Integration Slows Federated
Home & Textiles Today Staff -- Casual Living, March 12, 2007
Profits in the crucial Christmas quarter rose 4.9% at Federated Department Stores, to $733 million from $699 million last year, helped by a deep cut in interest expense that saved the retailer $78 million, deep cuts in operating costs, and $54 million in proceeds from a debt tender offer.
Acting as a drag and tugging at the bottom line was $167 million in costs tied to the integration of the May Department Stores acquired in August 2005, up from $106 million in integration costs in the same period last year.
The integration effect showed as sales at the department store titan fell by 4.3%, to $9.2 billion from $9.6 billion last year, hurt by the closing of about 80 duplicative stores from the May buyout. Still, the acid-test measure of same-store sales rose by 6.1%
Lending strength to the bottom line, Federated whittled down its operating costs by 10.6%, to $2.3 billion from $2.6 billion, yielding a cash savings of $275 million. Stockpiles were cut by 2.6%, but not enough to keep pace with the 4.3% drop in sales.
Federated Department Stores
|Qtr. 2/3 (x000)||2006||2005||% change|
|a. Fourth quarter results include $167 million in May integration costs vs. $106 million last year; and a $27 million after-tax loss from discontinued operations vs. a prior-year profit of $21 million.
b. 12-month results include $450 million in May integration costs vs. $159 million; a $191 million gain on the sale of receivables vs. $480 million and an after-tax profit of $7 million from discontinued operations vs. $33 million.
|Oper. Income (EBIT)||1,427,000||1,300,000||9.8|
|Per share (diluted)||1.40||1.26||11.1|
|Average gross margin||40.8%||40.6%||—|
|Oper. Income (EBIT)||2,095,000||2,113,000||-8.5|
|Per share (diluted)||1.81||3.24||-44.1|
|Average gross margin||39.9%||40.6%||—|