Federated to Boost Online Operation

Federated Department Stores Inc. (Cincinnati) has announced plans to invest approximately $130 million in capital over the next two years to support the growth of its direct-to-consumer businesses, including macys.com, bloomingdales.com, Bloomingdale's By Mail, macysweddingchannel.com and bloomingdalesweddingchannel.com.

“Online sales represent the fastest-growing part of our business and an outstanding opportunity for continued progress as we serve millions of new customers nationwide through our acquisition of May Company,” said chairman, president and ceo Terry Lundgren. “Our customers have told us they appreciate the convenience of shopping online as well as in our stores. This cross-channel integration is a vital component of our ability to maximize the potential of the nationwide Macy's and Bloomingdale's brands.”

“With the initial steps of our planned improvements scheduled to be in place by spring 2007,” Lundgren said, “we expect our direct-to-consumer sales to grow to more than $750 million by 2008 from about $450 million in 2005.”

These investments are part of the company's capital plan for spending $1.6 billion in 2006 and between $1.1 billion and $1.2 billion in 2007.

In 2002, Federated disposed of the Fingerhut online marketing operation it had acquired in 1999. “We have determined that there no longer is strategic value to Federated in retaining Fingerhut's operations,” said then-chairman and ceo James Zimmerman, “and we have no expectation that these businesses would contribute meaningfully to the company's future financial performance.”

“Our online businesses have performed very well over the past several years, with consistent double-digit sales growth rates and improving profitability,” Lundgren said. “To maintain the momentum, we recognize we need to invest to better serve additional customers who want to shop online for the type of fashion merchandise we sell, especially as Macy's and Bloomingdale's expand their store presence nationwide. We are very serious about capitalizing on this opportunity.”