Macy’s Annual Report 1999

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FY1999 Annual Report · Macy’s

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1999 Annual Report

On Retail’s Cutting Edge

F i n a n c i a l H i g h l i g h ts
F i n a n c i a l H i g h l i g h ts

Net Sales

Operating Income

1999

1998

1997

1996

1995

$17.716 billion

$ 15.365 billion $15.220 billion $14.833 billion $13.622 billion*

Excluding unusual items (Note 1) $ 1,701 million

$ 1,455 million $ 1,341 million $ 1,202 million $

995 million

% of sales

EBITDA (Note 2)

% of sales

Net Income (Note 1)

9.6%

9.5%

8.8%

8.1%

7.3%

$ 2,439 million

$ 2,079 million $ 1,931 million $ 1,735 million $ 1,470 million

13.8%

13.5%

12.7%

11.7%

10.8%

Excluding unusual items

Including unusual items

795 million

685 million $

575 million $

453 million $

333 million

662 million $

536 million $

266 million $

75 million

Diluted Earnings Per Share (Note 1)

Excluding unusual items

Including unusual items

$3.62

$3.06

$2.96

$2.58

$2.41

$2.09

$1.24

$1.79

$ .39

Net sales and percent of sales have been restated to exclude leased departments.

*Excludes net sales of $992 million for Broadway stores.

Notes:
(1) Unusual items represent inventory valuation adjustments related to consolidations and business integration and consolidation expenses (BICE) in 1995 and 1996,
the charitable contribution to the Federated Department Stores Foundation in 1995, the impact, in 1995, of the Broadway Stores, Inc. acquisition on Federated’s
consolidated operations, interest expense and per share earnings and, if applicable, the loss associated with the prepayment of debt in 1997 and 1998.

(2) EBITDA represents earnings before interest, taxes, depreciation, amortization, BICE, the charitable contribution to the Federated Department Stores Foundation

and the impact, in 1995, of the Broadway Stores, Inc. acquisition on Federated’s consolidated operations.

S a l e s
In Billions

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E B IT DA
As a Percent of Sales

(Earnings Before Interest, Taxes,
Depreciation and Amortization)

%
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D i l u ted E a rn i n g s
Pe r S h a re

(Excludes unusual items)

2
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6
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8
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On Cover: The world is changing fast … and so is I•N•C International Concepts, Federated’s of-the-moment private brand of women’s apparel.
Shown on the cover is the new look of embellished bottoms paired with simple tops, in a python print pant and sleek, sleeveless turtleneck. It’s a
modern reference to hippie chic. And if it’s modern – it’s I•N•C.

A Prof i l e of Fed e ra ted
A Prof i l e of Fed e ra ted

Federated Department Stores, Inc. is the nation’s leading operator of premier department

stores, with more than 400 department store locations in 33 states. In addition, Federated’s

direct-to-customer operations include wholly owned e-commerce sites within its Fingerhut,

macys.com and bloomingdales.com operations, as well as national direct mail catalog titles

within its Fingerhut, Bloomingdale’s By Mail and Macy’s By Mail subsidiaries.

Federated’s corporate structure capitalizes on the strengths of its divisions and subsidiaries

while bringing new dimensions of retailing innovation, operating efficiencies, financial

leverage and strategic growth opportunities to the company’s operations.

Co m m u n i t y I nv o l v e m e n t

Each Federated department store division and direct-to-customer subsidiary is well

established in its operating areas.

The company believes in giving back to the communities from which it draws strength and

sustenance. Federated understands that stronger, healthier and more vibrant communities

provide better environments for our stores to do business and for our employees and

customers to live and work.

In 1999, cash contributions to charitable organizations by Federated, its divisions and

subsidiaries – including those made by the Federated Department Stores Foundation – totaled

approximately $15.4 million. A significant and growing percent of direct giving was devoted

to two areas of strategic focus – women’s issues and HIV/AIDS.

Partners in Time, the company’s nationally recognized employee volunteer program, involves

all divisions and support operations. In 1999, more than 47,000 volunteers gave nearly

97,500 hours of time – touching nearly every segment of American society.

