Yet Another Marshall Field’s Update: Lerach Lawsuit Filed Against Macy’s, Inc. Gail Heriot
Loyal Right Coast readers know what a Marshall Field’s fanatic I am, and how unhappy I was at the foolish decision of Federated Department Stores (now called Macy’s Inc.) to absorb Field’s into Macy’s. (If you want to know why, click here, here, here, here, here, and here.)
Well, business continues to be bad for Macy’s. While Nordstom, Saks and J.C. Penney have posted healthy increases in same-store sales, sales at Macy’s–America’s Sick Man of Retailing–have been anemic and are expected to get worse. Yesterday, the … uh … feisty law firm of Lerach, Coughlin, Stoia et al. brought a securities fraud case asserting that Macy’s has been engaged in a cover-up of its lagging sales. The Lerach press release states:
Lerach Coughlin Stoia Geller Rudman & Robbins LLP ( Lerach Coughlin ) … today announced that a class action has been commenced in the United States District Court for the Southern District of New York on behalf of purchasers of Macy s Inc. (formerly known as Federated Department Stores, Inc.) … securities ….
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The complaint charges Macy s and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Macy s, the second-largest U.S. department store franchise, operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy s and Bloomingdale s. Macy s acquired May Department Stores Co. ( May ) in 2005 for $11 billion.
The complaint alleges that between February 8, 2007 and May 15, 2007, defendants caused Macy s shares to trade at artificially inflated levels by concealing that the May integration [which includes Marshall Field’s] was actually failing, sales growth was diminishing, the Company s business had deteriorated, and as a result, its sales projections were grossly overstated. Defendants positive statements had their intended effect and the Company s stock price reached a Class Period high of $46.70 by March 23, 2007.
CEO Terry Lundgren continues to blame the failed conversion on bad weather, the housing market, anything but his own error. But Wall Street appears to be ready to acknowledge that the problem is not going to just go away. Bloomberg.com reports:
Federated Department Stores Inc.’s sales at the former Marshall Field’s flagship store on Chicago’s State Street, which became a Macy’s in September, are “a huge problem,” said retail consultant Burt Flickinger. Some Chicago shoppers have boycotted the store to protest the name change of the landmark store, built in 1902.
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“It’s definitely a consumer retail revolt,” Flickinger, managing director of Strategic Resource Group in New York, said in an interview today. “This is a mistake that is a mess that is going to take years to clean up.”
Federated acquired the State Street store as part of its $11 billion acquisition of May in August 2005. Sales at former May locations have been “disappointing,” Chief Executive Officer Terry Lundgren said May 16.
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“The Macy’s in downtown Chicago is one of the weakest links in U.S. retail, certainly in the department-store sector,” Flickinger said. “Marshall Field’s was the one big brand that should have stayed and maybe should be brought back.”
I won’t comment on the securities fraud case here. I’m a shareholder myself (though not one who was fooled by the ridiculous excuses Macy’s spokesmen have been making for their company’s problems over the last few months). But as for bringing back Marshall Field’s: Great idea.