Posted at 12:15 p.m., Monday, September 24, 2001

Federated profits feel impact at New York stores

Advertiser News Services

CINCINNATI — Federated Department Stores Inc., the new owner of Liberty House, has seen sales plummet at its New York flagship stores since the Sept. 11 terrorist attacks, and warned today it might have to reduce its earnings outlook for the year.

Sales have been 20 percent below estimates since the terrorist attacks, the company said in a statement. At its two Manhattan flagship stores — Bloomingdale's and Macy's — sales have been 40 percent below expectations.

The Cincinnati-based department store company said that it would provide revised full-year earnings estimates after management completes its assessment of sales expectations for the remainder of the year.

Chief executive James Zimmerman has been trying to boost sales of private-label clothing at Federated stores. Since the attacks, consumers have been buying mostly food and household goods. Department stores and apparel chains, which had trouble attracting customers in the slowing economy, have fared even worse since the assault, analysts said.

"It was bad for anyone who wasn't selling American flags or wasn't a discounter selling food," said Midwest Research analyst Jeff Stinson, who rates Federated a "neutral" and said he doesn't own the stock. "The valuation on these shares is still fairly attractive, so it's hard to really get on either side of the fence here to buy or hold."

For the month, sales at stores open at least a year will be 15 percent to 20 percent below September 2000, Federated said. Last September same-store sales increased 2.9 percent.

Federated shares dropped 15 percent since Sept. 10 and fell 10 cents to $26.80 in late morning trading.

Sales aren't likely to pick up this year, Federated said. Earnings estimates may be reduced following a review.

Federated was forecast to earn $3.54 a share this year, the average estimate of analysts surveyed by Thomson Financial/First Call. Five analysts had lowered their estimates in the past 30 days, reducing the average by 2 cents.

Goldman, Sachs & Co. analyst George Strachan said in a report today he's reducing annual earnings estimates for department stores by an average of 16 percent, compared with a 5 percent reduction for discount chains.

"This is a first cut, based on recent spending trends, our sense of relative economic sensitivity, managements' abilities to react effectively and business concentration in or around New York City," wrote Strachan, who lowered his annual profit estimate to $3.25 a share from $3.55.

Federated has more than 450 department stores under names that include Lazarus, Rich's and The Bon Marche. The Macy's in Manhattan's Herald Square is one of the largest department stores in the world, at 2.16 million square feet. The Bloomingdale's store on 59th Street is 938,000 square feet.

Midwest Research's Stinson estimates the two New York stores combined account for 5 percent to 7 percent of Federated's $16.5 billion in annual department-store sales.