D i v e rs i t y

As a leading retailer in some of America’s largest and most diverse metropolitan areas,

Federated prides itself on aggressively encouraging inclusion of individuals of all types within

its workforce, vendor relationships and customer base. Management’s philosophy is intended

to help ensure that appreciation for the unique characteristics and strengths of every person is

pervasive at every level of the company.

Of Federated’s total workforce, approximately 75 percent are women and 42 percent

belong to a racial minority group. In management ranks, 67 percent of our executives are

women and 21 percent are racial minorities. This places Federated among the leaders in

diversity in our industry, as well as among major U.S. corporations.

Additionally, Federated’s vendor development program seeks to source goods and services

– either for resale or in support of business operations – from qualified minority-and women-

owned enterprises. In 1999, these purchases totaled approximately $304 million.

L e t te r to S h a re h o l d e rs
L e t te r to S h a re h o l d e rs

D ea r Fe l l ow S h a re h o l d e r :

Some years are simply better than others. And at Federated, 1999 was one of the best.

It was a year in which Federated outpaced everyone’s expectations for both strong sales and earnings, fueled by a spectacular

performance from our department stores. And it was a year in which Federated positioned itself aggressively – and we think

appropriately – for where retail is heading in the years just ahead.

With our 1999 strategic focus on macys.com, bloomingdales.com and the acquisition of Fingerhut Companies, Inc., Federated

leaped ahead of the competition and into an exciting future defined by the availability of different retail channels for different

customers, and for different customer needs at different times. It is a future in which we believe that no single retail channel will suffice

for all customers all of the time. And while some customers will prefer one retail format over most others, we do not believe there ever

will come a time when one retail channel totally dislodges the rest.

In short, we see a future of more choice, not less. A future of expanding potential to provide service and convenience to new and

existing customers. And at Federated, we think the time to prepare for that future is now.

On the pages of this year’s annual report, you will read about what we are doing in key areas of our business as we move to

integrate our bricks-and-clicks retail formats in innovative new ways… As we redefine our department stores to appeal to new

generations of customers even as we strive to better serve today’s core customer base… As we identify, recruit and develop the full

potential inherent in Federated’s next generation of managers,

merchants and operations executives... And as we

develop new retail channels, tap new technologies and

exploit our state-of-the-art distribution and logistics

systems to better run our business.

It’s an important story, and one we are pleased to share

with you. But first, let’s take a moment to recap

1999’s significant financial performance:

• Diluted earnings per share of $3.62 in

1999 were up 18% over the prior year.

• Sales of $17.7 billion for the 52 weeks

ended January 29, 2000 increased

15% over prior-year sales of

$15.4 billion. On a comparable-

store basis, Federated’s 1999

sales increase of 4.5% was the

highest among major department

store competitors.

• Department store operating income as a percent of sales increased 150 basis points, from 10.3%

in 1998 to 11.8% last year.

• Return on gross investment (ROGI) increased to 16.8% last year from 16.6% in 1998. This is an

important measure of the business defined as earnings before interest, taxes, depreciation,

amortization and gross rent, divided by total average gross investment.

Underlying this strong financial performance were other significant accomplishments that allowed

us to further improve how we run the business.

On the merchandising side, Federated’s private brands continued to gain in market share and

popularity, producing a record year for I•N•C, Alfani, Charter Club, Style & Co. and other popular lines

exclusive to our stores. Sales of Federated’s private brands last year increased at twice the rate of our

overall comp-store sales.

Our department stores continued their development of effective brand identification strategies to

amplify brand awareness, enabling Federated to capitalize on some of the strongest names in

American retailing.

Merchandising and marketing plans for the all-important fourth quarter were further refined to ensure

newness and an abundance of unique holiday gift-giving ideas. The success of these efforts resulted in

another outstanding holiday season performance across Federated, with comp-store sales increases of

4.4% in the fourth quarter.

Strategies for direct-to-customer catalog and e-commerce businesses were developed and refined

throughout the year as Federated evolved its retail presence in these important areas.

