FEDERATED RACKS UP ROBUST RESULTS FOR QUARTER, YEAR
Byline: Thomas J. Ryan
NEW YORK — Excluding costs from acquiring R.H. Macy & Co. and consolidations, Federated Department Stores reported strong figures for the fourth quarter and year.
Among the Federated divisions, Rich’s/Goldsmith was the star performer in 1994, continuing its winning ways in the healthy Atlanta market, while Bloomingdale’s, focusing on expense controls and more regular-priced selling, moved up the ladder into second place. Those divisions were followed by Burdines, The Bon MarchA, Abraham & Straus/Jordan Marsh, Stern’s and Lazarus.
Earnings rose 14.1 percent in the fourth quarter ended Jan. 28 to $166.5 million, or $1.31 a share, up from $146 million, or $1.16, a year earlier. For the year, earnings grew 36.1 percent.
Allen Questrom, chairman and chief executive officer, said that excluding the impact of acquisitions, “Federated clearly had a very good year.”
“If you break it down and take out all the extraneous charges, it looks like their performance was admirable,” said Peter Schaeffer, analyst at Dillon Read.
Among the highlights for the year:
A 23 percent gain in operating profits at Federated’s chains.
A 3.1 percent same-store increase.
A reduction in expenses as a percent of sales to 29.9 percent from 32.1 percent in 1993.
Questrom also pointed out that EBIDTA (earnings before interest, depreciation, taxes and amortization) rose to 11.8 percent of sales from 10.5 percent in 1993.
“Since 1992, we have constantly stated that our goal was to achieve an EBITDA margin of 11 to 13 percent in the 1995 to 1997 timeframe, and we have done so a full year ahead of plan,” Questrom said. “This is a solid measure of progress that we have made on the operational side of our business, exclusive of the impact of any acquisitions.”
He said the Macy’s merger is going as planned. Over the next several quarters, the company will concentrate on absorbing Macy’s into Federated, and on consolidations at Macy’s East, Lazarus and Rich’s/Goldsmith’s.
Including integration and consolidation costs of $58.9 million as well as other acquisition-related costs, net earnings in the latest quarter were $107.3 million, or 71 cents.
Sales rose 33.7 percent to $3.1 billion from $2.4 billion, reflecting $608 million in sales from Macy since its Dec. 19 acquisition. Excluding Macy’s, sales rose 7.8 percent to $2.5 billion with same-store sales up 4.1 percent.
The latest quarter interest expenses surged 80.6 percent to $73.2 million, reflecting the Macy’s acquisition.
In the year, earnings rose to $263 million, or $1.31, excluding special charges, from $193.2 million, or $1.16, a year earlier. After consolidation and integration costs of $85.9 million, or 39 cents, 1994’s net was $187.6 million, or $1.41.
Interest expenses climbed 33 percent in the year to $218.2 million.
Sales rose 15 percent to $8.32 billion from $7.2 billion. Excluding Macy’s, sales advanced 6.6 percent to $7.7 billion with same-store sales up 3.1 percent.
Going forward, Questrom said Federated will spend $225 million in additional integration and consolidation costs related to the Macy acquisition and the consolidation of Rich’s/Goldsmith’s and Lazarus.
Robert F. Buchanan, at NatWest Securities, pointed out that gross margins in the quarter slid to 37.5 percent from 38.8 percent, and selling, general and administrative expenses increased to 27.4 percent of sales from 26.5 percent. He said that reflected the “extremely tough” holiday season. “May, Penney and everybody else also got hit, so it was no surprise,” he said.
He expects earnings of $1.56 this year, up from $1.41 earned this year. Going forward, he looks for $2.19 in 1996.
Sales at Rich’s/Goldsmith’s advanced 7.7 percent to $999.7 million; Bloomingdale’s rose 6.7 percent to $1.3 billion; Burdines, up 2.9 percent to $1.3 billion; The Bon, up 5.6 percent to $873 million; A&S, up 3.3 percent to $1.4 billion; Stern’s, up 4.8 percent to $707.4 million, and Lazarus, up 17.1 percent to $1.13 billion.
Lazarus added 11 stores, Burdines added three and Stern’s, one. A&S and The Bon closed one unit each.
Bloomingdale’s by Mail had sales of $105.3 million in 1994 versus $98.9 million in 1993.
At Macy’s divisions – excluding I. Magnin, which closed, sales were almost $2 billion in the quarter and $6 billion in the year.
In the year, Macy’s East had sales of $3.5 billion, Macy’s West, $2.3 billion, Macy’s Specialty, which includes Aeropostale and Charter Club, $128.4 million, and Macy’s Close-Out, $83.1 million.