Federated Posts 1Q Profit

Cincinnati, OH, May 17, 2007--Federated Department reported earnings in the first quarter of $36 million, or $0.08 per share compared with a year-ago loss of $52 million, or $0.09 cents per share, hurt by a hefty charge.

Excluding costs associated with the company's integration of May Department Stores Co., which it acquired in 2005, earnings rose to 16 cents per share from 1 cent per share last year. Analysts had forecast a profit of $0.19 per share.

Sales slipped 0.1 percent to $5.92 billion from $5.93 billion last year, missing estimates for $5.99 billion. Last week the company announced sales at stores opened at least a year -- considered a key indicator of a retailer's success -- rose by 0.6 percent.

"Sales in the new Macy's locations were disappointing in the quarter," CEO Terry Lundgren said in a statement.

Chief Financial Officer Karen Hoguet told analysts in a conference call that while sales weakness in February and March was primarily in the former May stores and the home business -- particularly furniture -- it was more widespread in April, particularly in apparel.

The company reiterated its full-year earnings prediction of $2.45 to $2.60 per share, excluding May Co. merger integration costs. Analysts were predicting earnings of $2.68 per share.

Second-quarter earnings predictions were revised to $0.35 to $0.45 per share, compared with the company's previous estimate of $0.40 to $0.45. Company management is concerned about the uncertainty in the economy, and same-store sales in the next quarter are expected to range from flat to 2 percent growth, a decline from a former estimate of 1.5 percent to 2.5 percent.