BLOOMBERG NEWS
Macy's, a fixture in Manhattan, above, has taken over all
the Liberty House department stores in Hawaii.

Tax gain lifts
Liberty House
parent’s profits

Federated tops analysts'
expectations but again lowers
its earnings forecasts
for the full year

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Associated Press

CINCINNATI >> Federated Department Stores Inc., new owner of Liberty House, turned in a 75 percent increase in second-quarter profits, due in part to a one-time tax benefit. But a sluggish economy caused Federated to pare down the top range of its full-year earnings forecast for the second time in less than two months.

The results, announced today, beat Wall Street expectations by 2 cents, and do not include the integration of Liberty House or the closing of Federated's Stern's department store division. It does include a tax benefit of $44 million, related to the shutting down of Stern's Department Stores.

Federated bought Liberty House in July for $200 million from Oaktree Capital Management and DDJ Capital Management.

Federated, which operates such department store chains as Bloomingdale's and Macy's, earned $110 million, or 55 cents per share, for the three months ended Aug. 4, up from $63 million, or 30 cents per share, a year ago. Excluding those items, Federated's earnings per share were 43 cents. That compares with 30 cents a year ago, a figure that was affected by escalating credit delinquencies at Fingerhut. Analysts surveyed by Thomson Financial/First Call expected 41 cents per share.

Federated's stock climbed 93 cents to $38.33 today on the New York Stock Exchange.

Sales totaled $3.73 billion, down 8 percent from $4.1 billion a year ago. Lower sales for the quarter were attributed, in part, to the closing of Stern's and cutbacks at Fingerhut.

Sales at stores open at least a year, known as same-store sales, were down 4.8 percent for the quarter. Same-store sales are the best indicator of a retailer's health.

For the full year, Federated said it now expects earnings, excluding restructuring costs, to be between $3.60 and $3.80 per share compared with a previous forecast of $3.60 to $3.90 a share.

The consensus from Thomson Financial/First Call was $3.55. The range was from $3.89 to $3.21 per share.