Aloha to Macy's?

A report out of Hawaii says Federated Department Stores (Cincinnati) is negotiating to buy the Honolulu-based Liberty House department store chain. If the purchase is completed, the speculation is that Federated will use it as a stepping stone to establishing a retail beachhead in Japan. A Federated spokesperson said the company does not “comment on speculation about acquisitions.”

Liberty House operates 12 department stores and eight specialty stores, all on the islands of Hawaii (except for one in the Micronesia Mall on Guam). Sales were $295 million last year. The stores carry several of Federated's private-label lines.

Federated had reportedly been involved in discussions to buy Liberty House in 1997, but those talks failed and Liberty House soon thereafter went through a Chapter 11 bankruptcy reorganization. It emerged from bankruptcy in 1999 and was bought by two investment companies – Oaktree Capital Management LLC (Los Angeles) and DDJ Capital Management LLC (Wellesley, Mass.) – for $170 million.

Federated chairman James Zimmerman has said in the past he would like to take some of Federated's stores overseas, especially high-end Bloomingdale's. Analysts feel Hawaii would be a good first step for such expansion because of the lack of department store competition. Also, some 2 million Japanese tourists visit Hawaii annually. There are not incidental logistical concerns, however. Federated stores in Hawaii would be 2400 ocean miles from the company's nearest office, Macy's West in San Francisco.