By year's end, the company expects to generate $27.25 billion to $27.75 billion in total sales, with diluted earnings per share averaging $3.45 to $3.70. In the first quarter, Federated anticipates sales to post at $5.75 billion to $6.25 billion, same-store sales to drop to negative 0.5% to negative 1.5%, and diluted earnings per share to slump to negative 15 cents to negative 5 cents.
In the second quarter, the company expects to see positive growth, with total sales at $6 billion to $6.25 billion, same-store sales reaching 3% to 5%, and diluted earnings per share to rise to 45 cents to 55 cents. In the third and fourth quarters, Federated is predicting the most fruitful period since the merger, with sales generating $15 billion to $15.5 billion, same-store sales at 2% to 4%, and earnings per diluted share averaging $3 to $3.25.
In acquiring May, Federated added 490 department stores and 720 bridal and formalwear units to its existing stable of 460 department stores. Federated previously announced its intention to divest May's bridal group business and convert all of May's regional chains to the Macy's brand, and earlier this month announced the sale of its Lord & Taylor division. Federated's Bridal Group and Lord & Taylor divisions, are excluded from sales and earnings guidance.
In addition, the company plans to divest 83 of the department stores--48 from the May Portfolio and 35 from the Federated portfolio--as it integrates the new stores in the company and reduces duplicate and underperforming locations.
"We are very pleased with the progress we have made in the five months since the May Co. transaction closed," Hoguet commented. "There have not been any material surprises, and we are where we expected to be in the integration process at this time."
Hoguet said the company is dedicated to focusing on four main priorities: people; assortment; physical conversions; and fourth quarter results. She noted that identifying and retaining May talent has been a top priority for the company. In regard to assortment, Federated plans to make changes throughout the course of the year.
Hoguet went on to explain that Federated plans to convert 400 May stores. "We divided May doors into five tiers," she told investors. "On one end of the spectrum is a store where we are changing the name on building and putting in the minimum amount of signage. On the end other is remodeling and re-branding the store." In three-year's time, she said 70% of the May stores will be "reinvented."
The company also announced its fourth quarter earnings ended Dec. 31. During the quarter, earnings per diluted share from continuing operations were 48 cents, up 60% from last year's 30 cents. Income from continuing operations for Q4 2005 increased 61% to $51.8 million compared to $32.3 million for Q4 2004.
During the quarter, total revenue increased 17% to $241.8 million from $207.2 million for Q4 2004 and grew slightly from the prior quarter's $241.4 million. Total revenue for 2005 increased 8% to $909.2 million compared to $843.3 million for 2004. The company attributed the year-over-year increase in total revenue to increased average money market assets resulting from Federated's acquisition of Alliance Capital Management LP's cash management business.
Federated's total managed assets were $213.4 billion at Dec. 31, up $34.1 billion or 19% from $179.3 billion a year ago and up $6 billion or 3% from $207.4 billion at Sept. 30. Average managed assets for Q4 2005 were $210.1 billion, up $31.2 billion or 17% from $178.9 billion reported for Q4 2004 and up $2 billion or 1% from $208.1 billion in average managed assets reported for Q3 2005.
Federated now operates about 950 department stores in 49 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's, Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, and the Jones Store.
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