The analyst predicted that the merger, which was alleged in a Wall Street Journal report, will likely close stores, increase the amount of private label clothing at the merged entity and encourage further consolidation in the US department store sector, all of which could harm clothing suppliers. The analyst said Federated and May are both 10 per cent customers of Jones Apparel, Liz Claiborne and Tommy Hilfiger.
However, Merrill Lynch said that these suppliers are likely to welcome the merger because Federated's merchandise management model and policy of raising average unit retail prices is highly regarded by them.
The analyst said: 'We also get the sense that our vendors much prefer dealing with Federated. May is often cited as asking for the most egregious and last minute markdown support.'