FD , WMT ,,, Federated's 1Q Earnings Grow 27 Percent Wednesday May 11, 4:35 pm ET By Lisa Cornwell, Associated Press Writer Federated's 1Q Earnings Grow 27 Percent As It Proceeds With Takeover of May Dept. Stores
CINCINNATI (AP) -- Federated Department Stores Inc. said on Wednesday that its first-quarter profit grew 27 percent, topping Wall Street estimates and giving the retailer encouraging news as it proceeds with its takeover of rival May Department Stores Inc. ADVERTISEMENT
The owner of Bloomingdale's and Macy's said it made $123 million, or 71 cents per share, in the three months ended April 30 compared with $97 million, or 53 cents a share, a year ago.
The earnings beat Federated's forecast of 65 cents to 70 cents per share, and the consensus of 67 cents from analysts polled by Thomson Financial.
Net sales totaled $3.61 billion, up 3 percent from $3.52 billion a year earlier and ahead of the $3.58 billion expected by analysts.
Federated's stock fell 62 cents to close at $63.28 in Wednesday trading on the New York Stock Exchange. The stock price has ranged from $42.80 to $65.08 in the past year.
"We are obviously very pleased with the quarter's results and our above-expectations sales performance, especially since these comparisons are against a strong first quarter last year," said Terry Lundgren, Federated's chairman, president and chief executive.
Lundgren credited Federated's emphasis on its merchandise assortment, simplified prices and improved marketing and store improvements for the growth in profits.
Lundgren said Federated's first-quarter success is encouraging as the company prepares to take over May.
"We are more enthusiastic than ever before about the tremendous potential inherent in combining these two retail businesses ...," Lundgren said in a statement.
Federated announced in February that it was buying May for $11 billion in a widely anticipated deal that would create a powerhouse better able to compete against discounter Wal-Mart Stores Inc. and upscale merchants. The combined company would boast nearly 1,000 department stores and $30 billion in annual sales.
May on Tuesday posted a 46 percent drop in first-quarter earnings as it struggled with weak sales of its adult apparel and seasonal clearance markdowns.
Federated said it expects the merger to be completed in the third quarter.
Sales at stores open at least a year -- considered a key indicator in a retailer's strength -- grew 2.6 percent last quarter, Federated said.
Chief financial officer Karen Hoguet told analysts on a conference call Wednesday that sales were strong in its private-brand merchandise along with jewelry, cosmetics, handbags, men's and women's sportswear, and junior's and children's merchandise.
"We were weak in the big-ticket home areas -- furniture, bedding and floor coverings," she said. The company was encouraged by improvements in the small-ticket home categories such as luggage and housewares.
Sales strength was fairly widespread except for the central part of the country, she said.
The company maintained its forecast for second-quarter earnings of 80 cents to 85 cents per share. Currently, analysts predict income of 83 cents per share on $3.6 billion in sales, up from last year's income of 43 cents on sales of $3.55 billion.
The company said it does not plan to update its second-half earnings forecast until the timing of the merger with May is known.
Federated operates more than 450 stores in 34 states, Guam and Puerto Rico and also runs macys.com and Bloomingdale's By Mail.
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