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Federated Misses Estimates

TSC Staff

Federated Department Stores(FD Quote) swung to a first-quarter profit but missed analysts' estimates following soft sales in April and weakness at new Macy's locations.

The company, citing uncertainty about the economic environment, also lowered the bottom end of its projected earnings range for the second quarter.

The Cincinnati-based retailing giant earned $36 million, or 8 cents a share, in the first quarter. A year earlier, the company had a loss of $52 million, or 9 cents a share, weighed down by charges from the 2005 purchase of May Department Stores.

The latest quarter included 5 cents a share in May-related charges. Excluding those costs and discontinued items, earnings were 16 cents a share.

Analysts expected a profit of 19 cents a share, according to Thomson Financial. The profit was at the low end of Federated's guidance of 15 cents to 20 cents a share.

The Macy's and Bloomingdale's owner posted sales of $5.92 billion, down slightly from $5.93 billion a year earlier. That missed Federated's forecast of $6 billion to $6.1 billion, as well as Wall Street's target of $5.99 billion.

Same-store sales, or sales at stores open at least a year, edged up 0.6%.

The company said it saw particular weakness in sales in April, as well as at sales that have been converted to the Macy's nameplate due to the May purchase.

Last year, Federated changed the names of hundreds of department stores -- including brands such as Filene's, Hechts and Strawbridge's -- to Macy's, and it has seen weakness as consumers loyal to the old chains haven't yet embraced the Macy's concept.

Federated, which is set to change its name to Macy's Group next month, said April has given it "cause for concern" about the consumer and economic environment. It lowered its second-quarter earnings forecast to 35 cents to 45 cents a share due to the economic uncertainty. Previously, Federated forecast earnings of 40 cents to 45 cents a share for the period.

The guidance excludes any merger-integration costs. Analysts, on average, expect a profit of 45 cents a share.

The company also cut its second-quarter sales projection to $6 billion to $6.1 billion from a prior view of $6.1 billion to $6.2 billion. Wall Street forecast sales of $6.12 billion.

For the full year, Federated backed its guidance for earnings from continuing operations of $2.45 to $2.60 a share. Analysts estimate earnings of $2.68 a share.