Federated Cuts 550 Fingerhut Jobs
Friday, October 13th 2000, 12:00 am
By: News On 6
CINCINNATI (AP) â€” After months of trying to reduce losses at its Fingerhut subsidiary, Federated Department Stores Inc. said Friday it will cut 550 jobs from the electronic retailing unit to save $40 million annually. Federated's stock price surged.
The cuts represent about one-quarter of the 2,300 positions at Fingerhut's headquarters in Minnetonka, Minn., its data center in Plymouth, Minn., and its e-commerce operation in Edina, Minn.
In morning trading on the New York Stock Exchange, Federated shares climbed nearly 10 percent, rising $2.438 to $28.375 a share.
Federated, operator of the Macy's and Bloomingdale's stores, bought Fingerhut in March 1999 for $1.7 billion in hopes of jump-starting Federated's direct-to-customer sales business.
Federated announced in July, however, that bad-debt problems at Fingerhut would cost $150 million against second-quarter earnings. And in September, Federated said it was considering selling some or all of Fingerhut's operations.
``We believe the best strategy for us to pursue at this time is to make the Fingerhut core catalog a smaller, profitable and financially more viable business,'' said Ronald Tysoe, Federated's vice chairman. ``Extending credit more selectively will reduce sales, so expenses must be reduced significantly.''
He said some of the 550 Fingerhut jobs will be eliminated this month and the remainder in January.
Jeffrey Sherman, chairman of the Federated Direct division that includes Fingerhut and other direct-to-customer catalog and e-commerce businesses, said Federated's Arizona Mail Order, Figi's and Popular Club catalog operations will not be affected by Friday's announcement.
The restructuring will cost Federated $75 million to $100 million before taxes, management estimated. Those costs will be charged against earnings for the third and fourth quarters of the fiscal year, which ends Feb. 3.
Excluding restructuring charges, Federated still expects operating losses of $20 million to $70 million in the direct-to-customer segment for this fall. The company's department stores, which produce about 90 percent of Federated's annual revenue, remain strong, said James Zimmerman, Federated's chairman and chief executive.
Zimmerman said he expects Federated's earnings to reach $4 to $4.25 a share in 2001. In the longer term, he hopes earnings per share will increase 13 percent by 15 percent.
Federated has annual sales of about $17.7 billion. It operates more than 400 department stores in 33 states under the names Bloomingdale's, The Bon Marche, Burdines, Goldsmith's, Lazarus, Macy's, Rich's and Stern's. Besides Fingerhut, the retailer also operates Bloomingdale's By Mail, Macy's By Mail, macys.com and bloomingdales.com direct-to-consumer catalog and electronic commerce subsidiaries.
On the Net:
Federated site: http://www.federated-fds.com