21 Department Stores to Close in Southland

By Leslie Earnest and Roger Vincent

July 29, 2005 12 AM PT

Times Staff Writers

In a move that will rattle shoppers and alter the complexion of malls throughout Southern California, Federated Department Stores Inc. said Thursday that it intended to close 68 locations -- including 21 in the region.

The closures will begin early next year after Federated, the parent of the Macy’s chain, completes its $11-billion acquisition of May Department Stores Co., the operator of Robinsons-May.

The changes will affect more than 13,000 workers nationwide, though Federated Chief Executive Terry J. Lundgren said that “the vast majority” would be shifted to other stores.

When the deal was confirmed Feb. 28, the companies announced that they expected to shutter dozens of stores. On Thursday, Federated said it would close 14 Robinsons-May locations in Southern California, notably those at Glendale Galleria, Del Amo Fashion Center in Torrance and MainPlace in Santa Ana. A store in Bakersfield also will close. The company, which is based in Cincinnati, also will close seven Macy’s stores, including those at the Galleria at Tyler in Riverside and the Shops at Mission Viejo.

Robinsons-May stores that are not closed will be converted to Macy’s beginning next year, spelling the end to one of the oldest and best-known names in Southern California retailing. A few may be converted to Bloomingdale’s, a chain also owned by Federated. Nationwide, 330 Federated-owned stores will convert to the Macy’s nameplate.

The move will be felt not only by mall owners but by clothing makers and media outlets, including The Times, that carry both Macy’s and Robinsons-May advertising. The change will greatly affect California, where 28 malls have stores under both banners, more than in any other state, and vendors sew clothes for both chains.

The disappearance of the Robinsons-May brand -- itself the product of a retailing merger -- surprised and saddened many shoppers.

“Oh, no! We don’t want that,” said Jose Moreno of Sun Valley, who was shopping for kitchen equipment and electronics at the Robinsons-May at the Glendale Galleria. “Macy’s is more expensive.”

Moreno, a retired police officer, said he and his wife, Bertha, bypassed malls closer to home to shop at least twice a month at the store.

More broadly, Federated’s announcement will usher in a period of uncertainty for mall owners and retailers whose businesses could be hurt -- at least temporarily -- while the shifting occurs.

“It impacts much more than just the anchor tenant -- it affects the whole balance of the mall,” said Richard Giss, head of consulting firm Deloitte & Touche in Los Angeles. “The worst thing for a mall is dead space.”

But the closures also will create opportunities for a variety of retailers, from discounters such as Wal-Mart Stores Inc. to upscale Nordstrom Inc. And the changes could ultimately give shoppers more variety if, for example, a mall ends up with a Macy’s at one end and a Wal-Mart or a Target at the other.

Wal-Mart will consider the properties but has no plans to fill any of the vacancies, spokesman Eric Berger said.

He said the company was successful in redeveloping shuttered department stores in Baldwin Hills and Panorama City.

The store closures could give lower-priced retailers -- such as Kohl’s Corp., which entered the Southern California market with its first stores here in 2003 -- more chance to nibble away at traditional department stores. But the closures also will wipe out one of Macy’s main rivals -- Robinsons-May -- so that Federated can better compete, retail experts say.

“The first way to gain back market share is to stop losing it,” said Marshal Cohen, chief industry analyst for market research firm NPD Group. “They now control the department store business in the mall.”

Robinsons-May, Macy’s and other midrange department stores have battled for more than a decade to push back an army of competitors, including discounters such as Target, and so-called category killers such as Bed Bath & Beyond. More recently, consumers have been drifting to higher-end retailers, such as Neiman Marcus and Nordstrom.

Federated’s moves could create a prime opportunity for Nordstrom, which has yet to open stores in 13 of the California shopping centers where stores will be closing, said analyst Neely J.N. Tamminga of Piper Jaffray & Co.

Not that Federated would toss out the welcome mat for Nordstrom, one of the most popular stores among Southland shoppers.

“We believe that Nordstrom is very likely the last company in the world Federated wants to sell locations to,” Neely said. “However, there are fewer and fewer possible buyers with all the consolidation occurring in retail.”

Nordstrom, which operates 45 stores in California, said it would examine the targeted stores.

