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Federated cautions Wall St.

Heath E. Combs, Don Hogsett -- Home Textiles Today, July 9, 2001

With sales and profits both under heavy pressure in a prolonged slump for the nation's department stores, Federated Department Stores Inc. hoisted a yellow caution flag last week, warning Wall Street and investors that second-quarter profits will come in 33 percent to 43 percent beneath earlier expectations.

And same-store sales will record a decline of 1 percent to 2 percent, falling short of an earlier forecast that had comps running flat to up to 1 percent.

Slammed by the falling sales, Federated said earnings per share are now expected to come in between 40 cents and 50 cents a share, sharply beneath an earlier forecast of 70 cents to 75 cents.

In the prior-year second quarter, Federated recorded a per-share profit before one-time charges of 74 cents per share, before rising bad debt reserves and lingering credit problems in its Fingerhut division pushed per-share profits down to 31 cents.

In addition to the lower sales, Federated said the bottom line is being pressured as it takes markdowns on existing inventory so it can start the second half of the year in good shape.

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