New York, NY, Jun. 4--Federated Department Stores Inc. was upgraded by Credit Suisse First Boston to outperform from neutral on expectations of higher sales and profits.
"Continued healthy sales trends and earnings upside give the Federated story its legs," analyst Michael Exstein said of the Cincinnati-based retailer.
Exstein expects Federated to exceed both its second-quarter and fiscal 2004 earnings per share guidance. He projected a 4.5% increase in same-store sales in the second-quarter and a 4.1% increase for the full year.
The analyst also said Federated could benefit from a successful bid for rival chain retailer Marshall Field's, currently owned by Target Corp. (TGT). Exstein expressed confidence an acquisition could go smoothly because the company has proven it can integrate new retailers.
Federated said in April it was exploring buying Marshall Field's. Analysts have said Marshall Field's and Mervyn's are hurting Target shares, and a number of investors have expressed unhappiness that the retailer has continued to hold onto the department stores.
Exstein added that Federated could still post higher sales and earnings if it is edged out by rival May Department Stores Co. for Marshall Field's. He said the company would then resume its share repurchase program, centralize its home store and continue to "re-invent" its core department stores.