N e t I n co m e
In Millions

(Excludes unusual items)

The Federated Leadership Institute, recognized for excellence in retailing by the National Retail

Federation earlier this year, emerged as the backbone of our executive training and

development programming. In 1999, hundreds of corporate and division managers,

including all of our store managers from across the country, attended challenging

week-long sessions aimed at making them more effective in their jobs.

5
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3
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Of course, a year of record performance and results poses its own set of challenges.

Keeping the momentum going certainly is one of them. So while we’re optimistic about

producing another strong year in 2000, we aren’t taking anything for granted.

In the coming year, our number one objective and, therefore, the primary measure of our

success, will continue to be comp-store sales growth. If we do this well, profit and return on

investment goals also will be achieved.

Merchandise assortments that are new and kept fresh – including exclusive private brands

that distinguish us from the competition – are key to this strategy. So are strategies designed

to make Federated’s department stores, catalogs and e-commerce sites the retail mecca for

gift giving at any season and for all occasions.

customers of all ages. In some cases, this means providing capital for major in-store

remodels, and there are approximately 120 of them planned this year as part of an

In addition, we are determined to make our stores more exciting and appealing to

overall capital budget of $1 billion. In other instances, it may mean reallocating space

and locations of certain merchandise categories inside of the store – moving junior’s

departments next to young men’s and closer to mall entrances, for instance, to create

a critical mass that attracts younger customers. Or it may mean adding lighting or

enhancing visual merchandising techniques in our stores, making the merchandise

more visible and attractive to customers.

Among our other goals for the year ahead is improving the shopping experience

for our customers, including making transactions faster and achieving higher customer

service standards. We also will continue testing new concepts, some of which are

discussed later in this report, as we strive to “reinvent” aspects of the department store,

making it more convenient, more relevant and responsive to the needs of today’s

customers – and tomorrow’s.

Part of this strategy involves finding new ways to integrate the various facets of

in-store and online retailing – bringing the Internet into our stores in innovative ways

that can increase customer service and expand merchandise offerings, and using it to

drive traffic to our stores through cross-promotions and multi-channel marketing.

Of course, it is the quality of our people that makes the real difference in defining

Federated’s successes. And we are blessed with an abundance of incredibly talented,

dedicated, hard-working and creative people in every aspect of our business. From

2000 and Beyond

While the majority of Federated’s
business for the foreseeable future
will continue to come from our
powerful network of department
stores, we also have embraced
the Internet and its inherent
potential for integrating stores
and e-commerce. Federated’s
cutting-edge “bricks-and-clicks”
strategy positions the company
to take maximum advantage of
where the future of retailing is
headed. Following is a look at
how we think both the depart-
ment store and direct-to-customer
segments of our business will
benefit from this multi-channel
retail integration:

E-commerce benefits to stores --
or how clicks can help bricks:

• Drives traffic to stores

• Reaches and attracts new

stores and sales leaders to merchants and operations staff, Federated’s people are at the

customers

heart of who we are and what we can accomplish. We thank and commend each of

our 133,000 associates for all they have done to make 1999 such an outstanding year.

Federated also is fortunate to have an involved, committed board of directors. We

value the wisdom and support of each of our distinguished board members, certainly

including that of George V. Grune, chairman of the DeWitt Wallace and Lila Wallace

Reader’s Digest Funds. Mr. Grune is retiring from the board this year, and as he does so

he takes with him our sincerest thanks and appreciation for all of his many contributions

to Federated. He will be missed.

As we move into this new century, we are committed to continually renewing and

revitalizing our company. We believe that being on the cutting edge of retail means

being willing to lead rather than being satisfied merely to follow. And leading is exactly

what Federated is doing.

