Merchandise May Be Affected : Cuts to Make Federated Cost Effective, Experts Say

Campeau Corp.’s elimination of thousands of jobs at Federated Department Stores Inc. will result in a more cost-effective organization, Wall Street analysts say. But they also expect the cuts to affect the merchandise the stores offer.

“There will be much more efficiency here” after the reductions, said Walter Loeb, a retail industry analyst with the investment firm Morgan Stanley & Co.

But William Smith, at Smith Barney, Harris Upham & Co., said of the streamlining: “You hope it’s being done strategically.”

The string of layoffs announced over recent days were expected after financier Robert Campeau took control of Federated in a $6.6-billion tender offer last month. After buying Allied Stores Corp. at the end of 1986, Campeau made similar cuts.

Result of Consolidation

So far, there have been layoffs at five of the six Federated department store divisions and among the company’s corporate staff.

Goldsmith’s, a six-store chain based in Memphis, Tenn., fired 25% of its 2,400 employees, and at Columbus, Ohio-based Lazarus, 1,200 people were let go, representing 8% of the employees at its 43 stores.

Abraham & Straus, a New York-based chain with 14 stores, laid off 794 employees, or 7% of its work force, while Burdine’s in Miami, with 27 stores, let go 320 workers, or 3%.

Atlanta-based Rich’s, with 20 stores, laid off 250 workers, or 3%, and Federated’s corporate staff lost 207 employees, or 40%.

Bloomingdale’s, Federated’s star division, also is expected to announce layoffs. Reports have said at least 400 employees, or 3% of the division’s work force, will be cut.

Some of these layoffs were the result of consolidation of divisions. Goldsmith’s is being merged into Rich’s and the centralized operations of Federated will be combined with those of Allied Stores Corp., Campeau’s other retail division.

Carol Sanger, a Federated spokeswoman, said the cuts were being made in “back of the house” operations. Buying and sales staffs were not affected, she said, and consumers should not see any changes in merchandising or customer service.

“Just because you let someone go in the credit office or the distribution office doesn’t mean what you see on the sales floor will be any different,” she said.

Joele Frank, a Campeau spokeswoman, said some buying operations would be centralized and become more cost effective. Under the old Federated system, one clothing manufacturer would deal separately with the various divisions and sometimes had different prices for each, she said.

Some analysts worried about the ultimate effect the changes would have on the merchandise customers will find at Federated’s stores.

Monroe H. Greenstein, an analyst with Bear, Stearns & Co., said he thinks store buyers were among those let go and he expects merchandise to reflect such layoffs.

“Typically, when you sharply cut back your number of buyers, you’re buying more of the same lines at your stores,” Greenstein said.

Smith, the analyst at Smith Barney, said: “If in normal times you’d see a cutback like this, you’d think they’d pay more and buy better merchandise. I doubt that’s what’s in Mr. Campeau’s mind right now.”

Room for Input

The result at Federated, analysts said, will be part of a trend in retailing nationwide toward “sameness”--similar merchandise offered by many stores with less selection available.