ROBINSON’S & MAY CO. COMBINE : NEWS ANALYSIS : In ‘Over-Stored’ Region, May Co. Cuts Overhead
May Department Stores Co., whose Robinson’s and May Co. chains have struggled against cutthroat competition and weak economy, is making a move that retail analysts say will buoy its position in Southern California.
The plans announced Friday to merge the Robinson’s and May Co. chains and close 12 department stores, analysts said, will slash expenses and clear up the muddled fashion and merchandise image that has plagued the Robinson’s chain.
“Make no mistake, this is a move driven by the need to cut costs,” said Thomas Tashjian, a retailing analyst at First Manhattan, a New York brokerage firm. “This is a basic business decision designed to get higher profits in a time of slow growth for department stores.”
The nationwide retrenchment in retailing, after the go-go expansion of the 1980s, has been especially acute in Southern California, where more than 100 big-name stores have closed over the last 18 months.
Merchants such as Buffum’s, Barker Bros. furniture and Koala Blue sportswear are gone. The parent company of Bullock’s and I. Magnin shut weak stores after being forced to seek bankruptcy court protection, and the owner of the Broadway, which recently emerged from Chapter 11 proceedings, did the same.
Small “mom and pop” stores close every day without attracting headlines.
Analysts say the closings and mergers will continue until the economy improves in Southern California, still considered one of the most “over-stored” regions in the United States. Especially hard hit are the old-line department store chains, which have been battered by competition from discounters, smaller specialty stores and relative newcomers such as Nordstrom.
Still, St. Louis-based May Department Stores is considered one of the best-run companies in the field, and few question its ability to survive the hard times.
“They are the masters of consolidation and of wiping out overhead in the department store field. They are the prime players when it comes to wielding an ax,” said Alan Millstein, publisher of Fashion Network Report and a retailing consultant in New York.
The combined Robinsons-May, Millstein said, will be far stronger than longtime rivals the Broadway and Bullock’s. “They will be the dominant player in the ‘90s and into the 21st Century,” he said.
From a marketing standpoint, however, merging May Co. and Robinson’s into Robinsons-May could be tricky. Although Robinson’s once decidedly upscale image has been markedly toned down since its purchase by May Department Stores six years ago, the two chains were still separate and distinct.
“The potential for a confusing message is strong,” said Richard Giss, a retailing analyst with the Los Angeles office of Deloitte & Touche. “Even though Robinson’s isn’t the carriage trade store that it once was, the perception in customers’ minds of the store is very different from the view they hold of May. I don’t see the combined customer base as naturally compatible.”
While May Department Store officials say they will combine the “best elements of both divisions,” Millstein predicted that May Co.’s middle-of-the-road image will prevail. “They’re after the middle class and the middle price range,” he said. “In less than a year, there’ll be no designer clothes or designer departments in any of the stores.”
In recent years, sagging consumer demand and the arrival of new competitors have hurt all of Southern California’s traditional department stores, along with longtime general merchandise chains such as Sears, Roebuck & Co. and Montgomery Ward. A survey of 13 of these chains by The Times’ marketing research department last year showed that all of them have lost shoppers since hitting a peak in 1987.
Robinson’s, however, was among the harder hit. The survey found that the percentage of households in Los Angeles and Orange counties with someone who shopped at Robinson’s fell from 40.1% in 1987 to 22.2% early last year. Nordstrom, one of its main competitors, fell more gradually over the same period, from 32.3% to 24.4%.
May Co. also shared the pain, falling from 58.6% to 37.4%.
Still, company officials say that after Robinson’s was acquired in 1986, it was transformed from a money-loser to a money-maker. Today, both Robinson’s and May Co. “are profitable, and they will be even stronger when combined,” said Jim Abrams, a spokesman for May Department Stores in St. Louis.
He said that company officials expect to save $15 million annually from merging the two chains, a move that will put 550 Robinson’s employees out of work.
Robinson’s: The Last Decade
1983: Robinson’s celebrates its 100th year in business.
1984: May Co. seeks to acquire Robinson’s. May Co. Chairman David C. Farrell meets several times with Joseph H. Johnson, chairman of Associated Dry Goods, then-owner of Robinson’s.
1986: Robinson’s merges with May Co. in a $2.47-billion deal. The stores continue as separate entities.
1987: After the merger, Robinson’s management is changed.
1988: Robinson’s, which has become conservatively mainstream, strives to regain its upscale image. Employee morale is low. Analysts trace the company’s problems to May’s strict focus on the bottom line and a penchant for middle-of-the-road merchandising.
1992: May Department Stores Co. announces plan to close 12 stores in California under a consolidation effort that will merge its California May Co. and Robinson’s store divisions into one unit on Jan. 31.
