Federated Finishes Ahead of Q4 Forecast
NEW YORK – Putting what chief executive Terry Lundgren termed a “superb finish” on a challenging year, Federated Department Stores reported Tuesday that it had exceeded fourth-quarter earnings estimates and put in motion a plan to change its name to Macy’s Group.
During the 14 weeks ended Feb. 3, the nation’s largest department store retailer increased its net income 4.9% to $733 million, or $1.40 a diluted share, from the $699 million, or $1.26, registered during the 13-week quarter ended in January 2006. Excluding costs related to the integration with May Company, earnings per share for continuing operations were $1.66, 6 cents above the high end of guidance furnished by the company earlier this month.
Sales in the quarter retreated 4.3% to $9.16 billion from $9.57 billion, but same-store sales were up 6.1%. The same-store sales figure strips out the extra week of selling in last year’s fourth quarter as well as results from about 80 “duplicative” stores sold off by Federated during the year.
Federated’s board has approved a plan to change the name of the company to Macy’s Group. The name change would be effective June 1 if approved by shareholders at the annual meeting on May 18.
“Today, we are a brand-driven company focused on Macy’s and Bloomingdale’s, not a federation of department stores,” Lundgren said in a statement. “By aligning our corporate name with our largest brand, we will increase the visibility of the company with customers, leverage the world-famous Macy’s brand name, and get more credit for our accomplishments in the marketplace.”
Macy’s accounts for about 90% of company sales, he pointed out, adding that Bloomingdale’s “is and will remain a very important part of the company.” He added that the name change wouldn’t prevent the company from “growing in any direction in the future.”
The change would end a legacy dating back to 1929, when a number of family-owned regional department store operators banded together as a holding company. Most of their names, such as Lazarus and Abraham & Straus, have been lost to history in the last two decades as the company at first consolidated regional names and later eliminated all but Macy’s and Bloomgindale’s entirely. The survival of Macy’s as the dominant nameplate was promoted heavily in 2006 with a splashy new ad campaign, accompanied by numerous special events and philanthropic endorsements, but resistance lingered to what some called the “Macyfication” of the former Federated, May and Marshall Field stores.
In addition to integrating the May stores, the company sold several May brands, including Lord & Taylor and the David’s Bridal and Priscilla of Boston names, during 2006. However, its sale of the After Hours Formalwear chain to Men’s Wearhouse, for about $100 million, has been delayed by requests for more detail by the Federal Trade Commission. The parties still hope to complete that transaction during the first half of fiscal 2007.
Federated said it expects same-store sales increases of 2% to 3.5% during the current year and total revenues of between $27.1 billion and $27.6 billion. Excluding special items, earnings per diluted share should total $2.45 to $2.60.
For the full year, net income dropped 29.2% to $995 million, or $1.81 a diluted share, from $1.41 billion, or $3.24, in fiscal 2005. Excluding nonrecurring items, EPS was $2.30 versus $2.55. Sales rose 20.5% to $26.97 billion from $22.39 billion and were up 4.4% on a comparable-store basis.
