Federated to pull plug on Fingerhut division
January 21, 2002-- Home Textiles Today,
After assessing the long-term possibilities, Federated Department Stores has decided to dispose of Fingerhut, the catalog division it bought in March 1999.
"We have determined that there is no longer strategic value to Federated in retaining Fingerhut's operations, and we have no expectation that these businesses would contribute meaningfully to the company's financial performance," said James Zimmerman, chairman and ceo.
"We took 2001 to stabilize the core catalog and determine its long-term fit with Federated and its normalized rate of profitability," said Karen Hoguet, cfo, in a conference call. But while Fingerhut is still on track with an annual EBIT of $75 million to $125 million for 2001, "it was increasingly clear that Fingerhut will not fit in with Federated, nor have a meaningful positive financial contribution in the future." She added that Fingerhut would have generated a negative cash flow each year over the next few years, but that ceasing its operations will free up more cash for Federated.
Besides the Fingerhut catalog, the Fingerhut subsidiary also operates Arizona Mail Order, which issues catalogs under the names of Old Pueblo Traders, Lew Magram, Brownstone Studio and Bedford Fair. Arizona Mail Order and fellow subsidiaries Figi's and Popular Club Plan had sales through December of $510 million, she said, or more than 40 percent of Fingerhut sales. Federated believes that these components are salable.
However, Federated assumes that Fingerhut will not be sold and plans to liquidate the business and collect receivables. Federated will not take action for several weeks, however, to allow time for a prospective buyer for the entire Fingerhut business or the receivable portfolios. But if that situation does not arise, Hoguet said Federated would close the retail business by the summer, and 75 percent of collections would take two years to complete.
Fingerhut employs approximately 6,000 people in its core catalog operations, approximately 4,700 of whom are located in Minnesota, with an additional 1,300 at telemarketing and distribution centers in eastern Tennessee.
Related Content By Author
Industry Related Content
Countdown to Intertextile Shanghai