Federated Posts 59% Jump in Earnings
Macy’s parent Federated Department Stores Inc. said Tuesday that fiscal fourth-quarter profit rose 59%, aided by the purchase of May Department Stores Co. and a tax settlement.
The Cincinnati-based retailer also stuck with its profit projections for the current fiscal year and said it had appointed a new head of marketing to help build the Macy’s brand nationwide.
Earnings rose to $699 million, or $2.52 a share, from $440 million, or $2.55, a year earlier. Excluding merger integration costs and related inventory value adjustments, profit from continuing operations was $2.74, beating analysts’ expectations of $2.62.
Federated posted revenue of $9.57 billion for the quarter ended Jan. 28, up 87% from a year earlier. Sales at stores open at least a year rose 1.1%.
Both the Federated and May divisions performed better than expected, the company said. But Chief Executive Terry Lundgren cautioned that 2006 would be “a transition year in which sales and earnings performance will be difficult to predict.”
Federated also said Tuesday that it had tapped Citibank executive Anne MacDonald as chief marketing officer, a key post as it folds Robinsons-May stores and other chains under the Macy’s banner.
Analyst Robert Buchanan of A.G. Edwards & Sons voiced concerns about what was ahead for Federated, which he said overpaid when it acquired May for $11 billion in August. “I think this acquisition is large and will be onerous for Federated.”
The company’s shares fell $1.23 to $70.40.
Federated, which also operates Bloomingdale’s, is one of a slew of retailers releasing earnings results this month, giving investors a look at how much of holiday revenue sank to the bottom line. Gap Inc. and Nordstrom Inc. will report Thursday.
“I think the fourth quarter was a healthy one for the retail industry -- that much is clear from the reports we’ve seen so far,” Buchanan said.
Retail experts say the sales pace probably will soften somewhat in 2006 as shoppers grapple with concerns about energy costs, higher interest rates and a housing market slowdown.
Customers also may be thwarted by higher minimum monthly payments on credit cards, Buchanan said, noting: “I think we need to brace for that slowdown.”
Federated said earlier that it expected to lose 5 cents to 15 cents a share in the fiscal first quarter on a same-store sales decline of 0.5% to 1.5%. It predicts sales of $5.75 billion to $6 billion.
For the year, the retailer anticipates earnings of $3.45 to $3.70 a share from continuing operations, excluding May integration costs and a gain on the sale of receivables. It expects same-store sales to rise 2% to 3%.
