By Randy Tucker and Ken Alltucker
The Cincinnati Enquirer

The Lazarus-Macy's store in downtown Cincinnati soon will be one of a kind - the retailer's lone center city outpost.

And Federated Department Stores' announcement Friday that it will close five underperforming stores, including Lazarus-Macy's in downtown Pittsburgh, may have raised yet again questions about the future of the Cincinnati store.

DOWNTOWN STORES

With department stores Columbus: Lazarus/Macy's closing this summer. Kaufmann's continues at the connecting City Center, where it replaced Marshall Field's. The space once occupied by Jacobsen's, which went bankrupt, is empty. Indianapolis: Has a Parisian and a Nordstrom in Circle Center Mall. Milwaukee: Boston Store is sole survivor. Pittsburgh: Will be down to two with the closing of Lazarus/Macy's. A Lord & Taylor also is closing, although no date has been set. The flagship Kaufmann's and a Saks Fifth Avenue remain. St. Louis: The flagship Famous Barr - which holds the headquarters of Federated rival May Department Stores - still stands downtown. Without department stores Akron: O'Neil's turned out the lights in 1989. Cleveland: Dillard's closed what had been the main Higbee's store, located on Public Square, in 2001. Dayton: Elder-Beerman closed downtown store in 2002. Federated-owned Shillito's/Rike's closed in 1991. Kansas City: None. Lexington: None. Louisville: Dillard's in downtown's Galleria closed in 2003. Nashville: None. Toledo: Lasalle's, a division of Macy's before it was acquired by Federated, left downtown 20 years ago.

But the answer, according to Federated officials, to those questions is: "We have no intention of closing the downtown (Cincinnati) store."

"It's true, we would not have built the store unless our headquarters were here," Carol Sanger, a company spokeswoman, said. "We knew it was never going to be a stellar store for us, but we did it because we were and still are committed to downtown and downtown development."

Indeed, James Zimmerman, who stepped down Thursday as Federated's chairman, is vice chairman of the nonprofit group, 3CDC, formed to spur development in downtown Cincinnati and the central city.

Zimmerman reaffirmed the company's commitment to the downtown Cincinnati store earlier this week and said he was undaunted by the decision by some high-profile downtown retailers, including Banana Republic and Williams-Sonoma, to pull up stakes this year.

Sanger was quick to point out Friday that the downtown Lazarus-Macy's here - whose name was changed last year when Federated appended its Macy's name to its regional department stores - is still profitable, although "not a high-growth store."

But the Pittsburgh store and another downtown Lazarus-Macy's that will close later this year in downtown Columbus are not profitable, she added.

Federated agreed to open a new downtown Lazarus store at Fifth and Race streets in 1997 after the city of Cincinnati paid nearly $11.8 million to purchase their former location in the Shillito building on Seventh Street.

While the downtown store here has continued to receive significant corporate and public support, it is not immune to the market forces that have led to consolidation in the department store industry across the country, especially in downtown areas.

"Most cities struggle to support full-line department stores downtown because the demographics have changed and they don't have the population density," Wayne Hood, an equity analyst who follows Federated for Prudential Equity Group, said. "As a shareholder, we like to see those underperforming stores closed and the capital used in more productive ways."

But Kurt Barnard, chief economist and president of Barnard's Retail Trend Report in New Jersey, said that in today's competitive marketplace, most department store chains couldn't afford to carry the burden of even marginally-performing stores.

"No store can afford to have such a millstone around its neck," Barnard said.

Today, most department store operators, including Federated, are in the process of revamping their stores with new technology and merchandise and closing stores to cut costs and save money.

In the past two years, Federated has announced plans to close a handful of stores, including a Macy's in downtown Atlanta, while opening more suburban locations. Its downtown renovations and expansions have mostly been limited to its highest end store, Bloomingdale's.

The company's remaining downtown stores are in densely populated areas, including Boston, Seattle, San Francisco and New York.

It's an observation not lost on Cincinnati's city leaders.

Mayor Charlie Luken said Federated's decision to close the downtown Pittsburgh store must serve as a wake-up call to downtown stakeholders.

"In the short term, I'm glad Federated has kept their commitment to the city," Luken said. "But I don't want to be naÔve. What happened to Pittsburgh can happen here if we don't move."

Luken said the move is a reflection of dim retail prospects for downtowns across the country.

"We can't outmall the malls," Luken said. "We have to figure out how to have successful retail that is different than shopping malls. If we don't, the retail prospects in Cincinnati aren't any better than Cleveland."

Lazarus' lease shows the retailer has some wiggle room after being open for eight years. In fact, the retailer has the option of closing after 2005 if sales dip below $17 million and if two downtown anchor stores close.

One anchor, McAlpin's, closed its Fourth Street department store in 1997. But the city helped keep open a second anchor, Saks Fifth Avenue, by approving a $6.6 million aid package for the Fifth Street retailer in November 2001.

Under the terms of the Lazarus lease, downtown's third anchor - Tower Place mall - could be considered "closed" if fewer than 75 percent of its shops are open for business.

And many Tower Place merchants have complained of declining foot traffic. In fact, Banana Republic and Essentials for the Body and Soul confirmed earlier this month that they would soon close their Tower Place locations. Williams-Sonoma, which is in the adjoining Carew Tower Arcade, also is closing but will be replaced by Hunt Club Clothiers, which is relocating from near Fountain Square.

Franklin Covey also is negotiating a lease termination deal with Tower Place's owner, Charlotte, N.C.-based Faison Associates.

E-mail rtucker@enquirer.com or kalltucker@enquirer.com