Federated Navigates Choppy Waters

When R.H. Macy wanted a new trademark for the fancy dry goods store he opened in 1857, he chose a red star to match the one he had tattooed on his arm.

The tattoo was a tribute to the star that had guided Macy in his whaling days when he was lost at sea. And over the next 150 years, Macy's sailed through some turbulent waters in becoming one of the most recognized names in the retail industry.

Now Federated Department Stores(FD), which acquired Macy's in 1994, is placing its bets on the name. The company has already converted the nameplates of most of its stores to Macy, and, pending shareholder approval, will change the name of the company itself to Macy's Group on June 1.

The seas, though, are still rough. Federated has had trouble with the hundreds of stores that were changed to the Macy's name as part of its 2005 acquisition of May Department Stores. Under that purchase, venerable names such as Filene's, Marshall Field's and Hecht's were washed away.

Last week, Federated posted fourth-quarter earnings that topped expectations, but the company said the former May stores had weaker-than-expected sales.

Chief Financial Officer Karen Hoguet told analysts during the earnings conference call that Federated was disappointed with the performance of the former May stores, which had been changed to the Macy's nameplate.