By  on August 11, 2005

NEW YORK — If second-quarter profits are any indication of how Federated Department Stores Inc. will perform as Terry Lundgren takes the retailer into a "new era," Wall Street had better fasten its seat belt.

For the second quarter, net income soared 89.7 percent to $148 million from $78 million in the same period last year, on sales that rose 1.2 percent to $3.62 billion from $3.58 billion. The diluted EPS rose to 84 cents in the quarter from 43 cents in the prior year. The EPS for the quarter was in line with analysts' consensus estimate and within Federated's prior guidance of 80 to 85 cents a share.

Shares of the retailer jumped 3.3 percent on heavy volume midday Wednesday after the retailer posted 95 percent earnings-per-share growth in the quarter ended July 30. By the afternoon session, trading had cooled, and the stock closed up 1.3 percent at $73.69. The stock's 52-week high is $78.05, and the low is $42.80.

Lundgren, chairman, president and chief executive officer of the Cincinnati company, said closing the acquisition with May Department Stores Co., expected to happen during the third quarter after federal antitrust reviews are done, represents "the beginning of a new era for our company, and a period of positive, long-term change that we believe will benefit our customers, employees and shareholders."

Although the retailer did not offer any earnings guidance, the company expects same-store sales to show a gain of 3 percent in the third and fourth quarters. Lundgren said in a statement that sales growth "is expected to accelerate in the second half of the year as the company continues implementation of its strategic priorities to improve assortments, pricing, the shopping experience and marketing."

For the six-month period, net income gained 54.9 percent to $271 million, or $1.56 a share, from $175 million, or 96 cents, in the year-ago period as sales increased 1.9 percent to $7.26 billion from $7.13 billion.

Regarding the $17 billion deal with May Co., Lundgren and his executive team are already working to integrate the companies into one retail giant. On a conference call with analysts, Karen Hoguet, senior vice president and chief financial officer, said Lundgren and other executives were holding "meet and greet" sessions with May Co. executives as a way to share "what Federated is all about."

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