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Saks Fifth Avenue move continues department store shift
Tuesday, January 10, 2006

The owner of the Saks Fifth Avenue stores put another piece of its empire on the block yesterday, with the potential sale of the $700 million Parisian chain becoming the latest unknown in the shifting sands now known as the department store industry.

 
 
 
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Next month, York, Pa.-based retailer Bon-Ton Stores Inc., which operates six Bon-Ton stores in southwestern Pennsylvania as well as Elder-Beerman sites a little farther out, is expected to close on a $1.1 billion deal to buy 142 Northern department stores from Alabama-based Saks Inc.

Meanwhile, speculation has ranged from Boscov's to J.C. Penney to Nordstrom as possible replacements for three area stores to be closed as a result of Macy's owner Federated Department Stores Inc.'s purchase last year of Kaufmann's owner May Department Stores Co.

Just how it will all shake out, both regionally and nationally, is unclear. "The department stores have been under siege for a long time," said Patricia M. Johnson, of Seattle-based Outcalt & Johnson: Retail Strategists.

As consumers have taken more of their dollars to discounters and specialty retailers, the department stores have been both consolidating and tinkering with their merchandise offerings.

That has, in turn, created opportunities for the survivors.

Yesterday's announcement from Saks said the company would explore strategic alternatives for its 40-store Parisian specialty department store business, in addition to making management changes at its upscale Saks Fifth Avenue stores. Saks operates a store in Downtown Pittsburgh.

While potential buyers start looking over Parisian, Cincinnati-based Federated will wrap up its sale of about 75 locations, including Kaufmann's at Monroeville Mall and South Hills Village, as well as a Macy's site at Ross Park Mall. Closing sales are expected in the next few months. "We don't have dates yet," said Federated spokesman Jim Sluzewski.

Progress on divesting those locations has been reported monthly to the state attorney general. Pennsylvania was part of a several-state agreement that stipulated certain sites should be replaced from a short list of approved department store competitors, if possible.

The list includes Boscov's, Bon-Ton, Dillards, Gottschalks, Nordstrom, Neiman Marcus, Saks, Elder-Beerman, Belk, Profitt's, McRae's and Von Maur.

The restrictions apply to all three Pittsburgh-area sites, plus four Strawbridge's stores in the eastern half of the state, and are aiming at trying to ensure that Macy's does not end up as the only choice for consumers.

"There was interest in all of the Pennsylvania locations," reported James Donahue, Pennsylvania's chief deputy attorney general for the antitrust section. He said confidentiality agreements kept him from identifying potential takers but it's unlikely that chains such as California-based Gottschalks would wander this far east.

Other chains might also have reason to hesitate. Bon-Ton, for example, expects to be pretty busy absorbing its acquisition from Saks. "We'll certainly look at all of that," said Mary Kerr, vice president. "We haven't come to any conclusions."

And North Carolina-based Belk just last summer bought two of the other chains, Profitt's and McRae's, from Saks.

Attention has focused on chains such as Boscov's, a private company based in Reading that has department stores circling Allegheny County, and J.C. Penney, which has a presence here but doesn't have a store at South Hills Village.

Nordstrom, which has considered Pittsburgh in the past and then pulled back during a turnaround phase, is highly coveted.

In the end, replacing department stores with other department stores may not be what consumers want, said Ms. Johnson.

The retail consultant said Target, Wal-Mart, even Costco, now offer more of what shoppers demand and they may drive past malls that don't try something different. "We believe the market has spoken," she said. "That's why we're seeing the consolidation."

First published on January 10, 2006 at 12:00 am
Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.