Federated, which owns about 50% of the sites to be vacated, will work with mall owners to develop “what’s best for the mall,” CEO Lundgren said. In some cases, he said, that could mean replacing empty shops with restaurants or movie theaters instead of department stores.

“I’ve definitely heard that from some of the mall developers, including in California,” he said.

The Federated-May deal, expected to close in the fiscal third quarter of this year, would create the nation’s second-largest department store chain, with nearly 1,000 locations before the closures. Annual revenue would reach about $30 billion. Only Sears Holdings Corp., created when Kmart Holding Corp. bought Sears, Roebuck & Co. for $12.3 billion in March, would be bigger.

Not that all this means much to shoppers who were dismayed Thursday to learn that their favorite stores soon would vanish.

“When I told my co-worker’s mother, she literally bawled,” said Lois Nichols, 43, a counselor from Carson who is hoping that the Glendale Galleria will bring in a lower-priced anchor.

Some shop owners also are concerned.

Rosa Garcia, an assistant manager at the Lane Bryant next to the Glendale Robinsons-May, said the closure would affect business at her store. Sales at Robinsons-May bring in throngs of shoppers to Lane Bryant, she said.

“Their regular customers are our regular customers,” she said. Until they bring a new store to the space, “traffic is going to slow down.”

“It concerns me but it doesn’t scare me,” said Pat Simms, 35, owner of the Sunglass Hut next door to Macy’s at Montclair Plaza. “It’s change, but I hope it gets better. It will probably be younger foot traffic now.”

The transition won’t be easy, analysts say. Store renovation takes time, and emptied stores can sit vacant for years. Meanwhile, cities lose sales tax revenue.

Most of the affected malls are considered prosperous by industry standards, and owners expect to be able to find new anchor stores or redevelop the properties to accommodate other types of retail tenants.

Analyst Greg Andrews of Green Street Advisors estimated that each of the stores slated to shut down was generating about $30 million a year in sales.

“Retail dollars are up for grabs,” he said.

The chief executive of one of Southern California’s largest mall owners said the changes also created risk.

“It’s very threatening because the future is uncertain,” said Art Coppola, CEO of mall owner Macerich, a Santa Monica real estate investment trust with six Southern California malls that will lose stores, including Santa Monica Place and the Oaks in Thousand Oaks. “Who will Federated divest those stores to?”

Mall owners have three choices regarding what to do with a shuttered department store, said Richard Green, vice chairman of operations of Australia-based Westfield Group, one of the world’s largest mall owners: find another anchor, convert it to accommodate smaller retailers or knock it down and replace it with trendier tenants such as wine bars, movie theaters and restaurants.

“We can reposition the stores to make the centers stronger,” Green said. “Most developers would say this is an opportunity.”

Twelve Westfield malls are losing stores, including MainPlace in Santa Ana, Westfield Santa Anita and Westfield West Covina. The company is in negotiations with Federated to try to buy those stores, said Managing Director Peter Lowy.

The decision to close stores will create an almost immediate benefit for shoppers, said retail industry consultant Burt P. Flickinger. Profits from selling the closed stores, coupled with savings in operating costs, will enable Federated to renovate and restock its stores.

“Federated stores will match some of the best stores in Japan and Europe,” Flickinger said.

As Federated upgrades its stores and fresh competition is introduced into malls, other retailers will be compelled to improve their product mix while holding the line on prices, Flickinger said.

“It will make Southern California department stores exciting for the first time in 10 years.”

(BEGIN TEXT OF INFOBOX)

Shutting the doors

Federated announced plans to close 22 Robinsons-May and Macy’s stores in California after it completes its acquisition of May Department Stores. Nationwide, 68 stores will be closed and 330 will be converted to the Macy’s nameplate.

Stores to be closed:

Los Angeles/Orange counties

Del Amo Fashion Center (Torrance)

Glendale Galleria

Lakewood Center

Los Cerritos Center (Cerritos)

Northridge Fashion Center

Santa Monica Place

Shops at Mission Viejo

Westfield Fox Hills (Culver City)

Westfield MainPlace (Santa Ana)

Westfield Santa Anita (Arcadia)