Federated says Net's Fingerhut will be closed

By Shobhana Chandra
Bloomberg News

CINCINNATI — Federated Department Stores Inc. will close Fingerhut, the catalog and Internet business that it bought in 1999 for $1.7 billion.

It's unlikely a buyer will be found for the unit, which employs about 6,000, mostly in Minnesota, Federated said.

Fingerhut is the second largest U.S. catalog business. Federated, owner of Bloomingdale's, Lazarus, Macy's and Rich's, is the nation's No. 3 department-store company.

Back in 1999, the business of selling directly to consumers "had a boundless future," said Jeffrey Sherman, chairman of Federated Direct. But "with the realities of 2001, it became very clear that this whole sector was not going to be as big as we thought when we acquired Fingerhut."

Federated has been scaling back Web operations to keep its Internet and catalog division on pace to break even in 2003.

It restructured Fingerhut in 2000 after the Internet industry slumped and a rising number of catalog customers became delinquent in paying off their charge-card balances. Federated has since returned the unit to profitability by cutting jobs and tightening credit standards.