Federated Invests $100 Million in Direct Businesses

Five years after dumping its Fingerhut stable of catalogs and Websites, Federated Department Stores is once again embracing the direct channel in a big way. Want proof? How’s $100 million worth?

On April 4, the Cincinnati-based parent company of the Macy’s and Bloomingdale’s department stores said it will pour an additional capital investment of approximately $100 million into its direct-to-consumer businesses through 2008. This money will support continued growth among its Macys.com, Bloomingdales.com, Macysweddingchannel.com, and Bloomingdalesweddingchannel.com Websites and its Bloomingdale’s by Mail print catalog.

“Our online sales continue to grow at a rapid pace as the national expansion of Macy’s and Bloomingdale’s attracts new customers to our stores, Websites, and catalog,” chairman/president/CEO Terry Lundgren said in a statement. “In particular, we are seeing exceptional growth in online sales in new Macy’s markets such as Illinois, Michigan, Minnesota, Missouri, Oklahoma, Texas, and Utah.

Federated’s direct sales were about $620 million last year; it expects that figure to exceed $1 billion by 2008.

Investments will include the building of a 600,000-sq.-ft. distribution center in Goodyear, AZ, which will serve primarily as the West Coast shipping point for Macys.com. Construction will begin this spring and is scheduled for completion in spring 2008. The facility will employ more than 500 full-time workers once it is fully operational and will be able to accommodate a future expansion of another 400,000 sq. ft.

Also included in the 2007-2008 capital plan are an expansion of the direct-to-consumer warehouse management system, improvements to the order management system, and enhancements to the Macys.com Website.

These expenditures follow the investment of approximately $130 million in 2006-2007 in direct-to-consumer infrastructure improvements, primarily a 600,000-sq.-ft. Portland, TN-based distribution center scheduled to open later this month. The DC will serve as the shipping point for Macys.com to midwestern, southern, and central states.

Federated had purchased Fingerhut in 1999 as a means of getting into e-commerce. The strategy never quite panned out, and Federated sold Fingerhut to FAC Acquisitions in July 2002.

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