FEDERATED SEES MACY’S BOOSTING 4TH QUARTER
Byline: Thomas J. Ryan
NEW YORK — In a conservative outlook for 1995, Federated Department Stores Inc. forecast a 2.5 percent same-store sales gain in 1995, but added that its takeover of R.H. Macy Co. will give it a shot in the arm by the fourth quarter.
The company also noted Monday, during a conference call to Wall Street analysts, that margins are growing slightly ahead of expectations. Karen M. Hoguet, Federated’s senior vice president and treasurer, disclosed the information, providing analysts with data designed to guide them in calculating quarterly estimates.
This spring, Federated is putting the Macy’s nameplate on most of its A&S stores and renaming a few other stores. The transition could cause some temporary decline in sales, but Hoguet informed the analysts that by the fourth quarter, Federated will start realizing benefits from the consolidation. “I’m very excited about the prospects for Federated because it shows how diligently they have been working to realign the whole organization and, as a result of it, there will be strong improvement this year and more the following year,” said analyst Walter Loeb. He added that the better-than-expected gross margins and focus on expense control should boost earnings potential in the future. Federated is forecasting total sales increases of 2 to 2.5 percent in the first quarter, 2.5 to 3 percent in both the second and third quarters, and 5 to 6 percent in fourth quarter. Same-store sales should gain 2 to 2.5 percent in the first quarter and 2.5 to 3 percent in remaining quarters.
In the upcoming months, Federated is looking for same-store sales to be flat in February, decline 1.5 percent in March and rise 5 percent in April. The March and April numbers reflect a later Easter this year.
Hoguet said the company sees gross margin opportunities in the merger because Macy’s East and Macy’s West were both highly promotional in the second quarter of 1994. Merging Macy’s into Federated will eliminate certain costs through combining buying operations, which will yield advertising savings.
Federated also expects selling, general and administrative as a percent of sales to improve this year. However, the improvement will be checked by $39.3 million in nonrecurring credits Macy’s accrued in the second quarter of 1994 related to real estate, pension and workers compensation.
Total square footage is projected to inch ahead 0.5 percent to 73.8 million at the end of fiscal 1995, up from 73.4 million in 1994.
Shares of Federated rose 3/8 to 22 Monday on the New York Stock Exchange.
— Fairchild News Service