Naming In The News

What's in a Name? Analysts Say Federated Change Good Move

Lisa Cornwell
Associated Press

CINCINNATI – Federated Department Stores Inc. wants to rename itself after its new flagship Macy's store, a move analysts applaud as smart strategy that will further emphasize the brand with investors and the marketplace.

Pinning its future on a national brand, Federated earlier rechristened regional department stores around the country — including Marshall Field's — as Macy's, distressing some loyal customers.

In May the company will ask shareholders to approve changing the corporate name to Macy's Inc., a plan expected to have shareholder support. The company said this week that if the change is approved, its shares would be traded under an "M" ticker symbol.

"Macy's is a more relevant and accurate name," said Gary Stibel, a marketing analyst who heads the New England Consulting Group Inc. "To keep calling it Federated when it's no longer a federation of stores would be like referring to the United States as the Colonies."

Corporate name changes have been on the increase in recent years, primarily because more mergers and acquisitions have made older names irrelevant. Sometimes merged companies choose the name of their best-known brand as in the case of telecom giant SBC, which decided after acquiring former parent AT&T to assume the more familiar identity.

Some companies choose a new name to distance the corporation from past problems. Atlanta-based ValuJet Airlines adopted the name of its merger partner, AirTran, in an effort to rebuild passenger confidence after a ValuJet crashed in the Florida Everglades in 1996.

There was a 13 percent increase in name changes in 2005 — when more than 1,000 companies switched — compared with 2004, according to Strategic Name Development Inc. William Lozito, co-founder and chief branding officer, said that while figures were still being compiled for 2006, more than 2,000 companies changed names last year.

Terry Lundgren, Federated's chairman, president and chief executive officer, said in announcing the proposed change that it would increase the company's visibility to customers, leverage the Macy's brand name, and help the company get more credit for its accomplishments in the marketplace.

"Macy's Group is the appropriate name for our company, given that about 90 percent of our sales involve the Macy's brand," Lundgren said.

Cincinnati-based Federated began moving toward its Macy's national brand in early 2005, renaming Bon Marché, Rich's, Goldsmith's, Burdines and Lazarus. It acquired rival May Department Stores Co. later that year, and last year renamed those stores — including Marshall Field's, Foley's and Filene's — under the Macy's brand.

A new corporate name on top of the store name changes should increase familiarity for investors and with consumers, said James Gregory, chief executive officer of the brand strategy consulting firm CoreBrand.

CoreBrand tracks 1,200 companies across 47 industries and has studied corporate names and brands since 1990 to determine attributes such as reputation and familiarity.

Gregory likened Federated's action to Dayton Hudson Corp.'s decision in 2000 to name itself after Target Corp., its most successful division.

"That was an outstanding move for the corporation and the gold standard for trying to do it right," he said. "Target lives and breathes its logo and brand, but Federated was just a corporate name that really didn't mean anything."

Not all name changes work out well. DaimlerChrysler was the name chosen in 1998 when Daimler-Benz AG merged with Chrysler Corp. Some stockholders now want to drop Chrysler from the name because they think the reference to the automaker's struggling Chrysler division may hurt Daimler's image.

Some believe the Federated change is mostly aimed at investors and the financial community.

"I think the effect on the consumer will be zilch," Lozito said. "But generally, it makes sense when a brand is so much more well known than a corporate name. It's icing on the cake."

Analysts and consultants say it's important that everyone — investors, employees, consumers and employees — buy into all of Federated's name changes, especially in view of lingering resentment among customers still loyal to former May stores.

Some marketing experts also caution that the company needs to ensure that the higher-end Bloomingdale's doesn't get lost amid increasing emphasis on the Macy's brand.

Bloomingdale's always has been a separate and distinct brand and would remain that way under the Macy's Inc. corporate name, said Federated spokesman Jim Sluzewski.

Even if most consumers don't know or care what the corporation is called, analysts still see an impact.

"At first I didn't think it would matter much, but from the perspective of business it shows the financial community and employees that the company is continuing a very methodical strategy," said Marshal Cohen, chief analyst at NPD Group Inc. a market research company.

"It's a steady reminder of where this ship is being steered."