For the first time in more than a century, Pittsburgh is looking at a future without the Kaufmann's name on its department stores, the likely outcome of a planned $17 billion dollar merger of two of the nation's largest middle-market department store companies.

	Alyssa Cwanger, Post-Gazette A woman walks by an exterior window display at the Kaufmann's store Downtown yesterday afternoon. Click photo for larger image. Related coverage Graphic: About Federated; About May Arts groups, charities fear effects of losing Kaufmann's

Lazarus-Macy's owner Federated Department Stores Inc. yesterday confirmed weeks of speculation by laying out details of its plan to acquire rival May Department Stores Co., which owns the Kaufmann's chain, for $11 billion in cash and stock as well as assuming $6 billion in debt.

Federated officials said yesterday they expect most of May's regional department stores -- of which Kaufmann's is one -- ultimately will be converted to Macy's. No store name changes are planned before 2006, they said.

The deal must still be approved by shareholders of both companies and federal regulators, but officials said they foresaw no problems and expect the purchase to close by fall. With the recently announced Sears-Kmart marriage going ahead, there is no obvious reason to expect regulators to stop the merger on antitrust concerns.

Federated officials yesterday said a number of details have yet to be worked out in the creation of a single $30 billion company with almost 1,000 stores nationwide. It is unclear which stores might have to be closed although officials plan to look first at malls where both retailers are anchors. In Pittsburgh, that applies to Ross Park Mall, South Hills Village and Monroeville Mall.

Any closings will not likely start until after this year's holiday season.

Federated offered no details on what impact that would have on employees of affected stores. There are 10 Kaufmann's stores in the immediate Pittsburgh area.

Federated did not indicate if it would bring in Bloomingdale's, which appeals to upscale shoppers, to replace shuttered department stores in markets such as in Pittsburgh. Parker/Hunter analyst Steven C. Baumgarten said an empty anchor location in a strong mall might draw newcomers to the market, such as Nordstrom.

Kaufmann's has a number of area stores in malls where there are not Lazarus-Macy's locations, including the Mall at Robinson and Century III Mall, as well as in freestanding locations Downtown and at the Waterfront shopping center in Homestead,

Every store in the May group will be studied carefully, said Karen Hoguet, Federated's chief financial officer. "We will go through their store base just as we have our own."

Federated expects to find $450 million in cost savings by 2007 from the deal, although it may spend $1 billion in one-time expenses for things such as severance pay to workers whose jobs duplicate existing ones and shuttering overlapping stores, officials said.

Federated officials -- the conquerors in this transaction between two long-time competitors -- did not hold out false hope to those cherishing dreams that perhaps their regional store name, be it Kaufmann's or perhaps Hecht's in Washington, D.C., will survive.

No matter how beloved the Kaufmann's clock on the Downtown store, it will likely find itself attached to a Macy's store within two or three years. That name, venerable in itself, is already in process of vanquishing others just as well known in their own hometowns -- Lazarus, Rich's, Burdines -- all of which will disappear next week into Federated's new one-name chain.

"It's a stab in the heart a little emotionally," conceded Lois Huff, senior vice president with Retail Forward Inc., a consulting firm in Columbus, Ohio. But, she said, all the historic regional names scattered around the country have not been much help in recent years to department stores losing market share. "If they were so great, they would not be in this position." Huff said.

Sales in the Boston-based Filene's/Kaufmann's division of May stores alone came in at $3.02 billion in the fiscal year that ended February 2004, the most recent available. That was down from $3.25 billion two years earlier. Sales per square foot in the division's stores fell from $202 to $178 during the same period.

Both May and Federated have struggled in recent years with sometimes lackluster results as they competed with chains such as Wal-Mart and Kohl's and Bed, Bath & Beyond that didn't exist when the department stores first thrilled Americans with the ability to get almost everything under one roof.

The once-powerful companies that set fashions and dictated to vendors have been watching young customers choose specialty retailers over their sometimes stuffy selections and older customers discover the thrill of cheap jeans at Wal-Mart and cheap designer toasters at Target.

"Customers have traded both down and up, so you're seeing the middle getting squeezed," said Parker/Hunter's Baumgarten. Shoppers feeling smart for saving money on toilet paper and paper towels at Costco may reward themselves with a Coach handbag from a luxury store.

Federated and May attacked the problem differently and, by virtue of both improved sales results and being the last one standing, Federated seems to have won.

The Cincinnati company, which has 450 stores in 34 states, began investing heavily developing its own private label lines of clothing and home goods, so it could offer something not available to its competitors and keep more of the profit. Now private label sales make up about 17 percent of its sales, compared to about 13 percent for May.

Terry J. Lundgren, Federated's chairman, president and chief executive officer, expects to be able to improve sales at the 491 May-owned stores, such as Kaufmann's, through a system that matches merchandise better to each store. Federated has defined four customer types -- traditional, updated, neo-traditional and contemporary -- and puts goods in individual stores based on the mix of personalities who shop there.

"May Co. has just not had that," Lundgren said.

A number of analysts worry Federated is buying too many stores in weaker markets selling lower-end goods. Lundgren said a number of May's stores are actually in higher-end markets than the level of merchandise offered would indicate. Federated believes it can get those customers to trade up.

Both companies have been hampered by their numerous nameplates and the adherence to regular newspaper ads promoting sales, said C. Britt Beemer, chairman of America's Research Group. That left them without the money needed to invest in the TV campaigns that might actually reach younger customers watching funky Target spots or even ads for The Gap.

"The bottom line is that the department stores have been losing the under-35 shopper for the last 10 years," he said.

Federated looked at the numbers and began moving to a single name.

In recent years, May's traditionally conservative corporate culture also seemed so focused on keeping prices down that its service suffered from lower staffing levels and its merchandising became less interesting, said Beemer. He noted even the company's higher-end format, Lord & Taylor, was not compelling enough to benefit from an improved market for luxury goods and had to go through a round of store closings.

That conservative culture had long been part of the company, said Joanne Pagnanelli, a former Kaufmann's fashion executive who now has a gift shop on Cochran Road in the South Hills. Pagnanelli, a 30-year employee, can still remember being told in her early days that it was fine to be the second one out with new fashions. "I think they were slow to react to newness."

Both Huff and Beemer see benefits to the merger. Federated should have more power to convince vendors to create exclusive lines for its newly expanded chain. Instead of seeing the same Tommy Hilfiger fashions on both ends of the mall, perhaps the designer would customize a line.

Others are not convinced. Federated might be better off putting its money into an entirely different type of retail, something that worked for Dayton-Hudson. That company invested in an off-the-mall, discount concept called Target years ago and just last year sold off its Marshall Field's department stores to May.

"If you have cash, why would you want to go out and buy another slow growth business?" asked Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York.

But Federated's Lundgren said he believes department stores can be a vibrant form of retailing and he expects to learn a few things from May about operating efficiently.

In fact, he said, there are still a lot of unknowns to be worked out as the purchase gets closer. For example, the company has not quite decided what the future will be for May's Lord & Taylor stores, although one option would be to convert them to Bloomingdale's.

Federated plans to fund the acquisition through a mix of cash and funds generated either by selling its credit card business or taking on debt. Under the terms of the deal, May shares would be converted to the right to receive $17.75 per share in cash plus 0.3115 shares of Federated stock. Federated has also agreed to increase its dividend, now 54 cents a share, to $1, after the acquisition.

Shares of Federated closed yesterday at $56.45, down slightly on the day, while May shares finished at $34.51, down just over 2 percent.