Holidays Were Kind to Federated, Tandy

Federated Department Stores Inc., whose chains include Bloomingdale’s and Macy’s, and Radio Shack owner Tandy Corp. said profits rose in the fourth quarter, fueled by the biggest holiday season in seven years.

Net income increased 9.8% at Federated as strong sales helped the third-biggest U.S. department store company keep price markdowns to a minimum.

Tandy said profit from operations jumped 22%, with a boost from strong holiday demand for digital electronics such as wireless telephones.

Tandy warned, however, that gross margin this year will be hurt as it clears shelves of private-label audio and video products by cutting prices.

Federated’s net income rose to $448 million, or $2.04 a share, from $408 million, or $1.88, a year earlier. Per-share profit topped the $1.99 average estimate of analysts polled by First Call/Thomson Financial. Sales jumped 18% to $6.16 billion, and same-store sales rose 4.4%.

Federated’s direct-to-customer business, which includes Internet sites and the Fingerhut division, had sales of $775 million, topping the $710-million estimate of Salomon Smith Barney analyst Richard Church. Operating profit was $55 million.

Tandy said profit from operations rose to $129.6 million, or 63 cents a share, from $106.1 million, or 51 cents, a year ago. Last month, the company said it expected to meet forecasts of 62 cents, the average estimate in a First Call poll.

Fort Worth-based Tandy said its same-store sales rose 10% in the quarter. That was less than initially forecast because Tandy ran out of some popular items such as wireless phones and low-price computers in December.

Tandy said that even with the decline in gross margin, it expects per-share profit this year to rise about 20% on a 12% increase in sales. The average First Call earnings estimate is $1.73 a share, an 18% gain over last year’s profit from operations of $1.46.

On the New York Stock Exchange, Tandy’s shares fell $2.25 to close at $39.88, and Cincinnati-based Federated closed off 81 cents at $34.19.