Federated, Kmart Net Incomes Rise in Recent Quarter

Federated Department Stores Inc. and Kmart Corp., two of the nation’s largest retailers, reported sharply higher earnings for the latest quarter, beating Wall Street’s expectations.

Discount retailer Kmart said its net income more than tripled to $47 million, or 10 cents, from $14 million, or 3 cents, a year ago. Analysts had expected earnings of 9 cents a share.

Kmart’s sales rose 3% to $7.5 billion from $7.3 billion, with sales at stores open at least a year up 6.1%.

Federated, which owns Bloomingdale’s, Macy’s and other department store chains, said its net income climbed 150% to $60 million, or 27 cents a diluted share, from $24.1 million, or 11 cents, a year earlier. Analysts had forecast earnings of 23 cents a share. Sales rose 3% to $3.5 billion from $3.4 billion.

The Cincinnati-based company is wrapping up a drive to pare $100 million in annual costs by better tracking inventory and demanding more from suppliers. That’s helping it offset lackluster sales.

Federated said its earnings gain in the first quarter reflects a higher rate of growth than will be seen the rest of the year. The company has not changed its earnings guidance for the rest of the year, and analysts said they were expecting the slower growth.

The retailer is also revamping its chains. Federated said Wednesday that it agreed to sell its specialty-store division, which had sales of $185 million last year, to a management-led group. Terms were not disclosed.

Federated’s 400 department stores also include Stern’s, Bon Marche, Burdines, Goldsmith’s, Lazarus and Rich’s.

At Troy, Mich.-based Kmart, strong sales of Sesame Street children’s wear, Martha Stewart home fashions and women’s wear boosted results, Chief Executive Floyd Hall said. He also said inventories were lower than a year ago and that Kmart was “well-positioned” for the rest of the year.

“With our eighth consecutive quarter of increased earnings per share, we continue to feel good about the turnaround momentum at Kmart,” Hall said.

Retailers are benefiting from the strong economy and mild weather across much of the country, which have boosted sales and profits.

Bloomberg News and Reuters were used in compiling this report.