Federated cuts costs for 2Q gains
August 20, 2001,
CINCINNATI — Launching an earnings recovery in a weakened retail environment, Federated Department Stores parlayed deep cuts in costs and a big cut in its tax bill into a sharply higher second-quarter profit, up 74.6 percent from last year, to $110 million from $63 million last year.
In another major prop to earnings, the retailer's tax bill was cut to just $1 million during the quarter, dropping from $49 million last year, steering $48 million to the bottom line.
Reflecting the earlier closing of its Stern's division and the downsizing of Fingerhut, sales fell off by 8.2 percent, to $3.7 billion from $4.1 billion a year ago, a shortfall of $333 million. Same-store sales declined by 4.8 percent in a perilous environment for department stores.
Scoping out the year, ceo James Zimmerman forecast a same-store decline of 1 percent to 2 percent for the fall season. And given a weak retail environment, he modestly lowered his earnings forecast for all of this year to a range of $3.60 to $3.80, down from an earlier forecast of $3.60 to $3.90.
Federated Department Stores
|Qtr. 8/4 (x000)||2001||2000||% CHG|
|a-Second-quarter results include a $7 million inventory valuation adjustment related to the Stern's closing; a $28 million restructuring charge; and an income-tax provision of $1 million, compared to $49 million the year before. b-Six-month results include the $7 million Stern's inventory adjustment; a $55 million restructuring charge; and an income-tax provision of $43 million vs. $114 million a year ago.|
|Oper. income (EBIT)||239,000||220,000||8.6|
|Per share (diluted)||0.55||0.30||83.3|
|Average gross margin||39.7%||41.5%||—|
|Oper. income (EBIT)||463,000||473,000||-2.1|
|Per share (diluted)||0.83||0.72||15.3|
|Average gross margin||39.9%||41.0%||—|
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