May Department Stores reportedly has suspended its search for a new chief executive as it continues merger talks with rival Federated Department Stores.
ST. LOUIS — May Department Stores reportedly has suspended its search for a new chief executive as it continues merger talks with rival Federated Department Stores.
May and Federated declined to comment yesterday.
The New York Times, citing unidentified executives close to St. Louis-based May, reported yesterday that May told a recruitment firm to “put the search on the back burner” while it talks with Federated. May operates Lord & Taylor, Famous-Barr, The Jones Store, Filene’s and other regional department stores.
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The Times said talks between May and Cincinnati-based Federated — owner of Macy’s and Bloomingdale’s chains — gained momentum last weekend. Citing one executive, the newspaper said May has been holding out for a price “north of $40 a share” while Federated indicated it wanted to pay in the mid-$30s, though both sides in recent days indicated they’d be willing to compromise.
“Up until now, there’s been a lot of posturing,” The Times quoted one participant in the talks as saying. “This is the first time I’ve felt there’s a legitimate chance we will get across the finish line.”
May’s shares rose 17 cents to close at $33.62 yesterday, having ranged from $36.48 to $23.04 over the past year. Federated shares fell $1.43, or 2.5 percent, to close at $55.29, near the upper end of its 52-week range of $59.91 and $42.80.
May spokeswoman Sharon Bateman declined to comment yesterday.
Karen Hoguet, Federated’s chief financial officer, told analysts yesterday in detailing the company’s fourth-quarter earnings that Federated would not comment on what she termed rumors that Federated might buy May, Neiman Marcus or perhaps some stores operated by Saks.
“As you know, we do not comment on speculation,” Hoguet said in prefacing her comments during a conference call. “As such, I would appreciate it if you would not ask questions along these lines at this time.”
Federated said its earnings for the three-month period ended Jan. 29 fell 4 percent from a year ago when it recorded a tax gain, although profits still beat Wall Street estimates. Federated said it earned $440 million, or $2.55 per share, for the quarter, compared with earnings of $460 million, or $2.50 per share a year ago. Earnings per share were up because there were fewer shares.
At May, John Dunham has served as interim chief executive since Gene Kahn abruptly stepped down last month as chairman and CEO, just seven months after helping May acquire Target’s Marshall Field’s department stores and nine Mervyn sites for $3.24 billion. Many analysts said the price was too steep by several hundreds of millions of dollars. May beat out Federated in that bidding.
May lately has offered no public update on the search for a successor to Kahn, who analysts said had been criticized by people within the company for micromanaging the business and not developing a clear company vision.
Dunham has said only that an announcement on Kahn’s replacement would come when the board makes its decision. He has given no time frame.
Executives also have recently sidestepped questions about talks with Federated.
Some analysts have suggested that uniting two of the nation’s largest department-store chains into a behemoth with nearly 1,000 stores would make sense, creating a more efficient operation better equipped to go up against discounters. Together, the companies also could wring savings out of their merged retail systems and buying clout, some analysts suggested.
Others questioned whether the two retailers would be a good fit, citing the belief that Federated may be more upscale and May always margin-oriented while lacking on the merchandising side.
May’s performance has lagged behind competitors such as Federated and J.C. Penney as it has failed to come up with a compelling merchandising vision under Kahn and consequently has resorted to aggressive price-cutting to attract customers.
In the meantime, May said it has closed 25 of 32 underperforming Lord & Taylor stores it said it was jettisoning in 2003.