Today's news reports indicate shaky consumer confidence in February, but apparently not for Federated Department Stores'
Shopping seems to be a pastime filling many a bored winter hour this year. Wal-Mart
Federated fits someplace between the upper and lower ends of the shopping spectrum. And for its purposes, that was a good place to be. Its department store brands may have a shinier name than those of May Department Stores'
An upbeat quarter isn't entirely unexpected, as Federated lifted guidance early this month. Today, the company said that for the quarter ended Jan. 31, net income rose to $460 million, or $2.50 per share, compared to $341 million, or $1.78 per share, in the same period a year ago. If you take out a one-time benefit related to reduced tax liabilities, it earned $2.29 per share. Federated linked higher profits to improved inventory management and margins, with inventory down 4.3% and gross profit margins up to 41% from 39.9%.
Going forward, things are sounding pretty confident on the same-store sales front, at least for now. Federated says same-store sales for February are plugging along well ahead of previous estimates, which anticipated an increase of 2% to 3%. Now, it sees same-store sales in the 7%-8% range for the month.
Federated investors, who also enjoy a regular dividend with their shares, may be feeling pretty fashionable today, with the stock hitting a new 52-week high of $51.95. However, the strong February sales only mark the second month of strong gains since flat or scant same-store sales for several months running. A real lag in consumer confidence could once again make mid- to upper-scale retailers look less attractive to shoppers.
Do you look for dividend-paying stocks like Federated for your portfolio? For some great ideas in value investing, try our Income Investor newsletter.
Alyce Lomax does not own shares of any companies mentioned. She now tries to keep a low profile in department stores after her harrowing Platform Shoes Incident in Nordstrom.
