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Federated Update

From: ASAP


Federated Department Stores, Inc. (NYSE:FD) today updated its earnings forecast for the third and fourth quarters of fiscal 2001, lowering expectations in the wake of the September 11th terrorist attacks and subsequent economic downturn. The company said it now anticipates annual 2001 earnings per share (EPS) of $2.85 to $3.00 before restructuring charges, with EPS of 13-20 cents in the third quarter and $1.85 to $2.00 a share in the fourth quarter.

While noting the difficulties of forecasting performance for the remainder of the year in the current climate of uncertainty, James M. Zimmerman, Federated's chairman and chief executive officer, said the company is now anticipating same-store sales declines of 7-10 percent for the department stores in both October and the fourth quarter compared to the same periods last year.

"These sales declines will result in significant markdowns, which will be booked in the third and fourth quarters," Zimmerman said. "We have significantly reduced planned merchandise receipts for the fall season to correspond with our lower sales expectations, although we have taken steps to ensure that new and seasonal merchandise continues to flow into our stores throughout the period."

He added that while expense dollars for the fall season currently are expected to be below last year, the forecasted sales decline will result in a higher rate of expense as a percent of sales. However, Zimmerman noted that with reductions in working capital and capital spending, the company expects to produce free cash flow that equals or exceeds its original plan.

For its Fingerhut subsidiary, Federated reiterated its assumption of EBIT in the range of $75 to $125 million for fiscal 2001.

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 $18.4 billion. Federated currently operates more than 450 stores in 34 states, Guam and Puerto Rico, under the names of Macy's, Bloomingdale's, The Bon Marche, Burdines, Goldsmith's, Lazarus, Liberty House and Rich's, as well as macys.com, bloomingdales.com and Bloomingdale's By Mail. Federated also operates the Fingerhut subsidiary.

(NOTE: This release contains certain forward-looking statements that reflect current views of the financial performance and future events of Federated. The words " expect", "plan", "anticipate", "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 due to a variety of factors that affect the company, including competitive pressures from specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, new and established forms of home shopping (including the internet, mail-order catalogues and television) and general consumer spending levels, including the impact of the availability and level of consumer debt, the effect of weather and other factors.)

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