Federated Department Stores' second quarter of fiscal 2006 sales fell 9 percent to  $5.995 billion when comparing total  Federated and the (pre-merger) May Company Department stores sales for  second quarter of 2005. Combined sales for  Federated and May in second quarter 2004 were also higher at $6.51 billion. Same-store sales rose 4.6 percent for the second quarter ending July 29, 2006.

Profits for the second quarter at Federated rose 58 percent to $317 million from a combined $200 million for both Federated and May in second quarter 2005.  Federated  reported earnings of 51-cents per diluted share from continuing operations for the second quarter of 2006, ending July 29, 2006, up from 42-cents in 2005.

Second quarter results benefited from a cash refund of $80 million from the Internal Revenue Service and interest expense by approximately $17 million. In aggregate, this contributed 16-cents per diluted share to second quarter earnings. (Story continues after the quarterly sales graph.)

Year to date sales for Federated dropped 12 percent to $11.925 billion compared with  both Federated and May for January through July 2005. Federated's same-store sales for the first half were up 2.2 percent.

Profits  fell 27 percent to $265 million for the first half of fiscal 2006 at Federated. First half profits were impacted by  May Company merger integration costs and related inventory valuation adjustments of $306 million ($192 million after tax,)  and the gains on the sale of credit receivables of $191 million ($119 million after tax.) Federated  reported earnings of 47-cents per diluted share from continuing operations for the first half of 2006,  down from 78-cents in 2005.

Federated acquired May on August 30, 2005, and results of operations of May have been included in Federated's results of operations from the date of acquisition. Federated's shares offered  two-for-one split at close of trade June 9, 2006 to those shareholders of record on May 26, 2006.

Terry Lundgren, Federated's chairman, president and CEO said that by having exceeded earnings guidance in the second quarter of 2006, the indication is that the Federated-May Company integration process "remains solidly on track. In particular, we are pleased with the comp store sales progress in existing Macy's and Bloomingdale's locations, which reflect our strategy beyond the nationwide Macy's brand launch beginning September 9, 2006."
 
The transitioning process continues Lundgren said, with significant merchandise assortment change-outs, clearance sales of discontinued inventory and remodeling activity.  "We are looking forward to getting this work behind us and returning to a more normalized pace of activity after the nameplate changes in September."
 
Sales and earnings from the company's Lord & Taylor and Bridal Group divisions, which the company intends to divest, are being treated as discontinued operations.