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Federated: Big home impact in fall '05

CINCINNATI — Federated Department Stores' home department will experience "dramatic change" come next fall under the influence the centralized Macy's Home operation, Chief Financial Officer Karen Hoguet told analysts during the retailer's third-quarter conference call earlier today.

Acknowledging there are likely to be some bumps in the road along the way, Hoguet added, "We will continue to see some change in the fourth quarter and some in spring 2005, but not until fall 2005 will there be dramatic change."

Also by fall, Federated expects to be enjoying the fruits of its across-the-store "reinvent" remodeling program, which should by then be generating two-thirds of the company's sales, she said.

For the holiday selling season, Federated is making efforts to reduce clutter, omit center aisle tables and clear up some signage, Hoguet said, to create a better shopping experience for customers.

In third quarter news, the company said inventories were down 3.3 percent.

"And we are in very good shape for the fourth quarter," Hoguet added. "We have positioned ourselves better." However, Federated expects a modest fourth quarter, with comps rising from 1.5 percent to 3 percent.

The department store company boosted its third quarter net income by more than 10 percent, to $74 million. Terry Lundgren, Federated's chairman, president and CEO, said the performance exceeded the company's expectations.

Sales were just slightly better than break-even for the third quarter, and operating income increased by a modest 1.2 percent. Same-store sales edged up 0.4 percent for the quarter. The bottom line benefited from a reduction in interest expense for the quarter of nearly 10 percent. The company was also able to keep its selling, general and administrative expenses relatively in check; this item fell 20 basis points during the period.

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