Federated to Trim Stores, Jobs

Cincinnati, OH, Jan. 17--Federated Department Stores plans to close 11 stores and cut nearly 2,000 jobs as it anticipates flat sales and income this year. The retailer will consolidate its Rich's and Macy's department stores in the Atlanta area, resulting in the closing of seven Macy's stores in April and the elimination of 1,500 jobs. Federated also plans to close Lazarus stores in Indianapolis and Bloomington, Indiana, a Goldsmith's store in Memphis, and a Macy's store in South Brunswick. New Jersey Federated spokeswoman Carol Sanger estimated that those stores each employ about 100 workers. The closings are expected to reduce the company's net sales by about $100 million, Karen Hoguet, Federated's chief financial officer, said. "The Rich's that exists today will be operating this integrated entity with the intent of capturing the best of both franchises," said Hoguet. "We will combine the national power of the Macy's brand with the regional expertise of the Atlanta based Rich's." A total of 28 stores will begin branding themselves as Rich's-Macy's, beginning next month. They include Macy's stores in Georgia, Alabama and South Carolina. Federated estimated it will cost the company $115 million for the consolidations and closings. The company expects a 2002 fourth quarter charge of $70 million, or 22 cents a share, for the closings. "The message at the end of the day is that the company is trying to be cautious after two consecutive years of disappointing sales," said Jeff Stein, an analyst with McDonald Investments in Cleveland. "They are planning for a worst case scenario." Stein said consumers have been spending less on apparel than on big ticket items, and many consumers seem to have abandoned department stores for discounters, which sell apparel at lower prices. Hoguet said she doesn't think store traffic has been the main problem. "The whole issue has been that the average unit has come down in terms of costs," Hoguet said. "Our effort is to try to get each customer to buy just a few pennies more every time they're in the store." During the holiday shopping season, Federated reported same store sales slipped 2.6%; overall sales were down 0.8%. The company said it expects 2003 earnings per share to be between $3 and $3.20, below the $3.71 per share estimated by analysts at Thomson First Call. The company also said a preliminary review forecasts same store sales in fiscal 2003 to be down as much as 1.5% compared to last year.

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