Federated’s Profit Surges as Customers Spend More
Federated Department Stores Inc. on Wednesday said that its fiscal first-quarter earnings more than doubled, and raised its annual profit forecast as shoppers spent more at its Bloomingdale’s and Macy’s stores.
Net income surged to $96 million, or 52 cents a share, from $46 million, or 24 cents, a year earlier, the Cincinnati-based company said. Sales in the three months ended May 1 rose 6.9% to $3.52 billion, the biggest increase in more than four years. Net income this year will increase to as much as $3.90 a share, Federated said.
Bloomingdale’s shoppers spent an average of 13% more per visit than in last year’s first quarter, when there were more profit-eroding discounts, the company said. Chief Executive Terry Lundgren widened aisles and added shopping carts to make stores more convenient, drawing customers away from rivals including May Department Stores Co. and Kohl’s Corp.
“He has made the shopping experience in most of the stores far more attractive than they have been,” said Kurt Barnard, president of Retail Forecasting.
Shares of Federated rose $1.01 to $47.81 on the New York Stock Exchange.
Sales began surging last year at upscale retailers including Bloomingdale’s, Neiman Marcus Group Inc. and Saks Inc.’s Saks Fifth Avenue as wealthier consumers benefited from tax cuts and rising stock markets, analysts including Piper Jaffray’s Jeffrey Klinefelter have said. Neiman Marcus said same-store sales jumped 21% last quarter.
Discounters such as Wal-Mart Stores Inc. and Target Corp. have had smaller sales gains, while department stores that offer mostly mid-priced merchandise, such as May’s Filene’s and Hecht’s chains and Sears, Roebuck & Co. have struggled to attract shoppers.
Federated’s sales at stores open at least a year climbed 6.9% in the first quarter and have increased more than May’s in 10 of the last 12 months. May said Tuesday that its same-store sales for the quarter rose 1.7%.
Federated was expected to have first-quarter net income of 48 cents a share, the average estimate of 16 analysts surveyed by Thomson First Call. Federated boosted its forecast twice during the quarter after sales rose more than it expected.
Federated expects annual income of $4.04 to $4.14, excluding costs to centralize its home furnishing business. The company previously had forecast as much as $4 a share. The company had net income of $3.71 a share last year.
