In January, saddled by debt resulting from the highly leveraged Campeau takeover of Federated, both Federated and Allied file for bankruptcy reorganization. The reorganizing of more than $8 billion of debt begins. Allen Questrom becomes chairman and chief executive officer, joining James M. Zimmerman, president and chief operating officer, to form the senior management team that would resurrect the company.
Divisional consolidations begin. The company’s Florida operations, including all former Maas Brothers/Jordan Marsh stores, operate under the Burdines name, and division headquarters are consolidated in Miami.
A new public company - Federated Department Stores, Inc. - emerges from bankruptcy in February with 220 department stores in 26 states and annual sales of approximately $7 billion. The former Allied Stores Corporation is merged into Federated. A consolidation of the A&S and Jordan Marsh divisions results in the A&S/Jordan Marsh division, headquartered in Brooklyn, NY. Early in the new year, Macy’s files for protection under Chapter 11.
Federated announces the centralization of divisional accounting and accounts payable functions in Cincinnati. In addition, a management realignment reconfigures merchandise distribution for its northeastern divisions.
Federated acquires the Joseph Horne Co. of Pittsburgh, adding 10 Pennsylvania stores to its Lazarus division. In December, Federated acquires R.H. Macy & Co., creating the largest department store retailer in the nation. Acquisition approval, granted by U.S. Bankruptcy Court in December, culminates Macy’s three-year reorganization plan.

Macy’s East, headquartered in New York City, merges with A&S/Jordan Marsh to form a $4 billion retailing division of Federated. In San Francisco, Macy’s West continues to operate all West Coast Macy’s and Bullock’s stores, as Federated restores its presence in California and Texas.

Federated announces the discontinuation of the I. Magnin chain and 13 I. Magnin stores are sold or converted to Macy’s or Bullock’s.

Federated Logistics (now known as Macy’s Logistics and Operations) is formed to coordinate the company’s distribution facilities and functions in the northeastern United States.
Rich’s/Goldsmith’s and Lazarus are consolidated into one division - Rich’s/Lazarus/Goldsmith’s, based in Atlanta and operating stores in nine southeastern and midwestern states.

Federated acquires Broadway Stores, Inc., based in Los Angeles. Initially, this added 82 Broadway, Emporium and Weinstock’s department stores in California and four other southwestern states with annual sales of more than $2 billion. Federated announces that 56 of these stores will be converted to the Macy’s nameplate. Five others will become Bloomingdale’s, while other locations will be sold or closed.

Federated Logistics is expanded to handle distribution, logistics functions and vendor technology for all Federated divisions nationwide.

A&S stores, already a part of the Macy’s East division, are converted to the Macy’s nameplate.
Jordan Marsh stores in the northeastern United States, already part of the Macy’s East division, are converted to the Macy’s nameplate. Meanwhile, Bullock’s stores in Southern California, already part of the Macy’s West division, are renamed Macy’s.

May Company acquires Strawbridge’s in Philadelphia.

The Federated Department Stores Foundation is reactivated as the company’s primary vehicle for charitable giving. Total contributions by Federated, its divisions and the Foundation were $7.8 million in fiscal 1996.

Bloomingdale’s opens its first California stores with four locations - three in the Los Angeles area and one in Palo Alto.

macys.com is launched.
In May, James M. Zimmerman succeeds Allen Questrom as chairman and chief executive officer of Federated. Terry J. Lundgren becomes president and chief merchandising officer.
For the first time since 1988, Federated’s debt was rated by major agencies as investment grade. In the fall, the company launches a new Macy’s By Mail catalog and re-launches macys.com.

The May Company acquires The Jones Store in Kansas City, MO.
Fingerhut Companies, Inc. of Minnetonka, MN, a leading direct-marketing company, is acquired by Federated in March.

May Company acquires Zions Co-operative Mercantile Institution (ZCMI) stores in Utah and Idaho.