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Federated's Net Income Soars as Revenue Increases by 64%

November 10, 2005|From Associated Press

CINCINNATI — Federated Department Stores Inc., operator of the Macy's and Bloomingdale's department store chains, reported Wednesday that fiscal third-quarter profit climbed more than fivefold from a year earlier, aided by a large gain from the sale of credit card accounts.

Federated reported net income of $436 million, or $1.79 a share, for the three months ended Oct. 29. That compares with a year-earlier profit of $74 million, or 42 cents.

The quarter's results included a $384-million gain on the sale of outstanding Federated and Visa credit card accounts to Citigroup Inc. and $39 million in costs stemming from Federated's $11.9-billion acquisition of rival May Department Stores Inc. in August.

Excluding such items, Federated reported profit from continuing operations of 36 cents a share.

Revenue rose 64% to $5.79 billion from a year earlier. Sales and earnings figures include results from May Department Stores for September and October.

Wall Street had forecast earnings of 23 cents a share, the average of analysts surveyed by Thomson Financial, on revenue of $5.66 billion.

Chief Financial Officer Karen Hoguet told analysts in a conference call that sales from May stores in October were stronger than expected and helped increase profit for the quarter.

Federated sales totaled $2.1 billion in October, slightly above the high range of its forecast and nearly twice what the company recorded a year earlier.

The strongest sales in the third quarter were in handbags, fragrances, shoes, dresses and juniors, with sales in the home stores division remaining the weakest, Hoguet said.

"Cold-weather businesses were also weak due to the warm weather in the quarter, but they have picked up since the weather turned colder," she said.

Federated affirmed its earlier fourth-quarter view of earnings from continuing operations of $2 to $2.20 a share, or $2.35 to $2.45 excluding costs from the May acquisition. Analysts' average view for the current quarter is $2.44 a share.

The company, which announced this year that it planned to sell its bridal group division, said it was treating sales and earnings from that division as a discontinued operation.

Sales in stores open at least a year, a key indicator of a retailer's strength, are expected to increase 1% to 2% in the fourth quarter.

For the nine months ended Oct. 29, the company reported a nearly threefold increase in earnings to $707 million, or $3.58 a share, compared with $249 million, or $1.38, for the comparable period in 2004. Sales rose 23% to $13 billion.

Federated shares rose $4.94 to $68.85. The stock has traded in a 52-week range of $53.51 to $78.05.

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