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Federated beats Street
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November 8, 2000: 10:25 a.m. ET
Retailer's operating profit tops forecast by 6 cents a share; sales up 1.4%
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NEW YORK (CNNfn) - Upscale retail chain operator Federated Department Stores Inc. overcame sluggish sales to beat Wall Street's fiscal third-quarter profit expectations by a wide margin Wednesday, although the company remains well off its earnings pace of last year.
The Cincinnati-based parent of Macy's, Bloomingdale's and Stern's department stores reported a profit of 26 cents per diluted share for the period ended Oct. 28, before a host of one-time charges. The charges, which equated to roughly $740 million, were primarily related to asset writedowns at Fingerhut, an operator of several online properties and the No. 2 U.S. catalog operation acquired by Federated for $1.7 billion last year.
The operating earnings figure compared favorably to the consensus analyst estimate of 20 cents per share compiled by earnings tracker First Call Corp., but remained far below the company's profit of 56 cents during the same period last year.
"It's still disappointing, at least as to where people were [with Federated's estimates] three months ago," Robert Buchanan, a retail analyst with AG Edwards, told CNNfn.
When asset impairment and restructuring charges related to Fingerhut are included, Federated (FD: Research, Estimates) actually lost $668 million, or $3.32 per diluted share, during the quarter.
 Federated sales for the quarter inched up 1.4 percent to $4.195 billion, while comparable store sales grew 1.9 percent. Sales growth in the company's department stores climbed 2.6 percent, while direct-to-consumer sales driven by Fingerhut fell 7.8 percent to $453 million.
"The department stores did better than I expected to do. It was a decent performance in a tough environment for retail sales," Buchanan said.
Just last month, Federated announced it was eliminating 550 jobs, or nearly 25 percent, from its Fingerhut work force and planned to consolidate the company's operations.
"What they've tried to do was write [Federated's debt] down . . . and downsize the operation in the hopes that they can generate a sufficient return against the reduced investment," Buchanan said. "It's questionable in my mind as to whether they will generate that return. It's also still unclear as to what the long-term future of Fingerhut is, at least as part of Federated."
The purchase of the catalog and Internet retailer was expected to increase sales at Federated's direct-to-consumer units, including Bloomingdale's By Mail and Macy's By Mail. But then the company warned in July that delinquent credit problems with the division would cause Federated to miss its second-quarter results.
Federated shares rose 44 cents to $34.88 in early morning trading Wednesday. 
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