RETAILING MEGA-MERGER : Broadway Deal to Change California Retailing : Mergers: Employees, apparel makers and prices are likely to be affected by Federated acquisition. Particularly at peril are the 2,000 jobs at Broadway’s headquarters.
A merger of Broadway Stores Inc. and Federated Department Stores Inc. could dramatically shake up the California retailing scene, resulting in substantial layoffs, the closure of small apparel makers and higher prices for shoppers, retailing experts and economists said Monday.
The initial economic effect of the merger announced Monday between Federated, owner of Bullock’s, Macy’s and Bloomingdale’s chains, and Los Angeles-based Broadway Stores will be on jobs, especially those at Broadway’s headquarters and distribution center in Downtown Los Angeles.
“It will mean layoffs,” said Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County.
Particularly at peril are the 2,000 or so jobs at Broadway’s headquarters. Federated already has office and distribution operations in California and will probably jettison duplicate operations, observers say.
Less clear is the fate of the rest of Broadway’s 22,000 employees, about half of whom are full-time. The company’s stores--which operate under the Emporium and Weinstocks names in Northern and Central California--that are converted to Macy’s, Bullock’s or Bloomingdale’s will probably remain in operation.
Those that don’t remain could be closed, meaning a loss of jobs, or sold, in which case the fate of workers is unclear.
Federated hasn’t determined how many of the existing Broadway stores will remain open, saying only that a “significant number” of the stores will be retained.
No changes are likely until after the Christmas shopping season, Federated said.
Bill Ihle, a spokesman for Broadway, sought to reassure employees that it will be “business as usual for the foreseeable future.”
The merger will help Federated remain competitive with other national rivals--such as St. Louis-based May Department Stores, which operates the Robinsons-May chain in Southern California. In addition, the deal could make it harder for fast-growing chains, such as Dillards of Little Rock, Ark., to expand into the already crowded California market.
“The Broadway had poor management but some good real estate,” said retailing consultant Robert Kahn. “This solution is a good one because it will strengthen the Bullock’s operations against Federated’s major competitor: the May Department Stores.”
In addition, Federated will also be able to speed up the introduction of its tony Bloomingdale’s chain into Southern California. Federated had previously announced plans to open the region’s first Bloomingdale’s in Beverly Hills.
“Customers in Southern California have heard the name Bloomingdale’s--that will draw customers into the door,” said Jacquelin M. Fernandez, director of the Southern California retail services group for Deloitte & Touche.
The arrival of Bloomingdale’s may initially boost sales for all department stores by attracting shoppers to malls to see the new stores. “It’s new and it creates excitement,” Fernandez said.
However, shoppers will also eventually find fewer bargains once the Broadway and its many frequent sales disappear from the retailing scene, giving competitors less reason to match the promotions, retailing analysts say.
“Robinsons-May is not going to have to cut its prices so much,” Kahn said. “People will have to pay more.”
The merger will also increase the turmoil in the state’s burgeoning apparel industry. As a mega-retailer, Federated can step into Broadway’s shoes and drive harder bargains with apparel manufacturers, forcing down prices.
That means large manufacturers will benefit while smaller ones are driven out of business, said Richard Reinis, a Los Angeles lawyer who represents garment manufacturers. “The consolidation at the retail end will force a similar consolidation at the wholesale level,” he said.
Many Broadway Stores suppliers, who had worried about the company falling into bankruptcy, are now concerned that Federated will not retain them if the deal is completed.
“I’m thrilled they didn’t file for bankruptcy, but Federated is not based in Los Angeles and we’re concerned,” said Andrea Ross of Ross Enoch, a Beverly Hills company that helps produce product catalogues for Broadway Stores.
Also at risk are millions of dollars of advertising. Broadway is one of the region’s largest advertisers and a prime source of revenues for radio, television and newspapers such as the Los Angeles Times. Federated already advertises Bullock’s or Macy’s stores in many of the same media.
“In the short term, it means less advertising dollars for both electronic and print media,” Kyser said.
A spokesman for The Times declined to discuss how the merger might affect the newspaper’s advertising revenues.
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