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Federated to Cut Off its Fingerhut

Retailer suffered two years of losses with online efforts

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Federated Department Stores (Cincinnati) has announced its intention to dispose of its Fingerhut online marketing and catalog sales operation.

“We have determined that there no longer is strategic value to Federated in retaining Fingerhut's operations,” said chairman and ceo James Zimmerman, “and we have no expectation that these businesses would contribute meaningfully to the company's future financial performance.”

The disposition is expected to generate approximately $1.3 billion of after-tax cash proceeds over the next four years. After paying down approximately $500 million in asset-backed debt related to Fingerhut receivables, Federated says it expects to use the remainder of the anticipated cash flow for strategic investments to support its department store businesses.

Fingerhut was acquired by Federated in March 1999 for $1.7 billion to become the driving force of the retailer's online retailing efforts. It has lost an estimated $700 million in the last two years.

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