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Federated Sticks to Soggy Guidance

Fourth-quarter earnings rise.
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fourth-quarter earnings rose 44% from a year ago, boosted by the addition of May Department Stores. Per-share earnings fell slightly due to acquisition-related dilution and the company left its lackluster guidance intact.

Federated earned $699 million, or $2.52 a share, on 277 million shares outstanding, in the quarter ended Jan. 28. It earned $440 million, or $2.55 a share, on 172 million shares outstanding, a year ago. Excluding integration and inventory costs, Federated earned $2.74 a share in the latest quarter, beating estimates by 12 cents a share.

Fourth-quarter sales rose 87% from a year ago to $9.571 billion, compared with estimates of $9.42 billion. Same-store sales rose 1.1% from a year ago.

"We are very pleased with our results for the fourth quarter, which exceeded our guidance," Federated said. "The quarter included stronger-than-expected performance in both the Federated and former May Company divisions, as well as a benefit from a tax settlement and related adjustments. Across the organization, our executives and associates demonstrated exceptional discipline and focus through the holiday selling season, despite potential distractions related to the merger."

Federated reiterated

the guidance it issued on Jan. 26, saying it expects to earn $3.45 to $3.70 a share in the current fiscal year, including integration costs of 5 cents to 15 cents a share. Analysts, who expected earnings of $5.06 a share on Jan. 26, were most recently forecasting earnings of $3.93 a share for Federated's current year.

Same-store sales are expected to fall by 0.5% to 1.5% in the current fiscal year compared to the previous one.

"As we have said in the past, 2006 will be a transition year in which sales and earnings performance will be difficult to predict. Keep in mind that each of the next three quarters presents a unique set of challenges that may affect short-term sales and/or earnings, given the process of store divestitures, assortment assimilation and brand conversions between now and this fall," Federated said.