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CINCINNATI-As Federated Department Store Inc. wraps up its final “meet and greet” engagements this week with May Department Stores Co., the company reports another stable quarter before the two department store giants officially merge in the next month or so. The combined companies, which will be controlled by Federated management, will operate more than 950 department stores across the country.

“There were no real surprises in the quarter,” Karen Hoguet, senior vice president and CFO told investors during Wednesday’s earnings call. “We had a quarter consistent with our expectations, and we are waiting until the May deal closes to give guidance for the fall season.”

Hoguet said Federated’s strongest sales for the quarter ended July 30 were in Florida, while weaker results were reported in the central and northwest division. Private-brand merchandise continued to perform well with the strongest categories being cosmetics, shoes and handbags. Women’s apparel remained strong in the quarter, while the company saw a renewed interest in juniors.

Home sales, on the other hand, continued its weak performance, prompting the company to bring on two additions to the team. In June, Tim Adams was named chairman of Macy’s Home Store Division, and in July, Michael Osborn was named president of the department.

The company reported diluted earnings per share of 84 cents for the quarter, which was within the company’s prior guidance of 80 to 85 cents per share. This represents an increase of 95% from diluted earnings per share of 43 cents for the second quarter of 2004. Included in the year-ago quarter were one-time costs of $59 million, or 20 cents a diluted share, which the company says were related to the company’s repurchase of $274 million of its long-term debt. Excluding these one-time costs, Federated’s diluted earnings per share in the second quarter of 2004 would have been 63 cents.

For the six months of 2005, Federated reported a 63% increase in diluted earnings per share of $1.56, from 96 cents per share in the first half of 2004. Excluding costs related to the debt repurchase, diluted earnings per share for the first half of 2004 were $1.16. Sales of $3.62 billion for the second quarter of 2005 were up 1.2% over sales of $3.58 billion in the same period last year. On a same-store basis, Federated’s second quarter sales were up 1.1%.

For the year to date, Federated’s sales totaled $7.26 billion, an increase of 1.9% over sales of $7.13 billion in the same period last year. On a same-store basis, Federated’s first-half sales were up 1.8%. In the second quarter of 2005, the company opened a new Macy’s East store in Wheaton, MD. Federated expects same-store sales increases of approximately 3% in each of the third and fourth quarters. The company does not plan to issue guidance on its third or fourth quarter earnings until after the May merger closes.

The board of directors of Federated Department Stores also declared a regular quarterly dividend on Federated common stock, payable October 3, 2005. The amount and record date for the dividend will depend on when Federated’s pending merger with the May Department Stores Co. closes. The company said the amount of the dividend would be 25 cents per common share if the merger occurs on or before September 15 and 13.5 cents if it closes after September 15.

Federated, with corporate offices in Cincinnati and New York, reports annual sales north of $15.6 billion. Federated operates more than 450 stores in 34 states, Guam and Puerto Rico under the names of Macy’s and Bloomingdale’s.

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