Retailing’s slump has claimed another venerable victim: 134-year-old Stern’s, the third major chain to collapse since Christmas.
Stern’s parent, Federated Department Stores, is dumping all of its 24 Stern’s at suburban malls in New York and New Jersey by converting most of them to Macy’s, and two to Bloomingdale’s.
It will completely shut down five of the locations and lay off as many as 2,600 workers. Another 4,800 Stern’s employees at the surviving converted stores will remain on the payroll following mammoth fire sales in May at the Stern’s stores.
The switchover will cost up to $150 million, but fire sale revenue will cover about half that amount, executives said.
“Stern’s was too old for today’s shoppers, and its demise was very predictable,” said retailing analyst Kurt Barnard. “The stores were stodgy and hadn’t progressed anywhere in decades – they just sat there.”
“Customers were loyal but too old, and the younger people that Federated wants as its shoppers couldn’t be found there at all,” Barnard said.
He and other analysts lauded Federated’s move.
“It was a very smart move to redirect resources and energy to the two divisions that are best suited for launching into a very successful future,” Barnard said.
Macy’s stores outsold Stern’s locations five-to-one last year at its 90 Eastern stores, while Bloomingdale’s sold twice as much merchandise at its 24 locations. Stern’s had fiscal 2000 sales of $840 million, compared to $4.68 billion at Macy’s and $1.79 billion at Bloomingdale’s.
Federated stock jumped to a new high yesterday of $46.43 before closing at $42.98, down $2.96. Shares have doubled in the last six months. The shutdown of Stern’s came following the worst Christmas season in five years.
The dismal holiday sales also triggered a bloodbath at other old-line retailers. Six weeks ago, Montgomery Ward said it was closing its 128-year-old chain and firing 37,000 workers at its 250 stores. That came just a week after Bradlees said it would close 105 stores, eliminating hundreds of workers. Sears also took a hit, saying four weeks ago it would close 89 of its more than 3,000 locations and eliminate 2,100 from its payroll.
Separately, Federated said its January same-store sales rose a higher-than-anticipated 3.7 percent.
The company’s total sales for January – the five weeks ended Feb. 3 – were $1.105 billion, up 14.5 percent from $965 million for the four weeks ended Jan. 29, 2000.
James M. Zimmerman, Federated’s chairman and chief executive officer, said the changeover will improve Federated’s cash flow and return on investment.
Zimmerman said the company also expects to achieve its goal of earning $4 to $4.25 per share in 2001, excluding the costs of the conversion.
The decision to close the established Stern’s store group was difficult, Zimmerman said.
“Were it not for the unique opportunity Federated has to consolidate our presence in the greater New York area and to further leverage our Macy’s and Bloomingdale’s nameplates, we would have continued pursuing the Stern’s strategy successfully in these markets for some time to come,” he said.
Six New York stores to be converted into Macy’s are in Yonkers, Commack, Hicksville, Hampton Bays, Flushing and Douglaston. Eight New Jersey stores to be converted are in Paramus, Wayne, South Plainfield, Ledgewood, South Brunswick, Jersey City, Woodbridge and West Orange.
Stores in Toms River, N.J., Brooklyn and Bay Shore are being changed, though they may be closed at some point, Federated said.