Sincerely,

James M. Zimmerman

Terry J. Lundgren

Chairman/Chief Executive Officer

President/Chief Merchandising Officer

April 19, 2000

• Deepens relationships with

existing customers

• Expands range of merchandise

offerings

• Extends the reach of retail

franchises

• Enhances gift registry services

• Raises store standards to meet

demands of Internet customers

• Provides new career growth

opportunities

Stores benefits to e-commerce --
or how bricks can help clicks:

• Leverages trusted store brands

• Provides merchandising expertise

• Builds on established vendor

relationships

• Strengthens appeal of private

brands

• Gives customers confidence in

online offerings

• Provides immediate access to

real products

• Makes merchandise returns

more convenient

• Increases return on marketing
and advertising expenditures

O n Re ta i l ’ s
Cu t t i n g E d g e

“Our challenge is to harness all

of the new tools, technologies,

ideas and opportunities at

our disposal, and to apply them

to the objectives of building

relationships with our customers,

growing and improving a

profitable business to create

value for our shareholders

and ensuring a stimulating

environment for our employees.”

— Jim Zimmerman

New Ways to Reach New Customers
New Ways to Reach New Customers

Federated is moving quickly and adeptly to integrate new technologies, marketing

models and merchandising techniques into its highly successful traditional department store

businesses. In this process, Federated is emerging as a new breed of retailer – a progressive,

multi-dimensional organization serving a range of customer segments through a growing

array of channels.

Changing customer

demographics and

preferences are

driving these

improvements to

our business.

Shoppers today

expect greater

convenience, more

ways to shop, help

with gift-giving,

one-stop availability

of a wider assortment

of goods and services, and 24/7 access from anywhere they might live, work or travel.

In responding to this marketplace of the new millennium, Federated has deployed its two

most potent resources – a roster of widely recognized retail and merchandise brands, and an

energized management team dedicated to innovation and profitable growth.

The result is a synergistic approach to

retailing that is unique to Federated. It

combines the best-known department stores

and locations with strategic e-commerce

initiatives that support and extend our store

brands. It encompasses fashion and lifestyle

catalogs serving targeted demographic

niches. And it is backed by a network of

sophisticated call and fulfillment centers, wired

with software and technology systems that

enable the company to pair customers’ needs

with the right merchandise.

N ew g row t h c h a n n e l s

Until recently, “point of sale” meant a customer service area on the selling floor of a

department store. Today, it means much more.

While the vast majority of Federated’s total sales (nearly 90 percent in 1999) are

generated by customers drawn to our “bricks-and-mortar” stores, an increasing share of our

incremental sales growth is being generated through new direct-to-customer channels. Many

of these new channels are supported by our acquisition of Fingerhut Companies Inc., a

leading direct marketer, online retailer and provider of call center and fulfillment services.

Included in Federated’s multi-channel retail arsenal today are more than 28 direct mail

catalog titles sent to more than 100 million American households each year. These include

significant businesses such as Fingerhut, Bloomingdale’s By Mail and Macy’s By Mail, as well

as more targeted catalogs such as Outdoor Living, Arizona Mail Order and Bedford Fair.

A p p ea l i n g to
G e n e ra t i o n Y

Federated is building solid rela-

tionships with today’s “Generation Y,”

those less-than-20-somethings who

within the next decade or so will

overtake the baby boom generation

in sheer size and number. So how

are we reaching them? We are:

G
e
n
e
r
a
t
i

o
n

• revamping junior’s and young men’s

environments within our department

stores, increasing the emphasis on

both fun and fashion with music,

foodservice, visual excitement

and the integration of apparel

Another significant part of extending

our reach to new customers through an

array of retail options – and in many

cases driving incremental traffic to our

stores – involves selling goods and

services online through several wholly

owned e-commerce sites. These include

macys.com, bloomingdales.com and

fingerhut.com, along with a number

of smaller Internet sites such as

andysgarage.com and atomicliving.com.

In addition, Federated owns an

equity position in a number of

Internet companies. One of these is

assortments with other

categories appealing

to young customers;

• reorganizing the

presentation of store

assortments to emphasize

hot items and trends –

cargo pants, denim and

khaki, for instance.

Capitalizing on the hottest

new fashion brands

directed to teens is also

part of this strategy;

• building exciting

new e-commerce sites

tailored to this young

Junior’s departments are taking on a new look to appeal to “Generation Y” customers.

weddingchannel.com, the Internet’s leading wedding resource.

