Federated’s Net Income Falls 37%

Federated Department Stores Inc., owner of the Macy’s and Bloomingdale’s chains, said Wednesday that fiscal third-quarter profit fell 37% because of costs to close and combine stores. The company halted a three-year slide in sales at stores open at least a year.

Net income dropped to $67 million, or 36 cents a share, from $106 million, or 54 cents, a year earlier, when Federated had a gain from the sale of its Fingerhut unit. Sales in the period ended Nov. 1 rose less than 1% to $3.49 billion, the Cincinnati-based company said.

Same-store sales rose 0.3%, the first gain in 11 quarters. Federated Chief Executive Terry Lundgren is renovating stores and adding the Macy’s name to the company’s Bon Marche, Burdines, Lazarus and Goldsmith’s regional chains to use its best-known brand to revive sales. Shoppers had been shifting spending to discount chains such as Kohl’s Corp.

Same-store sales, a key retail measure, will fall as much as 1% or rise that much in the fourth quarter, which includes the holiday-selling season, Federated said. Some investors expected a higher forecast, said Brian Eisenbarth of Davidson Investment Advisors.

Shares of Federated fell 52 cents to $49.65 on the New York Stock Exchange. They reached a three-year high Tuesday.

The retailer was expected to earn 35 cents a share, the average estimate of analysts surveyed by Thomson First Call. Analysts raised the estimate last week after Federated said profit would be higher than forecast.

“We believe this indicates some strengthening in the economy, as well as improvement in our own performance,� Chief Financial Officer Karen Hoguet said in a conference call with analysts.

Bloomingdale’s stores had the strongest sales, Hoguet said. The company said it plans to open a five-level Bloomingdale’s store in San Francisco in 2006, its first in the city.