Sale Sharpens Federated’s Focus

Article Excerpt

FEDERATED DEPARTMENT STORES INC. $43 (New York symbol FD; Aggressive Growth Portfolio, Consumer sector; WSSF Rating: Average) has agreed to sell its 780 bridal and formalwear stores for $850 million. The company acquired these stores as part of its merger with May Department Stores, but would rather focus on its core Macy’s and Bloomingdale’s department store chains. In its third fiscal quarter ended October 28, 2006, Federated earned $0.03 a share (total $20 million) from continuing operations, down sharply from $0.87 a share ($424 million) a year earlier. If you exclude merger costs and other one-time items, per-share earnings grew 25.0%, to $0.20 from $0.16. Sales rose 5.4%, to $5.9 billion from $5.6 billion, while same-store sales rose 5.9%. Federated will probably use the cash to pay down its long-term debt of $8.0 billion (0.6 times equity), or buy back stock. In the first three quarters of its current fiscal year, Federated repurchased $1.1 billion worth of its stock. Federated is a buy…

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