Stock-In-Trade
Survive the Holidays
November 19, 1997

The real Santa Claus works at Macy's. Trust me. I know this for a fact. I've had my picture taken with him every December since I could afford to pay for my own plane ticket to New York. Oh, yeah, it's only the Macy's in New York that has the real one. We're good friends. I'm always on the "good girl" list and I know he wouldn't lie to me.

As a favor, I mentioned in my letter to him this year that I'd remind everyone that Macy's is owned by Federated Department Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FD)") else Response.Write("(NYSE: FD)") end if %>. Having Santa on its side is clearly helping this stock. Draw a chart of Federated's stock price for the last three years, and you'd think that Rudolph was guiding their sleigh up, up, up.

Genesis Merchant Group Securities recently raised their 1997 and 1998 earnings per share estimates on Federated to $2.55 and $3.00 from $2.47 and $2.55 based on FD's third quarter EPS of $0.47 compared to Genesis estimate of $0.32. Thirteen of the 22 analysts who follow Federated have raised their 1998 EPS estimates in the last week.

Genesis analyst Bernard Sosnick says that, "Although the Q3 sales increase of 3.8% (3.1% in comparable stores) was somewhat disappointing to management, these negatives were more than offset by expense savings that held the expense increase to 0.4%." Other analysts have also noted management's good job of getting the debt off their balance sheet.

The Fool covered the department store sector in Industry Snapshot back in August. Check out what Alex Schay (TMF Nexus) had to say about Federated and its retail competitors.

In my letter to Santa I also asked for any inside info he had on Federated. I'm having second thoughts about that now. What if he takes me off the "good girl" list?