Eliminating another potential obstacle to its merger with R. H. Macy & Company, Federated Department Stores Inc. said yesterday that it had agreed to close six stores in the New York metropolitan region -- including its Abraham & Straus store on Herald Square -- to ease the state Attorney General's concerns that the merger would reduce business competition.
Separately, Myron E. Ullman 3d, chairman and chief executive of Macy, surprised the retail industry by announcing he would resign from the merged company at the end of January. "I felt it was important to make my intentions clear sooner rather than later so no one misunderstood my role at the company going forward," he said.
"I would not be making this announcement if I wasn't sure things are on track with the merger, " he added, pointing to the agreement with Attorney General G. Oliver Koppell of New York as just one example that the combination of Macy and Federated was proceeding apace.
Mr. Koppell, who had been appointed to his post and lost a bid for election to it last week, agreed not to block the merger, which will get Macy out of bankruptcy-law protection and create one of the largest department store companies in the country. In what some regarded as campaign grandstanding, he had demanded that Federated sell 12 Macy's stores in the New York area, including the chain's flagship at Herald Square.
Federated has agreed instead to sell the Herald Square A.& S. store on 33d Street. When it opened in 1989 on the former Gimbels site, A.& S. Plaza was described as a calculated gamble because vertical malls, which stack stores one atop another for several stories, have never had the traffic and sales generated in conventional malls.
The A.& S. store there generated enough sales to eat into Macy's business a block away, but the rivalry between the two stores has been so intense that neither has made much money.
Federated will also try to sell A.& S. in Massapequa, L.I.; Bloomingdale's in Garden City, L.I., and two Stern's stores in Flushing, Queens, and Lake Grove, L.I. It will also sell Macy's in White Plains, though it intends to convert its nearby A.& S. store there into a Macy's.
Analysts said those were weak locations that probably would have closed eventually. " Federated and Macy would have ended up doing this as a sound decision, but now the A.G. can end up declaring victory and go home," said Isaac Lagnado, publisher of the newsletter Tactical Monitor. "In every case, they're leaving either the smallest, oldest or most underperforming store in the market."
The stores will stay open until they are sold. If they are not sold in two years, the company will hold further meetings with the Attorney General's office.
Federated has not found buyers for the stores yet. Sears, Roebuck and J. C. Penney have both expressed an interest in buying stores that the merger might eliminate, but they have not specified which ones.
Mr. Ullman's departure was expected, but the timing of his announcement was a surprise to many industry analysts. Some speculated that there was friction between Mr. Ullman and James M. Zimmerman, chief operating officer of Federated, while others suggested that he had rushed to declare his departure to distance himself from merger plans that will undoubtedly upset employees, suppliers and real estate developers.
But in an interview yesterday, Mr. Ullman, 47, said that he decided to make the announcement because in two weeks Federated would begin efforts to raise financing for the merger. "I thought it was important to be up front about my intentions, and that all the documents reflect them accurately," he said.
Federated is also expected to announce, perhaps as early as this week, that Harold D. Kahn, a former Macy executive who now runs A.& S., will oversee the merging of Macy's and A.& S. and other operations in the Northeast.
Mr. Ullman said his relationship with Mr. Zimmerman, as well as Allen I. Questrom, Federated's chairman and chief Executive, was good and that his admiration for the Federated executives had increased since they agreed to merge the companies in July. "The merger is proceeding on a pretty tight schedule," he said. "I can't imagine what this would be like if you didn't get along."
He said he had no plans yet but was announcing his intention to leave in part because he wanted to feel free to consider other options. "There must be some crisis brewing around somewhere that I could get involved in," he joked.
Retailing experts said he had been approached by the Kmart Corporation. Mr. Ullman declined to comment, saying only that he has been approached about several jobs. Shortly after Macy filed for bankruptcy protection in January 1992, he almost left to join the Dayton Hudson Corporation, and his ability to resolve Macy's many problems would make him an attractive job candidate, executive recruiters said yesterday.
During his nearly six years at Macy, Mr. Ullman oversaw the installation of technology to help the company get control of its inventory, dragging the $6 billion company into retailing's modern age. He carried out a merchandising strategy that essentially deploys a "traffic cop" to match buyers' purchases with stores' needs. And he imposed a strict cost-cutting regimen on a company whose expenses seemed uncontrollable.
Outsiders give him the most credit for steering the company through its tumultuous bankruptcy-law proceedings, rebuilding not only its infrastructure but also overhauling its corporate culture without major employee defections. In the year that ended on July 31, Macy's cash flow was $370 million, compared with $210 million in the previous fiscal year, exceeding its internal projections. It also managed to post a slight profit, although it was helped by an accounting change.
But in his biggest challenge, keeping Macy independent in the face of a bid from Federated, Mr. Ullman failed, and he is clearly disappointed, though he concedes that in today's competitive retail environment, larger companies have a better chance of survival.
His contract provides for an $8.4 million "golden parachute" plus two years of salary and bonus for a total of about $12.5 million. Because the demands of managing Macy have been so intense for the last three years, Mr. Ullman intends to spend a chunk of his severance package on five trips with each of his five children before taking another job.
He does not savor the idea of trying his hand at another corporate turnaround, and he is also somewhat wary of taking another retailing job. "It's probably easier for me to think about nonretailing positions right now because anything in retailing just doesn't measure up to Macy's, " he said.
