May-Federated Merger Could Stress Vendors

New York City, The May-Federated merger, which would create a $30 billion retailer, may put stress on department store vendors, according to analysts. Consolidation may cause store closings and reduce the number of outlets for apparel makers' merchandise. Additionally, the combined force of May and Federated may leave vendors with less price negotiation leverage.

Fashionable, premium-priced vendors such as Liz Claiborne and Polo Ralph Lauren will likely fare best in the altered department store environment, according to Merrill Lynch analysts. Manufacturer Jones Apparel, which includes Jones New York, Anne Klein, Evan-Picone and Kasper, may be left vulnerable since about one-quarter of its revenue comes from sales to May or Federated stores. Analysts say that manufacturers with distribution channels outside the department store sector will be left less vulnerable to the merger.