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Rapid consolidation in the department store industry could spark fresh competition for mass merchandisers, if the emerging department store giants start translating operating efficiencies into lower prices for consumers.

Two recent moves solidified Federated Department Stores, Cincinnati, and May Department Stores Co., St. Louis, as the dominant entities in department store retailing. Federated reinforced its position on the West Coast last week with the acquisition of 82-unit Broadway Stores, Los Angeles, following May's purchase two weeks ago of 14 Wanamaker stores in Philadelphia and three Woodward & Lothrop stores in Washington.

"The consolidations are making it possible for these companies to operate more efficiently..... Those savings can be passed on to consumers," said Kurt Barnard, president of Barnard Retail Marketing Report, Berkeley Heights, N.J. "Americans really like the department store, but for too long it's been out of their budgetary reach."

Boosting their store and revenue base allows Federated and May to mimic the purchasing and marketing efficiencies that have helped Sears Merchandise Group capture market share and register double-digit comparable-store sales gains in apparel, Mr. Barnard said.

Department stores registered sluggish sales and declining earnings in the second quarter. Mid-scale retailer J.C. Penney Co. last week said second-quarter net income fell 12.1% to $116 million compared with the same period a year ago. Revenue rose 4.6% to $4.44 billion. Dayton Hudson Corp.'s department store division said earnings "declined" for the quarter, while comparable sales rose 4%.

Dayton Hudson has repeatedly denied its department stores are for sale, though analysts continue to cite them as likely acquisition targets.

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