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Home a Struggle at Federated

Cincinnati — The recently consolidated home division of Federated Department Stores continues to be weak, even though the company had expected it to start picking up by now, executives reported during its second quarter earnings call last week.

“I think we would all say that while the strategy for consolidating home was absolutely the right thing to do, the execution of that and the cultural change is taking us a little bit longer to make progress,” explained Karen Hoguet, executive vice president and chief financial officer.

“We do expect home to pick up some in the balance of the year, but again, we had hoped it would be doing better by now. But we’re still hopeful.”

She said some of the new product has hit retail, namely the Provence collection, “and it’s doing very well. We feel good about the changes we’re making. It’s just taking a little longer.”

Hoguet added that while home continues to be weak, the company does not attribute the poor performance of the category to the home consolidation. “Home is interestingly no weaker than it had been prior to our consolidation decision, so we don’t think anything we did made it weaker,” she continued. “It just hasn’t strengthened as much as we had hoped at this point in time.”

In other news, Federated experienced its strongest sales during the period in Florida, and above-average performances at Macy’s West, Macy’s East and Bloomingdale’s. Sales were weaker in the company’s central division and in the Northwest.

Also, private brands merchandise continued to demonstrate strength across the entire store during the second quarter.

Inventories were down close to 3 percent at the end of the quarter and continue to be “in very good shape, both qualitatively and quantitatively,” Hoguet said.

Because of its pending merger with May Co., Federated limited its fall guidance to comparable-store sales — 3 percent for the Federated division, 3 percent for the third quarter and 3 percent for the fourth quarter. She noted that once the transaction is closed, which is expected to be during the third quarter, Federated will provide further guidance.

Also regarding the merger with May Co., Hoguet said Federated does not intend to make any material changes to May this fall. When asked about the merger process thus far, Hoguet said Federated is organizing “meet and greet” meetings with May Co. executives, “just trying to get out as human beings and put faces behind the people.” Most of the division’s have been covered in meetings, and the rest are scheduled for review in the next week or so.

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