Federated to Invest $130 Million in Its Direct Business

Federated Department Stores plans to invest about $130 million in capital during the next two years to accelerate the growth of its direct-to-consumer channels. With the planned improvements, the company expects online and catalog sales to grow to more than $750 million by 2008 from about $450 million in 2005.

The company said in a press release that the funds are going to be used to for infrastructure improvements and service enhancements for macys.com, bloomingdales.com, macysweddingchannel.com, and bloomingdalesweddingchannel.com, as well as for its Bloomingdale’s by Mail print catalog business. The investment is part of the company’s capital plan for spending $1.6 billion in 2006 and $1.1 billion-$1.2 billion in 2007.

The retailer’s plans include construction of a 595,000-sq.-ft. distribution center in Portland, TN, designed specifically to handle direct-to-consumer orders and supported by a tailored warehouse management system, which it expects to complete by spring 2007. Online orders are currently fulfilled from several distribution centers that also service Federated stores. Federated will also upgrade and enhance content and order management software systems that support Internet-based selling functions.

With the acquisition of May Department Stores Corp. in August, Federated’s brick-and-mortar presence grew from 460 to 950 locations. At the National Retail Federation’s annual convention last week, Federated CEO/president Terry Lundgren said that the rebranding of the acquired retail chains, including Burdine’s and Rich’s, as Macy’s spurred Macys.com sales in those regions.

Lundgren added that the company would be growing its bloomingdales.com channel, though the company’s primary online channel will still be macys.com, which Lundgren said does as much business as 10 brick-and-mortar Macy’s locations.

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