May, Robinson’s Seen Little Changed by Possible Merger
A marriage of the owners of Southern California’s May Co. and J. W. Robinson would combine two of the largest department store chains in one of the toughest retail markets in the nation.
The proposed acquisition of Associated Dry Goods by May Department Stores of St. Louis may create a new giant in the retailing business, but industry experts predict that competitors and customers in Southern California may hardly notice the difference.
May Department Stores, which operates 36 May Co. California stores, has suggested that it has no plans--at least for now--to sell or close any of Associated’s 23 Robinson’s stores.
Together, May Co. and Robinson’s control more than 40% of the Southland’s department store market, according to industry estimates, and have been a major part of the Southern California retail market for decades.
In some instances, they even anchor the same shopping centers, such as the Sherman Oaks Galleria and Los Cerritos Center in Los Angeles County, Mission Viejo Mall and Westminster Mall in Orange County and the Oaks shopping center in Thousand Oaks.
But the two chains are very different: May Co. is a middle-income department store while Robinson’s carries higher-priced goods designed to appeal to a more upscale shopper.
“To me, it’s two different ballgames,” said Michael A. Gould, who resigned in March as chairman and chief executive of Robinson’s and now is president of Giorgio Inc. “I think they (May Department Stores) have a great opportunity to end up with both ends of the market.”
May Co. California is May Department Stores’ largest division. It had sales of $784.2 million, making up nearly 24% of the company’s $3.327 billion in department store sales in 1985. May Co. California employs 13,000 of May Department Stores’ 72,500 employees.
Robinson’s does an about $560 million in sales, according to industry estimates, or about 21% of Associated Dry Goods’ $2.7 billion in department store sales. Of Associated Dry Goods’ 60,000 employees, Robinson’s has about 9,500.
Overall, May Department Stores had $5.1 billion in total revenue, while Associated had $4.4 billion for the fiscal year ended Feb. 1.
May officials have suggested that they have no plans to close any stores in the Los Angeles, Pittsburgh and Denver areas--the major markets where the two companies compete head to head. But they have not said so directly.
When asked about closing operations in those areas, May Department Stores spokesman Jim Abrams quotes from a letter sent by May Chairman David C. Farrell to Associated Chairman Joseph H. Johnson on the proposed merger. “We have considered with our advisers all legal and other requirements and do not foresee any difficulties,” Farrell said.
Most competitors of May Co. and Robinson’s declined to speculate on the impact of a merger or weren’t willing to be quoted by name, but privately they said they expect little change if May Department Stores actually doesn’t merge operations or close stores.
“It probably wouldn’t make a heck of a lot of difference,” one retail executive said.
“It certainly remains to be seen what would happen, but my guess . . . is they’re going to continue to operate as separate entities,” said Ron Rotter, a retail analyst with Seidler Amdec Securities in Los Angeles.
“Initially, there probably would be very little impact to the consumer, at least as far as he is aware,” Rotter said. “But five years from now, if one is doing much better than the other, who knows.”
Sarah A. Stack, an analyst with the Bateman Eichler, Hill Richards brokerage in Los Angeles, said there is room for both retailers, even if they were owned by the same company.
“The May Co. customer is a different customer from the Robinson’s customer,” she said. “Robinson’s is much more the upscale customer. . . . May Co. is much more middle of the road.”
“I don’t care” about a possible merger, said James F. Nordstrom, president of the Seattle-based Nordstrom department store chain, which has been investing heavily in Southern California. “We’re just trying to run our own deal.
“Hopefully, they will become less competitive,” Nordstrom said with a laugh.
WHERE SHOPPERS DO THEIR SHOPPING
Based on a survey of 1,000 households in Los Angeles and Orange counties. Table shows percent of respondents who said they or someone in their household shopped regularly at the specified department stores in the preceding six months. (Percentages add up to more than 100% because respondents generally shopped at more than one store.)
J.C. Penney 29.0% The Broadway 28.4% May Co. 22.9% Sears 22.1% Mervyn’s 19.2% Robinson’s 16.8% Bullock’s 15.7% Montgomery Ward 10.4% None/don’t know 23.2%
Source: Los Angeles Times Marketing Research, MSI International