Federated plans name change to Macy’s

NEW YORK — Federated Department Stores Inc. reported strong fourth-quarter profits Tuesday and said it will change its name to Macy’s Group Inc. But the department store operator — still struggling to integrate former May Department Stores Co. stores — offered a profit forecast well below Wall Street expectations.

Meanwhile, Target Corp. said fourth-quarter profits rose a better-than-expected 19 percent, fueled by strong holiday sales. Earnings for the current year should be in line with Wall Street’s estimates, company officials said.

Cincinnati-based Federated, which also operates Bloomingdale’s, said stronger sales at established stores and lower costs drove fourth-quarter earnings up 5 percent.

The company said it would immediately repurchase 45 million shares for $2 billion, half of a planned $4 billion increase to its stock buyback program.

Federated, which is building a national department store brand under Macy’s, plans to seek approval for the name change from shareholders during its annual meeting in May.

“Most customers don’t know what Federated Department Stores stands for, and obviously the name brand recognition for our new name is an easy decision for us,” said Chief Executive Terry J. Lundgren in an interview Tuesday with The Associated Press, noting that 90 percent of sales are coming from the Macy’s brand.

Federated changed the name of more than 400 May stores to Macy’s last year after acquiring its formal rival in August 2005. Those stores, which operated under the former nameplates of Hecht’s, Marshall Field’s and Filene’s, struggled during the holiday season, though business is rebounding, company officials said.

“We would have preferred seeing the sales at the former May Co. stores perform better,” Lundgren said. Despite difficulties winning over customers still loyal to stores under their previous names, there has been progress, he said.

Federated executives told investors in a Tuesday conference call that the introduction of an exclusive Martha Stewart home furnishing collection this fall along with its best performing store brands would bring improved results.

A big challenge remains for Macy’s as it tries to wean customers off coupons, which were used heavily by May stores. Karen Hoguet, Federated’s chief financial officer told investors that customers will get the same value at Macy’s without coupons.

For the quarter ended Feb. 3, net income rose to $733 million, or $1.40 per share, from $699 million, or $1.26 per share, in the prior-year period. Stripping out the costs of integrating May stores, Federated said earnings for the latest quarter were $1.66 per share, topping the company’s estimate of $1.55 to $1.60 per share.