Cut Costs
To cut operating costs and boost profits, Federated Department Stores said Monday that it is merging four department store divisions into two and consolidating data-processing and corporate office functions.
Effective immediately, Federated said that it is merging its Midwest-based Lazarus and Shillito Rikes department store chains into a single 31-store unit to operate under the name of Lazarus, one of Federated’s founding families.
The 17-store Lazarus division is now based in Columbus, while the 14-store Shillito Rikes group is based in Cincinnati.
The consolidations will mean the addition of more sales personnel and sales managers in the stores but will cost some corporate jobs, said Carol Sanger, vice president-public relations.
She said Federated has not determined how many jobs will be eliminated.
To Spend $50 Million
“We have no estimate of job loss in any market at this time,” Douglas M. Thomsen, chairman and chief executive of the new Lazarus division, told a news conference in Cincinnati.
He said Lazarus will spend $50 million to upgrade its store interiors, add about 300 jobs for sales personnel and sales managers and establish three smaller department stores in the central Ohio cities of Newark, Zanesville and Lancaster later this year and in 1987.
The reorganization is not intended to thwart an outside takeover, said Donald J. Stone, Federated’s vice chairman. He declined comment on reports that Federated’s management plans a buy-out of the company.
Projected Sales Volume
The new unit, to be based in Cincinnati, will be Federated’s largest in number of stores and second largest only to the New York-area Bloomingdale’s chain in terms of sales volume.
The new unit’s fiscal 1985 sales volume is projected at $850 million. Bloomingdale’s had a fiscal 1984 sales volume of $903 million.
The new Lazarus division will serve Ohio, Indiana, Kentucky and West Virginia. It retained the Lazarus name partly because the Lazarus division accounted for a larger portion of the sales, Federated officials said.
The senior executives of Lazarus are not part of the Lazarus-Shillito Rikes merger, and their job futures are undecided, Stone said.
Federated also said it is merging its Columbus-based Gold Circle store unit and its Atlanta-based Richway chain into a mass-merchandising unit to be based in Columbus. The new unit will include 76 stores in eight states in the Southeast and Midwest and it is projected to have 1985 sales totaling $1.1 billion.
It will operate 45 Gold Circle stores in Ohio, Kentucky and New York and 31 Richway stores in Georgia, Florida, Tennessee, North Carolina and South Carolina.
As part of the changes, Federated said it is creating a centralized data-processing facility in Atlanta to combine the separate data-processing operations of Federated-owned Rich’s stores in Atlanta, Burdines in Miami and Sanger Harris in Dallas.
The Atlanta center will provide about 120 new jobs when it is fully operational within a year to 18 months, Sanger said.
Federated executives said they expect that the consolidations will reduce income during the first half of fiscal 1986 and will result in a $25-million after-tax charge against earnings in the fourth quarter of fiscal 1985, which ends Feb. 2.
Lazarus, founded in Columbus in 1851, will be headed under the new alignment by Shillito Rikes executives Thomsen, as chairman and chief executive, and Herbert E. Ross, as president.
Peter J. Hayes, chairman and chief executive of Gold Circle, and unit President Robert B. Glass will serve in the same positions in the consolidated Gold Circle-Richway division. E. Jackson Smailes, who was president of Richway, will become vice chairman of the new division.
John H. Weitnauer Jr., chairman and chief executive of Richway since 1980, will remain with Federated, assist in the transition and will have a “continuing role with Federated,” the company announced.
