Department Stores

Federated Department Stores, Inc.

The Company

Casting aside a tumultuous decade (the 1980s), Federated Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FD)") else Response.Write("(NYSE: FD)") end if %> has re-emerged as a department store industry leader. With names like Bloomingdale's, Macy, The Bon Marche, Burdine's, Rich's, Lazarus, and Goldsmith's, it would seem impossible to fail. As everyone knows, a business is like an automobile, it won't run itself except downhill, and that's exactly what happened with Federated. However, Federated has beaten First Call earnings estimates for every quarter since it emerged from bankruptcy in 1992.

The company trades at a substantial discount to industry blue chip May Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAY)") else Response.Write("(NYSE: MAY)") end if %>, but will quickly close the gap if it can make good on its promises of: (1) comparable-store sales of 3% to 4%, (2) an EBITDA margin of 13% by 1999, (3) de-leverage debt to equity down to 40%, (4) increase Return on Investment (ROI) above current levels and grow EPS 15% per year. New management led by Jim Zimmerman is attempting to aggressively grow sales internally as well as focusing on shareholder return, a departure from the past.

Latest Financials

Federated Department Stores reported net income of $24.1 million or $0.12 a share for the first quarter of 1997, compared to a net loss of $37.9 million or $0.18 cents a share in the first 13 weeks of last year. Earnings for the first quarter of 1997 were up 159.6% over earnings of $9.3 million or $0.04 a share for the same period last year, excluding inventory valuation adjustments (IVA) and business integration and consolidation expenses (BICE) related primarily to the integration of Broadway Stores into Federated.

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