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Federated sees more stores in its 'future'

Cincinnati — Several years into its strategy of "reinventing the department store," Federated discussed the expansion of its "store of the future" as well as merchandise initiatives at its annual shareholder meeting here late last week.

"The department store is not dead," said chairman and ceo James Zimmerman after the meeting. "All businesses have to contemporize themselves."

By the end of the fourth quarter, Federated plans to renovate 50 other stores to the store of the future concept, which debuted last fall in Columbus, OH, with a clean, edited assortment, price checkers, shopping carts, a Starbucks, centralized checkouts, a lounge area, child care and more.

The Columbus store, a Lazarus in the Easton Town Center, has been performing at or above plan since its October 2001 opening, said coo Terry Lundgren. The two-level unit, at 245,000 sq. ft., is the largest store in Columbus and encompasses all families of business, including furniture. Private-label brands are fully represented, although on the whole the store carries 20 percent fewer skus to eliminate clutter.

Lundgren said that the 50 store renovations will be applied across all its nameplates with the exception of Bloomingdale's. Federated plans to spend $100 million of its $700 million capital budget on the rollout.

The smaller format The Bon Marché store opened as a test last year in Helena, MT, is performing well, Zimmerman said. "It's another example of thinking out of the box." He added that the company doesn't see a lot of markets for the format, although it does plan to go forward with it in a few locations.

In addition, Federated will open 13 new stores this year, including a Bloomingdale's Home store in Las Vegas. "Las Vegas is a relatively new idea and a brand new market for that division," Lundgren said.

The company will continue to pursue its private label strategy and is on track to grow the penetration of private label in the mix from the current 16 percent to 20 percent within the next few years. Lundgren described the Charter Club brand as "very developed and successful."

The just-introduced, upscale Hotel label has also been received well. "We see opportunities to trade up," Lundgrren said. "Offering unique product — a big deal today — and connecting that with great value, that combination is working in the home store."

Although, home did not do well in 2001 across the company, it's performing much better currently, particularly in big-ticket items, executives said. Going forward, Lundgren said, the company "feels very good" about the department.

Regarding Fingerhut, Zimmerman said, "It's over in terms of financial implications. We were clearly wrong on how big e-commerce should be," he said. "The path and the scale were not appropriate."

The company still sees the Internet as an important component of retailing, and some segments, especially bridal, "greatly depend on it." Federated expects to break even in that segment of the business in 2004, Zimmerman said.

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