Federated Profits Fall

Cincinnati, OH, May 15--Federated Department Stores Inc. said that first-quarter profits fell 48 percent, but those earnings exceeded analysts' expectations because store-closing costs were lower than expected. Federated reported net income of $46 million, or 24 cents a share, for the quarter ended May 3, compared with $89 million, or 43 cents a share, for the same quarter a year ago. The Cincinnati-based retailer's stores include Bloomingdale's and Macy's. Analysts surveyed by Thomson First Call predicted earnings of 15 cents a share, and the company's expectation was 14 to 19 cents. "Our ability to produce planned earnings in a sales environment that continues to be weak is reflective of a number of factors, foremost among them being good inventory management and tight expense controls for which Federated is well known," said Terry Lundgren, Federated's president and chief executive officer. Sales were down more than 4 percent at $3.29 billion, compared with $3.45 billion a year ago. Same-store sales, considered the best indicator of a retailer's strength, were down 5 percent from last year. The company originally predicted store closings and consolidations would cost $35 million in the first quarter, but it spent only $8 million, mostly on Atlanta stores. The company expects some of the expense to be incurred later in the year. "We continue to believe that it will be a difficult second quarter in terms of sales, but we are hopeful that the economy will continue to improve, eventually stimulating consumers to begin to resume more normal spending patterns in the latter half of the year," Lundgren said. Federated shares traded down 75 cents to close Wednesday at $31.70 on the New York Stock Exchange. Federated operates more than 450 stores in 34 states, Guam and Puerto Rico including Rich's-Macy's, The Bon Marche, Burdines, Lazarus and Goldsmith's, as well as macys.com and Bloomingdale's By Mail.