In a major cost-cutting move prompted by the flagging California economy, the May Department Stores Co. said Friday that it will close 12 stores in the Southland and merge the California May Co. and Robinson's department store chains by the end of January.
The company is creating a hybrid chain, melding the venerable Robinson's upscale style with May Co.'s orientation toward heavy promotions. The new department store chain will be christened Robinsons-May and carry merchandise popular at both stores.
Industry analysts say the merger is the latest sign of consolidations by major department stores, a trend that is likely to continue. The result: Less variety among stores, stable or lower prices and fewer employment opportunities in retailing.
May's decision--which will lead to 550 layoffs and save the company $15 million a year--is a reflection of hard times in the state, as retailers struggle to stay afloat in a sea of consumer pessimism.
"Sales are rotten and there is excess capacity in retailing," said Jack Kyser, economist at the Economic Development Corp. of Los Angeles. "Many people have wondered why May operated two retail chains in the same market. It doesn't make sense during bad economic times. This change is probably long overdue."
However, the St. Louis-based May also plans to open eight stores in California by 1995--a sign that the retailer is optimistic about the state in the longer term.
May Department Stores, the nation's largest department store operator, will close the 12 Southern California stores between Jan. 15 and Jan. 31 and create a 55-store operation with sales of $1.4 billion. Each of the remaining stores will carry the Robinsons-May name beginning in February, 1993.
Of the 12 to be closed, five are May Co. stores and seven are part of the 109-year-old Robinson's chain. That will leave 34 May Co. and 21 Robinson's stores. There were 23 Robinson's stores when May acquired that chain in 1986 from Associated Dry Goods.
In Ventura County, none of the three May Co. or Robinson's stores will be closed, said May Co. spokesman James Watterson.
Both the May Co. and Robinson's stores at The Oaks mall in Thousand Oaks will remain open, each operating under the name Robinsons-May, Watterson said. He said it is has not been determined whether both stores will carry identical merchandise or house different sales departments.
The May Co. store in The Esplanade mall in Oxnard will remain open as a Robinsons-May store, Watterson said.
May Department Stores President Thomas A. Hays, speaking at a news conference Friday morning in Los Angeles, said the company is making the changes to become more competitive.
"The economy in Southern California has been very tough," Hays said. "When we acquired Robinson's, we could run two businesses (in California). Now, we can't afford to run two businesses. . . . The combinations are an important strategic step that will enable us to serve our customers better, reduce our costs and streamline our operations."
Much of the hoped-for cost savings will come from laying off 550 of the 700 employees at its Robinson's headquarters in Los Angeles. The other 150 will be absorbed into the new division, which is basically the May Co. California headquarters staff and is based in Los Angeles.
May Department Stores, which employs nearly 19,000 at May Co. and Robinson's divisions statewide, also plans to keep the 1,900 employees at the 12 stores scheduled to close. While those workers will be assigned to other stores, the company hopes to reduce overall employment ranks through attrition and an early retirement program.
The merger marks the end of Robinson's, a pioneer Los Angeles retailer, as a separate entity. The retailer's history began in 1883 when it opened its first store--then known as Boston Dry Goods--near City Hall. The retailer was incorporated as the J.W. Robinson Co. in 1891 and began to expand the number of store locations in 1915.
May Department Stores began to court Associated Dry Goods--then the owner of Robinson's--in 1984. In a $2.47-billion deal, Associated Dry Goods agreed to a merger between the May Co. and Robinson's.
May Department Stores founder David May opened his first store in 1877 in the mining town of Leadville, Colo. He began to expand in 1885. The chain established itself in California by opening a store in Los Angeles in 1923. Today, the company operates 319 department stores and 3,459 Payless ShoeSource stores.
May Co. stores in California have been known for their promotional practices; the stores frequently offer discounts during special sales events. Robinson's has had a reputation for offering fashions that are slightly more upscale. However, the differences between the two stores have been narrowing since May Department Stores acquired Robinson's, said Linda Kristiansen, an analyst at Wertheim Schroder.
"Because they have become fairly similar, it really makes sense to consolidate the operations," Kristiansen said. "This is an excellent move. It gives the (merged) division more buying power, which enables it to get better prices on goods. It will make them more cost-efficient and competitive."
May Co. stores to be closed by the end of January are: Wilshire Boulevard outlet in Los Angeles, Eastland Center in West Covina, Buena Park and Main Place in Orange County and Inland Center in San Bernardino. Also scheduled for closing by February are Robinson's stores in downtown Los Angeles, Woodland Hills and Sherman Oaks Galleria, the Pasadena and Glendale Fashion Center locations and Westminster Mall and Brea Mall in Orange County.
Hays said the 12 stores have not been among the best performers, but all of the locations--except the downtown Robinson's--were profitable.
May Department Stores will also spend about $120 million to renovate existing stores and another $140 million to open eight California stores. New stores have been announced for the Los Angeles Farmer's Market, Glendale Galleria, The Plaza at West Covina and Murietta Springs Mall in Riverside County. The company will announce the locations of the other four stores later.
The company will begin issuing a new credit card for the combined stores in February, 1993, and will eventually phase out the individual store cards. Until that time, May Co. stores will begin to accept Robinson's credit cards in December; May Co. credit cards will be accepted at Robinson's at the same time.
David P. Mullen, president of May Co. California, will become president of the combined Robinson's-May unit. Gerald A. Sampson, chairman of May Co. California, will become chairman of the new hybrid. The company said Robinson's President Robert L. Mettler and Robinson's Chairman Kenneth L. Wilkerson will remain at May Department Stores, but their future positions have not been determined.
Department stores operating in the Los Angeles area have been hard hit by the California recession, which has seen extensive layoffs of workers in aerospace, banking, real estate and retailing. Economic forecasters say Southern California will not pull out of the recession until mid-1993 at the earliest.
A number of department stores in the Southland have struggled during the economic slump. The Buffum's chain closed last year, Carter Hawley Hale Stores was forced into Chapter 11 bankruptcy protection for 20 months and just emerged as a reorganized company earlier this month, and Seattle-based Nordstrom, which had grabbed market share in the late 1980s with its service-oriented approach, has seen its earnings fall recently, largely because half of its stores are in California.
Analysts and investors generally applauded Friday's announcement. May Department Store stock closed Friday at $65.50, up 50 cents on the New York Stock Exchange.
"The May store consolidation makes sense, because it will help the company become more efficient and more profitable," said Walter Loeb, an industry analyst at Loeb Associates in New York City. "This is part of a clear trend."
There will also be some changes in the actual stores. Company executives said the new merged stores will contain the most popular merchandise from the Robinson's and May Co. stores. For example, May Co. has a wide selection of strong-selling fragrances and Robinson's has a line of very popular cosmetics. Both lines of goods would be sold at the merged stores.
Times staff writers Mathis Chazanov and Phil Sneiderman contributed to this story.
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