NEW YORK — Federated Department Stores Inc. said Monday it will earn 33 cents per share more than expected in the second quarter because of a favorable tax settlement.

The retailer guided second-quarter earnings, including the adjustment solely for the tax settlement, to between 78 cents and 88 cents. It also estimated earnings per share for the year at $3.83 to $4.08.

The company last week projected second-quarter EPS of 45 cents to 55 cents. The consensus among Wall Street analysts was for 56 cents, excluding the tax settlement.

Federated said it will receive a cash refund of $158 million, including interest, from the Internal Revenue Service. The tax settlement involves losses connected with the disposition of Fingerhut on Federated’s tax returns for the years 2000, 2001 and 2002, the firm said. Federated added that it expects to see a tax benefit of $80 million, plus $20 million in interest income, in the second quarter.

This story first appeared in the May 17, 2006 issue of WWD. Subscribe Today.