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Federated to Become Macy's

In addition to reporting earnings, the retail giant plans a name change and sets a $4 billion buyback.

Updated from 9:30 a.m. EST

It was a busy day for

Federated Department Stores


Tuesday as the company posted higher-than-expected fourth-quarter earnings, announced a $4 billion increase to its stock buyback program, and offered a full-year guidance that was shy of Wall Street's forecast.

And in a big move for the retailing giant, the company also said it plans to change its name to Macy's Group.

Federated, which operates more than 850 department stores under the Macy's and Bloomingdale's names, said it is looking to change its name to increase the visibility of the company and leverage the Macy's brand.

The move comes after Federated converted hundreds of stores acquired from May Department Stores to the Macy's nameplate. About 90% of the company's sales come from the Macy's brand.

"Macy's Group is a name that more accurately reflects the transformation of our business in recent years," CEO Terry Lundgren said in a statement. "Today, we are a brand-driven company focused on Macy's and Bloomingdale's, not a federation of department stores."

Shareholders will vote on the name change at the company's annual meeting scheduled for May 18.

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Separately, Federated said its earnings for the quarter ended Feb. 3 rose to $733 million, or $1.40 a share, from $699 million, or $1.26 a share, a year earlier.

Excluding merger integration and inventory write-off costs, latest-quarter earnings were $1.66 a share. Analysts were looking for a profit of $1.58 a share, before items.

Sales dropped 4.3% to $9.2 billion, hit by the closing of 80 stores tied to the company's 2005 acquisition of May. Same-store sales, or sales at stores open at least a year, increased 6.1%.

For the current year, Federated forecasts earnings of $2.45 to $2.60 a share, excluding merger integration costs. Analysts are looking for a profit of $2.84 a share.

Federated said it expects same-store sales to increase by 2% to 3.5% in the current year, with a same-store sales increase of 2.5% to 3.5% in the first quarter, 1.5% to 2.5% in the second quarter, and 2% to 3.5% in the third and fourth quarters.

During a conference call with analysts, Chief Financial Officer Karen Hoguet said the company was disappointed with the former May stores' performance during the quarter, but said, "The trend has improved."

"We are doing the right things in these stores," Hoguet said, but added it has taken time for customers, sales associates and executives to get used to the changes.

Federated also said its directors had authorized a $4 billion increase in the company's stock buyback program, and it set the immediate repurchase of $2 billion shares.

At the current share price, the $4 billion buyback would represent about 18% of Federated's common shares outstanding at the end of fiscal 2006.

Moody's Investors Service downgraded Federated's long-term senior unsecured debt rating to "Baa2" from "Baa1" following the company's announcement. Moody's said the May acquisition was one of the reasons for lowering Federated's rating, as it "reflects the weaker performance of the acquired May stores and the more-challenging-than-expected transition to Federated's somewhat less promotional pricing strategy."

Shares of Federated were off a penny to $44.19 in recent trading.