Federated, Target post strong profit

Federated Department Stores Inc. reported strong fiscal fourth-quarter profit Tuesday and said it would change its name to Macy’s Group Inc. But the department store operator -- still struggling to integrate former May Department Stores Co. stores -- offered a profit forecast well below Wall Street expectations.

Meanwhile, Target Corp. said fourth-quarter profit rose a better-than-expected 19%, fueled by strong holiday sales. Earnings for the current year should be in line with Wall Street’s estimates, company executives said.

Cincinnati-based Federated, which also operates Bloomingdale’s, said stronger sales at established stores and lower costs drove earnings up 5%.

The company said it would immediately repurchase 45 million shares for $2 billion, half of a planned $4-billion increase to its stock buyback program.

Federated, which is building a national department store chain under the Macy’s brand, plans to seek shareholders’ approval for the name change during its annual meeting in May.

“Most customers don’t know what Federated Department Stores stands for, and obviously the name-brand recognition for our new name is an easy decision for us,” said Chief Executive Terry J. Lundgren, noting that 90% of sales are coming from the Macy’s brand.

Federated changed the name of more than 400 May stores to Macy’s last year after acquiring its rival in August 2005. Those stores, which operated under such nameplates as Hecht’s, Marshall Field’s and Filene’s, struggled during the holiday season, though business is rebounding, company executives said.

For the quarter ended Feb. 3, Federated’s net income rose to $733 million, or $1.40 a share, from $699 million, or $1.26, a year earlier. Stripping out the costs of integrating May stores, the company said earnings for the latest quarter were $1.66 a share, topping its estimate of $1.55 to $1.60 a share.

Analysts polled by Thomson Financial, who exclude one-time charges and gains from their estimates, expected earnings of $1.58 a share.

Analysts forecast fourth-quarter sales of $9.07 billion.

Sales at stores open at least a year -- considered a key indicator of retail strength -- rose 6.1% in the quarter.

Federated said it expected earnings of $2.45 to $2.50 a share for the current year excluding integration costs of $100 million to $125 million. That was a disappointment on Wall Street, with analysts looking for earnings of $2.84 a share.

Minneapolis-based Target, the nation’s second-largest discount chain, said it earned $1.12 billion, or $1.29 a share, for the quarter, up from $939 million, or $1.06, a year earlier.

Revenue of $19.71 billion rose from $16.95 billion during the same period last year, driven by the longer 14-week quarter that ended Feb. 3.

Analysts surveyed by Thomson Financial expected earnings of $1.27 a share on revenue of $19.52 billion.