Federated Agrees to Sell Lord & Taylor Chain

Federated Department Stores Inc. said Thursday that it had agreed to sell its Lord & Taylor chain to a group of investors for $1.2 billion to focus on its Macy’s brand.

The sale to principals of investment firms Apollo Real Estate Advisors and National Realty & Development Corp. includes 48 Lord & Taylor stores, Cincinnati-based Federated said. The 180-year-old chain will have sales of $1.1 billion this year, one analyst estimated.

The new owners said they might shrink Lord & Taylor’s New York flagship store. Federated, which also owns Bloomingdale’s, acquired Lord & Taylor when it bought May Department Stores Co. last year for $11 billion. The company plans to double its stable of Macy’s stores by converting about 400 May properties.

“Where it doesn’t make sense, they are selling,” said Arun Daniel, an analyst at New York-based ING Investments. “You don’t want to have a Macy’s, a Bloomingdale’s and a Lord & Taylor owned by the same company. They don’t want them to cannibalize each other.”

The transaction will probably be completed in the third quarter, Federated said.

Lord & Taylor employs 12,000 people, and its flagship store is on New York’s Fifth Avenue. The chain started pulling out of the southern U.S. in 2003, eventually closing 32 stores.

Under Chief Executive Jane Elfers, who will continue to run the retailer, Lord & Taylor has sought to sell upscale items such as $395 Kate Spade cabana bags.

Federated’s shares rose 33 cents to $36.13.