Federated OKs Option for Macy to Purchase Bullock’s
The pricey Bullock’s and Bullocks Wilshire department store chains in Southern California, along with the tony I. Magnin high-fashion chain, could be sold to R. H. Macy & Co. even if Macy’s loses the fight to take over Federated Department Stores.
Federated announced Monday that it had granted Macy’s an option to buy Bullock’s and Bullocks Wilshire for a minimum of $800 million, and I. Magnin for at least $150 million. The option was given after Macy’s sweetened its takeover bid for Federated by $200 million to $6.3 billion.
The sale of the Bullock’s and Bullocks Wilshire--two of Federated’s top-performing chains--might make Federated less attractive to rival bidder Campeau Corp., and Campeau said it would go to court to block the agreement.
For Macy’s, the purchase of the two chains would give it a long-sought foothold in Southern California. “It accelerates Macy’s expansion on the West Coast,” said retail analyst Thomas H. Tashjian at Seidler Amdec Securities in Los Angeles. “This type of opportunity comes along only once every 30 years.”
Company officials would not comment on whether the three Federated divisions would be merged under the Macy’s name or allowed to operate under their current names. But, in recent years, Macy’s has imposed its name on the Bamberger’s chain in New Jersey and the Davidsons stores in Atlanta.
“The nice thing about this is they are entering the market without adding . . . more department stores” to the market, said Cathy Nichols Manning, a director at McKinsey & Co., a management consulting firm. “They are basically taking a competitor out while they enter the market--that’s attractive.”
Analysts say Macy’s would definitely stir things up in the Southern California department store market. “They would turn the heat up on the competition among department stores here,” said Sarah Stack, retail analyst at Los Angeles-based Bateman Eichler, Hill Richards.
“Macy’s brings absolutely superior merchandising skills,” Stack said. “It’s a well-managed operation--it’s reflected in the way the stores look.”
In Bullock’s, Macy’s would gain an 81-year old, 22-store chain that caters to middle- and upper-income consumers. In recent years, Bullock’s has sought to build up its image as a fashion-conscious retailer. “Bullock’s is a valuable franchise,” said Stack. “I think the image of the store as a contemporary one has been emphasized even more with the opening of the downtown store.”
The first Bullock’s store was opened on the corner of Broadway and 7th Street in downtown Los Angeles in 1907 by John G. Bullock and P. G. Winnett, Canadian immigrants and retailers. Bullock opened up the store with a $250,000 investment from Arthur Letts, who founded the Broadway department store chain. Bullock’s was part of the Broadway chain until the 1920s.
In 1929, the second Bullock’s store was opened up in the “Miracle Mile” section of Wilshire Boulevard in Los Angeles. After Bullock’s was merged with Federated in 1964, the Miracle Mile store--known for its Art Deco styled tower--became the flagship store for the Bullocks Wilshire chain.
Bullocks Wilshire is known as a specialty apparel store. Unlike Bullock’s, the seven Bullocks Wilshire stores do not carry home furnishings or appliances. Bullock’s also owns three other specialty stores--named Bullock’s Women--that specialize in large-size clothing.
Bullock’s and Bullocks Wilshire rang up sales of about $890 million last year, Tashjian estimated.
The other chain Macy’s could also buy--San Francisco-based I. Magnin--features designer-label apparel for men and women. I. Magnin posted sales of $340 million in 1987.
“Magnin is an under-performer but it’s promising,” said William Smith, retail analyst at Smith Barney, Harris Upham.
With the option to purchase Bullock’s and Bullocks Wilshire, Macy’s stands to gain even if it fails to beat Campeau in the bid for Federated, said retailing analyst Monroe Greenstein, at Bear, Stearns and Co. “Macy’s is trying to be a winner whether it wins or loses.”
