Cincinnati, OH, Feb. 24--Federated Department Stores, Inc. today reported fourth quarter results for the year ended January 31, 2004 that reflected strong sales and earnings trends.
Federated's 2003 fourth quarter earnings from continuing operations were $2.50 a diluted share. Diluted earnings from continuing operations were $2.29 a share for the fourth quarter, excluding the impact of a one-time $38 million reduction in net deferred income tax liabilities resulting from anticipated lower effective income tax rates in the future, which increased earnings per share by 21 cents. On this basis, diluted earnings per share from continuing operations increased 29% compared to $1.78 for the fourth quarter last year.
Federated's 2003 earnings from continuing operations were $3.71 a diluted share. Diluted earnings per share from continuing operations were $3.51 for fiscal 2003, excluding the impact of the tax adjustment, which increased annual earnings per share by 20 cents. On this basis, diluted earnings per share from continuing operations increased 9% compared to $3.21 for fiscal 2002.
In 2003, Federated generated $1.59 billion in cash flow from continuing operating activities, an increase of more than $400 million over last year. Cash flow from continuing operations, before financing activities, totaled more than $1 billion in 2003--nearly double last year's level.
Terry J. Lundgren, Federated's chairman/chief executive officer and president, said Federated has put its strong cash flow position to work in increasing shareholder return, including the institution of a cash dividend in 2003 and the continuation of a share buyback program. The company used approximately $645 million of excess cash to repurchase approximately 16 million shares of Federated common stock in 2003.
"We were particularly pleased with the strength of our fourth quarter sales and earnings performance," Lundgren said, noting that improved sales trends and good inventory management led to stronger profitability in the latter part of the quarter, which enabled the company to exceed its earnings expectations for the period.
"We entered 2003 strategically focused on four key priorities for improving our business over the longer term--differentiating merchandise assortments, simplifying pricing, enriching the overall shopping experience and communicating better with our customers through more effective marketing," Lundgren said. "Our results for the year indicate that we are making progress on these strategies and the customer is responding, which we think bodes well for sales growth in the coming months."
Lundgren said the company's February sales are trending well ahead of expectations, attributable in part to favorable weather and the possibility that some anticipated March sales migrated into February. As a result of this sales strength, Federated is revising its February same-store sales forecast to an increase of 7%-8% compared to the prior forecast of up 2%-3% for the month. Actual February sales will be reported on Thursday, March 4.
For the 13-week fourth quarter ended January 31, 2004, Federated's operating income was $758 million or 15.0% of sales, compared to $634 million or 12.6% of sales for the same period last year. Federated posted operating income of $1.341 billion or 8.8% of sales for the 52 weeks of fiscal 2003, compared to operating income of $1.343 billion or 8.7% of sales for fiscal 2002.
Included in selling, general and administrative expenses (SG&A) for the fourth quarter of 2003 were $12 million of costs associated with the Rich's-Macy's and Burdines-Macy's consolidations and other announced store closings. Included in SG&A for all of 2003 were $59 million of costs associated with the Rich's-Macy's and Burdines-Macy's consolidations and other announced store closings.
