Federated can afford to be picky on deals
By John Nolan
Associated Press
CINCINNATI — Federated Department Stores Inc. is in position to try to buy other retailers despite its decision to back off from an effort to purchase Marshall Field's earlier this year, a retail industry consultant said yesterday.
Federated, whose store groups include Macy's and Bloomingdale's, has performed well in the generally sluggish department store business under the guidance of CEO Terry Lundgren, said Kurt Barnard, president of Retail Forecasting in Upper Montclair, N.J.
Federated can afford to wait for an acquisition that would be a good fit and can be had at the right price, Barnard said.
"They have a lot of cash stashed away," Barnard said in a telephone interview. "They don't need to be in a rush."
Federated said in April that it was exploring whether to buy the 62-store Marshall Field's group, but backed away because management considered the asking price too high.
Some industry analysts said Marshall Field's would have been a good fit with Federated's upscale image. Last month, Target Corp. sold Marshall Field's to May Department Stores Co. for $3.2 billion.
Federated is scheduled to report its second-quarter earnings today.
Analysts surveyed by Thomson First Call have forecast earnings of 47 cents a share for the quarter and $3.82 a share for all of this fiscal year.
At the end of the first quarter, Federated said it had $900 million in cash on hand. That has been drawn down since then by company buybacks of its stock and debt notes, company spokeswoman Carol Sanger said yesterday.
Federated remains interested in acquisitions and will look at whatever becomes available, Sanger said. The company doesn't want to overpay for any acquisition and wants to stay within the department store business rather than diversify, she said. She declined to identify any potential targets.
The retailer's shares closed at $46.02 yesterday on the New York Stock Exchange, up $1.12 for the day and near the midpoint of its fluctuation between a low of $40.70 and a high of $55.06 during the past year.
Since emerging from Chapter 11 bankruptcy reorganization in 1992, Federated has acquired New York-based Macy's, the Los Angeles-based Broadway stores and Hawai'i retailer Liberty House. Federated's biggest misstep was its 1999 purchase of Fingerhut Cos. Inc., a direct-marketing company based in Minnetonka, Minn. After sustaining heavy losses, Federated sold Fingerhut's assets in 2002.
Federated, one of the nation's largest retailers, has annual sales of more than $15.2 billion. Its 450-plus stores in 34 states — including Hawai'i — and Guam, include Macy's, Bloomingdale's, Bon-Macy's, Burdines-Macy's, Goldsmith's-Macy's, Lazarus-Macy's and Rich's-Macy's.
