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Federated 1st Qtr. 2002

From: ASAP

Comments

Federated Department Stores, Inc. (NYSE:FD)(PCX:FD) today reported diluted earnings per share of 43 cents for the fiscal first quarter of 2002, exceeding the company's original guidance of 25-30 cents a share for the quarter, and within the range of its most recent guidance of 40-43 cents a share.

Diluted earnings for the first quarter of 2001 were 29 cents a share, including restructuring charges related to the closing of its Stern's department store division. Excluding these charges, diluted earnings for the first 13 weeks of 2001 would have been 42 cents a share.

James M. Zimmerman, Federated's chairman and chief executive officer, said the company is pleased with its first quarter performance.

"We've had a strong start to 2002, with first quarter earnings and cash flow that significantly exceeded our original expectations," Zimmerman said. He reiterated that the quality and quantity of the company's inventory going into the quarter had a better-than- anticipated impact on gross margins. "We are hopeful that this strong start bodes well for our ability to meet expectations for the remainder of the year."

Operating Income/Cash Flow

Operating income in the first quarter ended May 4, 2002, was $221 million or 6.4 percent of sales. This compares to operating income of $178 million or 5.0 percent of sales for the first quarter of 2001, including restructuring charges, or $223 million or 6.3 percent of sales excluding those charges.

Cash flow from operating activities was $169 million in the first quarter, compared to $3 million in the same period last year. After first-quarter investing activities, cash flow was a positive $77 million compared to a net use of $68 million in the same period last year.

Sales

Sales for the first quarter of 2002 totaled $3.453 billion, a decrease of 2.9 percent from sales of $3.556 billion in the same period last year on both a total and same-store sales basis.

New stores opened in the quarter included Bloomingdale's in Bridgewater and Willowbrook, NJ; Rich's in Columbus, GA; and Macy's in Capitola, CA.

Earnings Expectations

Federated's earnings expectations for the remainder of fiscal 2002 are unchanged. By quarter, the company's current guidance is for earnings per share of 50-60 cents in the second quarter and $2.45 - $2.65 for the combined third and fourth quarters that comprise the fall season.

Federated, with corporate offices in Cincinnati and New York, is one of the nation's leading department store retailers, with annual sales of more than $15.6 billion. Federated currently operates more than 460 stores in 34 states, Guam and Puerto Rico, under the names of Macy's, Bloomingdale's, The Bon Marche, Burdines, Goldsmith's, Lazarus and Rich's. The company also operates macys.com and Bloomingdale's By Mail.

This release contains certain forward-looking statements that reflect current views of the financial performance and future events of Federated. The words "expect," "plan," "think," "believe" and other similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties. Future results of the operations of Federated could differ materially from historical results or current expectations because of a variety of factors that affect the company, including transaction costs associated with the renovation, conversion and transitioning of company retail stores in regional markets; the outcome and timing of sales and leasing in conjunction with the disposition of company retail store properties; the retention, reintegration and transitioning of displaced company employees; competitive pressures from department and specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, and all other retail channels; and general consumer-spending levels, including the impact of the availability and level of consumer debt, and the effects of weather.

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