Through Federated’s partnership with weddingchannel.com, customers can access

bridal gift registries for nearly 350,000 couples who have registered online or at

Federated’s department stores across the country. This fully integrated in-store/online

registry facilitates gift-giving for a couple’s wedding guests, no matter where they might

live. weddingchannel.com quickly has become a destination website for couples planning

a wedding, through which they can access comprehensive information, tips, checklists and

products and services ranging from traditional wedding dresses to catering.

demographic, while driving GenY

business to our “bricks-and-mortar”

locations through Internet advertising

and promotions on our department

store websites;

• launching a new Green Dog line of

tots-to-teens apparel and accessories

that will debut nationally just in time

for back-to-school shopping this fall.

New Looks for a New Age
N ew L o o ks fo r a N ew Ag e

With customer demographics and expectations changing so rapidly, Federated is

reaching out to today’s … and tomorrow’s … shoppers with new concepts and retailing

techniques. Bold new ideas are being tested across the country in a process of redefining

and reconfiguring the department store, even as we explore new avenues for enhancing

the online and catalog shopping experience.

Our goal is to reach existing and future customers most effectively. To do this, we will be

1) capitalizing on the strengths inherent in each of our “bricks-and-clicks” retail formats,

and 2) looking for innovative ways to integrate these formats in order to meet changing

customer needs and most effectively grow sales.

Some of the new concepts we’re testing are immediate hits with our customers. And

when we find ideas that work, we have the resources to roll out these “best practices”

quickly across the company. On the other hand, when ideas fall short of expecta-

tions we have the tenacity to tweak the concept and try again, or to learn from

our mistakes before we mercifully bury them.

Exa m p l e s a b o u n d …

Interactive in-store computer kiosks, for instance, are being piloted in a

variety of circumstances – and have the potential to be a significant new

channel to fulfill customer needs for merchandise beyond what might be

available in a typical department store inventory. Kiosks, in fact, are a

microcosm of the “bricks-and-clicks” integration envisioned within Federated.

Case in point: A shopper at a smaller suburban department store wants

to purchase 12 place settings of fine china – a category that store displays,

but does not stock in depth. She can examine the merchandise on display,

then use a touchscreen computerized kiosk to order the merchandise with a

swipe of her credit card. The customer’s order is channeled to the nearest

Federated distribution center with the china in stock, and it is shipped directly

to her home within hours – freeing her to continue shopping the store.

Shoppers in many of our stores soon will be finding new conveniences to improve the

shopping experience. These may include additional sitting areas to relax within depart-

ments; roving food service carts selling coffee, juice and snacks; a service-laden lounge for

VIP customers; upgraded hair salons and spas and numerous other extras, all of which

strengthen the destination status of our stores while enticing customers to spend more time

shopping there.

Federated’s successful stable of private brands also are taking on new looks and

dimensions. Green Dog, a national line of tots-to-teens apparel and accessories, will

debut in fall 2000. Green Dog will offer kids the latest hot fashion looks, along with a

more sensible way of coding sizes for ease of shopping.

Souson, a private brand of bath and body products was rolled out to larger stores nation-

wide in fall 1999 as part of a larger trend toward open, assisted-sell cosmetics and related

merchandise lines. Open-sell fixturing, which Federated has been doing in cosmetics areas

in its stores since 1996, provides customers greater opportunity to touch and feel product,

and greater freedom to select merchandise that appeals to all their senses.

souson

Alfani, a Federated brand of men’s contemporary tailored apparel, was extended

successfully to women’s apparel categories in 1999. Meanwhile, I•N•C International

Concepts – a widely popular, exclusive-to-Federated collection of updated casual apparel

and accessories for women and men – met with tremendous customer response when the

line was added to Bloomingdale’s merchandise offering last year.

Meanwhile, electronic gift cards, which we pioneered in 1998 as a replacement for

paper gift certificates, have become an important component of Federated’s strategic

positioning as a gift headquarters for customers. Gift cards can be purchased in-store,

online or by phone – and with stored values at whatever amount a customer chooses.

