Financial reports: Federated, Gaiam

Federated’s Financials Marked by Restructuring Costs

Restructuring charges, one-time costs, and much uncertainty wove its way through the quarterly and annual financial statements filed by cataloger/retailer Federated Department Stores (NYSE: FD). Federated owns several department store chains, including Macy’s, Bloomingdale’s, Burdines, and Rich’s, as well as Bloomingdale’s by Mail, Macys.com, and on-the-block multititle mailer Fingerhut Cos.

Cincinnati-based Federated incurred a series of restructuring charges. These include a $43 million charge related to the closure of Stern’s in the fourth quarter, and a total of $100 million for the full year; an $8 million charge due to the integration of Liberty House into Macy’s West in the fourth quarter, and a total of $14 million for the full year; and a $44 million charge due to the reorganization of Macys.com, Bloomingdales.com, and Bloomingdale’s by Mail, all of which occurred in the fourth quarter.

For the fourth quarter of fiscal 2001, ended Feb. 2, net income from continuing operations—in other words, excluding the Fingerhut titles–was $310 million, down 23% from $400 million for 2000. Total fourth-quarter sales fell 8%, to $5.13 billion from $5.60 billion.

Annual sales totaled $15.65 billion for the year, down 6% from $16.64 billion in 2000. Net income from continuing operations tumbled 61%, to $518 million before the extraordinary items.

As for Fingerhut, its fourth-quarter sales totaled $434 million, while it posted EBIT (earnings before corporate expenses, interest, and taxes) of $49 million. For the fiscal year, sales were $1.24 billion and EBIT totaled $103 million, within the projected range of $75 million-$125 million. But its after-tax operating loss totaled $14 million. Included in the loss are asset write-offs, as well as cash costs associated with winding down the Fingerhut business. These cash costs still are estimated to be $150 million-$200 million on an after-tax basis. The company continues to expect to generate approximately $1.1 billion-$1.3 billion of after-tax proceeds (net of one-time costs) over the next four years as a result of this disposition.

After all of that, Federated is raising its guidance for 2002 and expects to achieve earnings per share from continuing operations of $3.30-$3.55.

Gaiam’s Annual Sales Up 63% Broomfield, CO-based Gaiam (Nasdaq: GAIA), which mails the Real Goods, Harmony, Inner Balance, SelfCare, and Living Arts catalogs, enjoyed a 63% rise in annual sales. For the year ended Dec. 31, the marketer of healthy-lifestyle products posted revenue of $98.7 million, compared with $60.6 million in 2000. Net income for the year increased 73%, to $4.5 million from $2.6 million in 2000.

For the fourth quarter, sales were $35.1 million, up nearly 53% from $23.0 million the previous year. Net income for the fourth quarter increased 47%, to $2.5 million, from $1.7 million last year.

Gaiam says it ended the year with no debt, $22 million in cash, and its $15 million line of credit fully available. What’s more, it is increasing its reliance on proprietary products, which currently account for 53% of sales, up from 37% in 2000, primarily through its acquisition of last year of Real Goods.

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