Federated cuts costs for 2Q gains

Don Hogsett, 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 a big lift to the bottom line, the nation's largest department store retailer hacked away at its overhead, reducing its costs by 15.8 percent to $1.2 billion from $1.5 billion last year, a big $231 million cash savings. Measured as a percentage of sales, the expense ratio improved by 300 basis points, to 33.1 percent from 36.1 percent a year ago.

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.
Sales $3,732,000 $4,065,000 -8.2
Oper. income (EBIT) 239,000 220,000 8.6
Net income 110,000a 63,000a 74.6
Per share (diluted) 0.55 0.30 83.3
Average gross margin 39.7% 41.5%
SG&A expenses 33.1% 36.1%
Six months
Sales 7,554,000 8,097,000 -6.7
Oper. income (EBIT) 463,000 473,000 -2.1
Net income 168,000b 152,000b 10.5
Per share (diluted) 0.83 0.72 15.3
Average gross margin 39.9% 41.0%
SG&A expenses 33.5% 35.2%

Featured Video

  • Why you should go to Shanghai for Intertextile Home Textiles

    Camera Icon More Videos

Subscribe to
Home & Textiles Today eDaily
Receive the news you need to know about the trends in the industry delivered right to your inbox.


HTT digital edition

See the June 2017 issue of Home & Textiles Today. In this issue, we discuss how U.S, ports are gearing up for the future, and what to expect from second half trade shows. See details!