Federated Department Stores, Inc. reported total sales of $2.580 billion for fiscal September, an increase of 89.6% when compared to total sales of $1.361 billion in the same period last year. On a same-store basis, Federated's September sales were up 1.3%.
For the year to date, Federated's sales totaled $10.912 billion, up 14.3% from total sales of $9.548 billion in the first 35 weeks of 2004. On a same-store basis, Federated's year-to-date sales were up 1.7%.
Federated's total sales for September include the May Company acquisition, which was completed Aug. 30, 2005. Same-store sales include only Macy's and Bloomingdale's locations open for more than one full fiscal year. Sales from the company's Bridal Group division, which the company intends to divest and is being treated as a discontinued operation, are excluded from Federated total September sales.
“We had expected September comp store sales at Macy's and Bloomingdale's to increase between 2% and 3%. But a number of factors have led to disappointing sales results,” said Terry J. Lundgren, Federated chairman, president and chief executive officer. “These include lost sales from stores closed because of Hurricanes Katrina and Rita, reduced consumer spending resulting from higher gas prices, dampened consumer confidence and continued softness in our home store business.”
Based on August and September trends, Federated now expects same-store sales to rise by 1% to 2% in October, which would result in an increase of 1% to 1.5% in the third quarter of fiscal 2005. Same-store sales are expected to increase by 1% to 2% in the fourth quarter.
“In spite of lower-than-expected sales, Federated (excluding the impact of the May Company merger and upcoming credit transaction) still is on track to deliver the operating income anticipated when the year began. This indicates that the core of our business is solid as we enter a period of significant change to build shareholder value for the long term,” Lundgren said. “However, third and fourth quarter earnings for the merged company are difficult to predict because of a number of unusual factors, such as one-time costs associated with initial phases of the May Company integration, disruption to May division organizations and purchase-related accounting adjustments. Moreover, we can have little impact on May Company's fourth quarter results because assortments and marketing had been planned prior to the acquisition.
“That being said, our best guidance for earnings from continuing operations – excluding an estimated after-tax gain of $380 million ($1.56 per share) on the planned sale of receivables in the third quarter and one-time acquisition related pre-tax costs of $50 million to $100 million (13 cents to 25 cents per share) in the third quarter and $100 million to $150 million (22 cents to 33 cents per share) in the fourth quarter – is 20 cents to 25 cents per share for the third quarter and $2.35 to $2.45 per share for the fourth quarter. Including these items, our guidance for earnings from continuing operations is $1.50 to $1.65 per share for the third quarter and $2.00 to $2.20 per share for the fourth quarter.”
