What's in a name? Apparently not much, as far as Federated Department Stores (NYSE:FD) is concerned.
The retailing giant announced yesterday that in the wake of its purchase of May Department Stores, it will scrub the venerable Marshall Field's name from the locations that carry that moniker and replace it with Macy's. The move was immediately praised by business analysts and decried by traditionalists. So who is right? Well, for the most part, the business analysts, but it turns out the traditionalists have a point.
On the plus side, by changing all Marshall Field's stores to Macy's, Federated accomplishes its goal of creating a national brand. With said brand, the company can take advantage of economies of scale in advertising and buying. Further, since consumers tend to gravitate to a known quantity, if Federated ingrains Macy's in the public's brain as a top-notch national brand, folks who like to shop at the Macy's in New York are likely to turn to Macy's when they are in, say, Detroit. Thanks to the name change, then, Federated will enjoy the same advantages as national retailing giants like Target (NYSE:TGT) and Wal-Mart (NYSE:WMT).
On the downside, after 153 years, the name Marshall Field's has acquired quite a bit of cachet and Federated is just throwing that value away. It's worth pointing out that when Dayton Hudson (now Target) bought Field's, it changed its Dayton's and Hudson's stores to Marshall Field's, because the latter name was seen as a more powerful brand. A great deal of that power seems to be connected to Field's history, which is itself embodied in the flagship State Street store in Chicago. The building, opened in 1893, has long been a symbol of Chicago. Now Federated risks diminishing the attraction of the distinctive Chicago landmark by homogenizing it into just another Macy's.
However, even if performance at the State Street location suffers somewhat, the name change is probably a worthy trade-off if Federated can improve results at the other 61 Field's locations. Rumor has it that while the State Street site has been doing well, the same can't be said for other sites. So shoppers probably won't miss the Field's name at their local malls if they are promised a better shopping experience. And given its success with Macy's, Federated looks like it may just be up to delivering on that promise.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
