Posted on: Thursday, August 16, 2001
Liberty House owner cuts back purchases
Advertiser Staff and News Services
Federated Department Stores Inc., the new owner of Liberty House, said it is slowing down purchases in anticipation of continued sluggish sales for the rest of the year.
The Cincinnati-based retailer also said it plans to scale back its budget for capital acquisitions to make up for the $200 million it spent in July to buy Liberty House.
Karen Hoguet, the company's chief financial officer, made the announcements in a conference call with analysts yesterday following the release of Federated's financial results for the three months ended Aug. 4.
Federated reported a 75 percent increase in second-quarter profits, due in part to a one-time tax benefit. But a sluggish economy caused Federated to pare the top range of its full-year earnings forecast for the second time in less than two months.
The results, announced yesterday, beat Wall Street expectations by 2 cents.
The company, which operates Bloomingdale's and Macy's, earned $110 million, or 55 cents per share, for the quarter, up from $63 million, or 30 cents per share, a year ago.
The results include restructuring charges related to the integration of the newly acquired Liberty House stores into Macy's West as well as four weeks of sales from the 152-year-old Hawai'i department store chain.
The results also include a tax benefit of $44 million and costs related to the shutting down of Stern's Department Stores.
Excluding those items, Federated's earnings per share were 43 cents. That compares with 30 cents a year ago, a figure that was affected by escalating credit delinquencies at its Fingerhut catalog unit.
Analysts surveyed by Thomson Financial/First Call expected 41 cents per share.
Federated's stock closed yesterday up 93 cents at $38.33 on the New York Stock Exchange.
Sales totaled $3.73 billion, down 8 percent from $4.1 billion a year ago.
Lower sales for the quarter were attributed, in part, to the closing of Stern's and cutbacks at Fingerhut. Hoguet said new stores and four weeks of sales at Liberty House, which she said is doing well, offset some of the overall sales decline.
Sales at stores open at least a year, known as same-store sales, were down 4.8 percent for the quarter. Same-store sales are the best indicator of a retailer's health.
"As you well know, we were very disappointed with sales this quarter," Hoguet told analysts.
Given uncertainty in the economy and projected lower sales for the rest of the year, Federated has slowed purchasing. The company also plans to reduce capital spending from $800 million to $775 million this year, and by another $50 million to $100 million from next year's $850 million budget.
Hoguet said that even with an expected strengthening in consumer demand for the fall, the company expects sales to be down by 1 percent to 2 percent for the second half of Federated's fiscal year.
For the full year, Federated said it now expects earnings, excluding restructuring costs, to be between $3.60 and $3.80 per share compared with a previous forecast of $3.60 to $3.90 a share.
The consensus from Thomson Financial/First Call was $3.55. The range was from $3.89 to $3.21 per share.
The higher end likely isn't achievable in light of the sluggish economy, said James Zimmerman, chairman and chief executive.
In early July, Federated had reduced its full-year forecast to a range of $3.60 to $3.90, from $4.00 to $4.25 per share.
For the six-month period ended Aug. 4, earnings were $168 million, or 83 cents per share, compared to $152 million or 72 cents per share, a year ago.
Sales were $7.55 billion from $8.01 billion a year ago.
In addition to Bloomingdale's and Macy's, the company operates under such names as The Bon Marche, Burdines, Goldsmith's, and Lazarus. It also operates Macys.com, Bloomingdales.com and Bloomingdale's By Mail units and the Fingerhut catalog and electronic-commerce subsidiary.
