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Federated predicts textiles growth

Textiles and housewares are expected to benefit most from Federated Department Stores' new centralized home buying system, although across the overall store there will be no significant reallocations of selling space.

"Textiles is one of our stronger businesses, but I think perhaps, with the change, we can even accelerate that part of it," chief financial officer Karen Hoguet said during the company's fourth quarter conference call last week.

The application of Federated's relatively new everyday low pricing program — known as best values — will "grow significantly" in home this year, she added. The EDLP strategy is part of a broader initiative to clarify pricing across the store as the company works to reduce couponing.

Best values are expected to grow to roughly 10 percent of the total store mix long-term, although such merchandise currently represents a little over 1 percent today.

"I can't really talk yet about what's going to happen with the home store (in terms of best values) until the new team is in place and puts their plans together," Hoguet added.

Sales in the first half of February were tracking unexpectedly strong — strong enough to prompt Federated early last week to bump its guidance for the month from a 2 percent to 3 percent comp gain, to an increase of 7 percent to 8 percent.

The company's reinvented stores "did tend to do a little bit better," Hoguet said. She hastened to add that not all reinvented stores outperformed non-reinvented stores, and even where they did, "There was not a huge gap."

Key elements of the reinvention include an improved sitting-room environment, better directional signage, shopping buggies to make bulk purchases less cumbersome — particularly in the home department — and price-check machines.

Roughly 100 stores in the 427-store confederation have now been touched by some aspect of the reinvention, and in 2005 Federated expects 70 to 75 percent of its volume will be done in reinvented stores. Hoguet said that the number of stores to be converted this year has not yet been determined, nor has Federated settled on which markets it will focus on during the period.

The company also remains committed to its private-label strategy. Across the store, PL penetration grew from 16.5 percent in 2002 to 17.2 percent in 2003.

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