Federated Department Stores Inc., parent of Macy's and Bloomingdale's, on Tuesday said stronger sales at established stores and lower costs drove fourth-quarter earnings 5 percent higher. The retailer also announced plans to change its name.
Federated, which is building a national department store brand under Macy's, said it will ask shareholders to approve changing its name to Macy's Group Inc. The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.
"Most customers don't know what Federated Department Stores stands for, and obviously the name brand recognition for our new name is an easy decision for us," Chief Executive Terry J. Lundgren told The Associated Press in an interview Tuesday morning. "We've thought about this for some time, but now that we've finished our merger this past year and 90 percent of our $27 billion annual revenues are coming from the Macy's brand, it just made a lot of sense to change the name of the corporation to Macy's Group Inc."
For the quarter ended Feb. 3, net income rose to $733 million, or $1.40 per share, from $699 million, or $1.26 per share, in the prior-year period. Stripping out costs related to the integration of the stores acquired in the 2005 acquisition of May Department Stores Co., Federated said earnings for the latest quarter were $1.66 per share, topping the company's estimate of $1.55 to $1.60 per share issued about three weeks ago. That figure includes a gain of 6 cents per share.
Analysts polled by Thomson Financial were expecting earnings of $1.58 per share. Analysts typically exclude one-time charges and gains from their estimates.
Federated shares were up 22 cents, to $44.42, in mid day trading on the New York Stock Exchange. They have traded in a range of $32.57 to $45.01 over the past year.
Sales fell 4 percent to $9.16 billion from $9.57 billion, as the company shuttered 80 "duplicative" store locations.
Analysts forecast fourth-quarter sales of $9.07 billion. The recent quarter included an extra week of sales — 14 weeks versus 13 weeks a year ago.
Sales at stores open at least one year — considered a key indicator of a retailer's success — rose 6.1 percent in the quarter.
Lundgren said he is encouraged by progress in the former May stores, despite some reluctance by customers who are loyal to their former nameplates. He said sales at the former May stores have been growing stronger every month.
"We would have preferred seeing the sales at the former May Co. stores perform better, particularly in the home furnishings category, and move faster than they in fact did," Lundgren said.
Federated said it will begin reporting same-store sales for the former May stores for the first time beginning this month. The current same-store results include only the Macy's and Bloomingdale's stores that existed before September, when the company transformed most of the former May Co. branches to Macy's units.
Federated has been reorganizing since acquiring rival May in August 2005. In the past five months, the company has shed its Lord & Taylor division, David's Bridal and Priscilla of Boston brands.
Over the quarter, Federated lowered its selling, general and administrative costs 11 percent to $2.31 billion.