Federated Stores to Close Stern’s Division

Federated Department Stores Inc. said Thursday it will close its Stern’s department store division, converting most of the New York and New Jersey outlets to Macy’s and Bloomingdale’s stores and possibly laying off up to 2,600 of the division’s 7,400 employees.

The Cincinnati retail giant said the move to close five of the 24 locations and convert the other stores should improve cash flow and return on investment by allowing it to expand Macy’s and Bloomingdale’s presence in the region.

The Stern’s closing will result in one-time costs of $130 million to $150 million.

Federated said employees working at the stores slated for closure and the division’s Paramus, N.J., office, may be laid off, but will be given priority consideration for open jobs elsewhere.

After the conversions, Macy’s East store group will operate 107 stores in 15 states and Puerto Rico with annual sales more than $5 billion, Federated said. Federated’s total annual revenue is about $18.4 billion.

Separately, Federated said its January same-store sales rose a higher than anticipated 3.7%.

Federated also said it will meet targeted earnings per share, excluding charges related to the closing, of $4.00 to $4.25 this fiscal year.

Federated shares closed at $42.98, down $2.96, in New York Stock Exchange trading.