USA: Federated’s Net Income Plunges By £74m

Federated Department Stores, Inc today reported net income of $63m for the second quarter of 2000 versus earnings of $137m for the same period last year. The decrease results from previously announced larger bad-debt reserves required to cover credit delinquencies at the company's Fingerhut subsidiary. Diluted earnings per share were 30 cents for the second quarter of 2000, compared to 61 cents for the second quarter of 1999. For the first half of 2000, Federated's net income was $152m or 72 cents a diluted share. In the same period last year, earnings were $224m or $1.02 a diluted share. James M Zimmerman, FDS chairman and chief executive officer, said the company's second quarter earnings reflect the previously announced credit problems at Fingerhut and satisfactory earnings from the department store segment. "This was a difficult quarter, as we recently indicated it would be, and we are very disappointed," Zimmerman said. "Federated's core businesses continue to perform reasonably well and we were satisfied with the profit performance of our department store segment, despite lacklustre apparel sales in the quarter. "We have initiated a number of steps aimed at stemming the tide of credit delinquencies at Fingerhut," Zimmerman noted. "We will continue working diligently to remedy this situation so as to eliminate its negative impact on our future earnings. Meanwhile, it is significant to note that absent the incremental Fingerhut bad-debt problem, our diluted earnings per share for the second quarter this year would have been 74 cents, which is above prior consensus estimates."