Federated posts $3 million loss

first_imgCINCINNATI – Federated Department Stores Inc. on Wednesday reported a $3 million loss in the third quarter as it struggled with disappointing sales at its newly converted 400 Macy’s stores and continued hefty costs related to last year’s acquisition of May Department Stores Co. The department store operator, which also operates Bloomingdale’s, said the loss for the quarter ended Oct. 28 amounted to a penny per share compared with a profit of $436 million, or 90 cents per share, last year. Chief Financial Officer Karen Hoguet admitted to analysts in a conference call Wednesday that extensive changes in the stores – in assortments, systems and people – cost Federated business in the third quarter, but the company feels well-positioned for the holiday season. “While the trend in the new Macy’s doors, primarily in the home category, is not what we had hoped, we have confidence in the long-term strategy,” Hoguet said. AD Quality Auto 360p 720p 1080p Top articles1/5READ MORESurfer attacked by shark near Channel Islands calls rescue a ‘Christmas miracle’Hoguet pointed out that apparel sales were brisk across the Macy’s chain, including its store label fashions. Federated officially completed the conversion of about 400 May stores to the Macy’s nameplate in September. Excluding costs related to the May acquisition and inventory adjustments of $90 million, or 17 cents per share, the retailer posted earnings of 20 cents per share. Revenue grew 6 percent, to $5.89 billion from $5.56 billion a year ago. Analysts surveyed by Thomson Financial expected earnings of 25 cents a share on revenue of $5.98 billion. Sales at stores opened at least a year, considered a key indicator of a retailer’s strength, rose 5.9 percent in the quarter. James Dion, founder and president of the Chicago-based retail consulting firm Dionco Inc., said the acquisition probably cost Federated more than expected. “It was a huge undertaking, and there are always all kinds of cost surprises in areas like replacing signs, offering severance packages or finding more older inventory than expected,” he said. Patricia Edwards, a retail analyst in Seattle for San Francisco-based Wentworth, Hauser and Violich, expects improvement in the fourth quarter. She said the stores and merchandise look great, and while the May integration might be more difficult than expected, she’s also confident Federated will make it work. “Taking May customers to a little more upscale and different set of merchandise can be a hard transition,” she said. “It’s like when you walk into a living room and someone has changed the furniture. It takes time to get accustomed to it.” Dion said the home business is especially tough. “You are dealing with a lot of items that are bigger and bulkier than other merchandise and take up a lot of space,” Dion said. “If you make a mistake in items like shirts or dresses, you can take a markdown and move on.” In last year’s third quarter, the company recorded a gain of $384 million, or 79 cents per share, on the sale of credit-card receivables to Citigroup, as well as integration costs of $39 million and a gain of $10 million from a legal settlement.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more