NEW YORK (CNNMoney.com) - Federated Department Stores, Inc. announced Thursday plans to sell its Lord & Taylor stores by the end of this year.

"After a thorough review, we have concluded that Lord & Taylor does not fit with our strategic focus for building the Macy's and Bloomingdale's national brands," Terry Lundgren, Federated's chairman, president and chief executive officer, said in a statement.

Lord & Taylor, based in New York, operates 55 stores in New Jersey, New York, Illinois, Massachusetts, Connecticut, Maryland, Virginia, Michigan, Pennsylvania, Missouri, Delaware, Florida and Washington DC.

Industry watchers said they weren't surprised by the announcement, especially since the company last summer had indicated that Lord & Taylor's future within Federated's revamped portfolio of department stores was up in the air following the company's acquisition of May Department stores.

In July, Federated announced it would start converting 330 May department stores into Macy's locations nationwide and all Marshall Field's stores to the Macy's nameplate in 2006.

"I think this is a superb decision by Terry Lundgren and CFO Karen Hoguet to monetize a flagship brand," said Burt Flickinger, an independent retail analyst. "Lord & Taylor was becoming redundant for Federated because it already has Bloomingdales and both Terry and Karen have done a great job making Macy's more upmarket from middle-market chain."

"Lord & Taylor was already a troubled division and it was in the middle of changing it's image from older to younger, but this wasn't bearing fruit," said Howard Davidowitz, president and CEO of retail consultancy and investment banking firm, Davidowitz and Associates.

"So there's no sense on Federated spending time turning things around at Lord & Taylor when the main event for Federated is the integration of May stores," Davidowitz said.

Federated did not disclose who the potential buyers could be for the chain. Flickinger said it could be the "usual" suspects of private equity firms that have made recent retail acquisitions. Those include Vornado, Cerberus, Kohlberg, Kravis & Roberts and the Apollo Group, to name a few.

At the same time, he didn't rule out the possibility of Sears Holding (Research), parent of Sears and Kmart, or J.C. Penney (Research) also making a play for Lord & Taylor. "Although I think it would be a better fit for Nordstrom," he said.

Known as one of the earliest department stores, Lord & Taylor was founded in 1826. In 1986, it was bought by May Department Stores and Federated acquired the Lord & Taylor chain when it bought its rival May nearly one year ago in a deal worth about $11 billion.

Shares of Federated Department Stores (up $1.01 to $72.64, Research) rose 2 percent in afternoon trading on the New York Stock Exchange.

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What does Federated's CEO Terry Lundgren have planned for Macy's and Bloomingdale's? Click here.