Profits off 48% at Federated
May 19, 2003,
Hurt by weakening sales and the cost of shuttering some stores in the Atlanta area, first-quarter profits at Federated Department Stores were slashed almost in half, falling by 48.3 percent, to $46 million from $89 million last year.
Easing the pressure on profits, store closing and consolidated costs were lower than estimated, the company said. The company had originally forecast closing costs in the Atlanta area — where it operates duplicative stores under the Macy's and Rich's nameplates — would total $35 million in the opening quarter, but now said some costs will be pushed back until later in the year. And total closing costs will be scaled back by $10 million to $15 million, the retailer added.
Federated sales declined by 4.7 percent, to $3.3 billion from $3.5 billion last year. Same-store sales fell back by 5.0 percent.
"Our ability to produce planned earnings in a sales environment that continues to be weak is reflective of a number of factors, foremost among them being good inventory management and tight expense controls, for which Federated is well known."
Indeed, even including the $8 million in store closing costs, overall operating expenses were reduced by 1.0 percent, to $1.1 billion from $1.2 billion, generating a cash savings of $11 million. Pull the closing costs out of the equation, and expenses actually fell by 1.6 percent, or by $19 million.
But offsetting any savings, average gross margin slimmed down by 60 basis points, or six-tenths of a percentage point, to 39.2 percent from 39.8 percent. Caught between the falling sales and margin erosion, gross margin dollars fell by 6.3 percent, to $1.3 billion from $1.4 billion.
In a lift to the bottom line, the retailer pared back its inventory levels by 3.8 percent, to $3.5 billion from $3.6 billion last year.
Federated Department Stores Inc.
|Qtr. 5/3 (x000)||2003||2002||% change|
|a-SG&A expenses, operating profits and net income during the quarter were reduced by $8 million in pre-tax store closing and consolidation costs principally related to the closing of duplicative stores in the Atlanta market, where the company operates stores under the Rich's and Macy's nameplates.
|Oper. income (EBIT)||146,000a||221,000||-33.9|
|Per share (Diluted)||0.24||0.43||-44.2|
|Average gross margin||39.2%||39.8%||—|
Related Content By Author
1200 Suppliers are Ready for You at Intertextile Shanghai
Home & Textiles Today eDaily
Most Viewed Articles
See the August 2017 issue of Home & Textiles Today. In this issue, we look at the Top 50 Retailing Giants Report, plus Manufacturing: Made in the USA gaining ground; International: Portugal ramping up exports; New products: NY Now home textiles introductions; Outlook: Commentary from H&TT's editors; and Planning: Trade show calendar.