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Federated to Convert Regional Store Nameplates to Macy's

From: ASAP

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Federated Department Stores, Inc. (NYSE:FD)(PCX:FD) announced that it plans to convert all of its regional department stores to the Macy's nameplate in January 2005. With this change, Federated will launch a new era in American retailing as it begins operating coast to coast exclusively under its two most powerful retail brands - Macy's and Bloomingdale's.

"This is a bold and exciting step toward fulfilling our vision of Macy's as 'America's department store'," said Terry J. Lundgren, Federated's chairman, president and chief executive officer.

"The evolution of the Macy's brand is a significant development for our company and its competitive positioning in the retail sector," Lundgren added. "By focusing all of our efforts on Macy's and Bloomingdale's, two of the world's best known and most formidable retail nameplates, we will be able to maximize the incredible potential inherent in both of these brands through distinctive, consistent and far-reaching marketing initiatives."

Lundgren said customers ultimately will be the biggest beneficiaries of this change, which blends the national reach of Macy's with the hometown values and service for which its regional stores are known. "This is what we mean by bringing our customers the best of both worlds," Lundgren said. He noted that as a result of the name change customers will enjoy the advantages of a new national Macy's customer loyalty program, access to an enhanced national Macy's gift and bridal registry, and an accelerated 2005 rollout of the company's "reinvent" initiatives in their local stores.

Operating under a single Macy's nameplate also gives the company increased ability to develop exclusive merchandising arrangements with vendors, Lundgren said, as well as expand its own private brands such as I.N.C, Tasso Elba, the Hotel Collection, Alfani and Charter Club. He added that the company also expects this decision to lead to expense efficiencies over time by leveraging such areas as collateral materials in marketing, visual and credit.

Federated's decision to further leverage the Macy's brand affects regional department stores that currently operate as Burdines- Macy's in Florida, Bon-Macy's in the Pacific Northwest, Goldsmith's-Macy's in Tennessee, Lazarus-Macy's in the Midwest, and Rich's-Macy's in the southeast. These stores will begin operating exclusively under the name Macy's by the end of January.

The managements, organizational structures and operations of the three divisions operating stores under these hyphenated nameplates will be unaffected by this announcement. The 184 stores converting to Macy's will join the 239 department stores that already operate under that name in 19 eastern and western states, Guam and Puerto Rico. (For a complete listing of stores by division and state, go to the Federated website address listed below.)

"This divisional structure enables us to operate under one nameplate while continuing to reflect the unique regional differences in buying and merchandising that exist among our markets," Lundgren said. "This traditionally has distinguished Federated from other department store retailers, and we believe this approach represents a clear competitive advantage for us."

The company expects to install new outside signage on the stores converting to Macy's beginning in January - a process that is likely to take several months to complete. The Macy's brand logo will begin appearing in store advertising in late January, while internal store signage and other visible collateral such as shopping bags, customer credit cards and employee nametags may begin transitioning to the Macy's nameplate somewhat earlier. Federated expects expenditures for these changes to be absorbed in its annual $600 million capital expenditures budget. It also expects that incremental transition expense will be immaterial.

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 $15.2 billion. Federated operates more than 450 stores in 34 states, Guam and Puerto Rico. The company also operates macys.com and Bloomingdale's By Mail.

September 2004

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