May Profit Falls 38% Amid Consolidation

May Department Stores Co., the owner of Lord & Taylor and Filene’s stores, said profit fell 38%, the sixth straight quarterly decline, because of costs of combing four chains into two divisions.

Its fiscal second-quarter net income dropped to $69 million, or 22 cents a share, from $111 million, or 35 cents, a year earlier. Sales in the three months ended Aug. 3 declined 1.7% to $3.1 billion, the company said.

May, the first major retailer to release earnings this quarter, is combining operations to reduce expenses amid increased competition from discount chains such as Kohl’s Corp.

Sales at stores open at least a year slipped 4.9% at the fourth-largest U.S. department store company as shoppers sought out bargains and visited malls less.

“People are going to retailers that have pretty good merchandise where you can get a deal,” said Matt Spitznagle, an analyst at Northern Trust Corp., whose $330 billion in assets included about 1.36 million May shares as of March. “They can get in and out and don’t have to walk through the mall.”

May Chief Executive Eugene Kahn this month completed the combination of the Kaufmann’s and Filene’s divisions in the Northeast and the Robinsons-May and Meier & Frank units in the West and Northwest.

May expects $60 million in annual pretax savings from the consolidation. The company now has six divisions.

“May is a battleship,” said Abhay Deshpande, a senior analyst at Arnhold & S. Bleichroeder Capital, whose $3.5 billion in assets include about 17,000 May shares. “Trying to turn it around takes a lot of time.”

May shares fell 23 cents to $27.55 on the New York Stock Exchange. They have declined 25% this year, compared with a 12% drop in the Standard & Poor’s 500 department store index.

May is introducing private-label clothing brands such as Be this month to attract younger shoppers. Such exclusive apparel usually has a higher profit margin than national brands, investors said. The company also has purchased wedding gown and tuxedo rental chains, including Priscilla of Boston, to increase sales beyond the Christmas season.

May has 436 department stores, including the Hecht’s and Strawbridge’s stores, as well as 163 David’s Bridal stores, 238 After Hours Formalwear stores and 10 Priscilla of Boston stores.

Excluding $37 million in costs to combine the units, May said profit would have been 34 cents. On that basis, results were 1 cent more than the average estimate of analysts surveyed by Thomson First Call.