Creatively designed cards for special events and occasions make gift-giving more fun, and

in some cases our electronic gift cards have become lasting momentos and collector’s items.

The spirit of innovation also has stimulated new approaches in mail order catalog

businesses. At Fingerhut, for instance, assortments are being molded

into lifestyle catalogs that can be closely targeted to specific

customer groups, with enhanced graphic design to

support a more compelling visual presentation.

New Energy/New Attitudes
N ew E n e rg y / N ew At t i tud e s

The most effective way to improve a business is to step back and look for fresh approaches

to persistent challenges, with the understanding that conventional wisdom cannot be allowed

to impede success.

Federated made a quantum leap forward

in 1999 toward its objective of recruiting

the brightest and most promising

college graduates for entry-level

executive management training

positions. The company became

the first major retailer – and

among the first major corporations

in any industry – to build and

launch a separate Internet site

specifically for college recruiting.

Since hitting the web in the fall, Federated’s

retailology.com site has attracted thousands of

student visitors – and hundreds of qualified

applicants for full-time and intern positions.

To facilitate professional growth at the

middle- and senior-management levels, the

Federated Leadership Institute was

introduced to provide advanced

training in management skill

development. The Leadership

Institute has been named an

“American Retailing Best Practice” by

American Express and the National Retail

Federation, and more than 400 employees,

including division principals, corporate

executives and store managers benefited

from the program in 1999. This year, the program will be expanded to

encompass management-level merchants and operating executives.

Technology and ingenuity continue to make Federated’s methods

of transacting business more sophisticated and efficient.

Divisional merchants have begun using a proprietary system to download lists of vendor

products and write purchase orders directly from their laptop computers in one seamless

process – whether they are in a vendor’s

showroom, on an airplane or in their offices.

Once merchandise is bought, another

proprietary tool provides merchants and

distribution teams real-time access to

the status of orders through the entire

chain of supply. This system is being

used to ensure optimal delivery of

merchandise to the selling floor –

and thus, to customers.

As a company rich

in detailed data on

customer needs

and preferences,

Federated is

beginning to

tap Fingerhut’s

With plenty of sunlight, the remodeled furniture floor of Macy’s Union Square in San Francisco

underscores fresh approaches to the department store business.

expertise in data collection and management to find

better ways to target merchandise offerings and

marketing to department store customers. The Fingerhut

database alone holds up to 1,400 data elements –

including demographics, product preferences, birthdays

and anniversaries – on more than 30 million customer house-

holds. Together with Federated’s department store customer

files, they comprise one of the most potent data warehouses

in American retailing.

The world-class order fulfillment, logistics and distribution

organization of Fingerhut will be used increasingly in the coming

years to improve back-of-the-house functions of Federated’s direct-to-

customer business. Moreover, through Fingerhut Business Services,

Inc., Federated is generating revenue by providing fulfillment services

to third parties, such as Wal-Mart, for Internet order fulfillment.

N ew B r i c ks a n d Mo r ta r
N ew B r i c ks a n d Mo r ta r

Underscoring the importance of its premier department stores as the sales and profit engine of the

company, Federated continues to invest heavily in providing customers the most exciting store environments.

In 1999, the company’s store upgrade program was highlighted by extensive improvements at its three

largest flagships – Bloomingdale’s 59th Street and Macy’s Herald Square in Manhattan, and Macy’s

Union Square in San Francisco. Together, these multi-year store

upgrades involve our highest-volume, highest-visibility locations.

Macy’s Union Square project was completed in 1999, with work

at the New York Macy’s and Bloomingdale’s stores slated to

continue through next year.

In all, Federated’s capital plan for 2000-2002 calls for

spending $1.3 billion on approximately 120 separate

department store remodel projects.

Some of those remodels will include overhauling existing

junior’s, young men’s and activewear departments – key

growth businesses for the years immediately ahead. In some

cases, junior’s and young men’s may be brought together to

create dynamic environments where young customers can

meet, socialize and shop.

These departments will have painted concrete floors to

accentuate the fashion edge, trendy snack vending machines,

The new Burdines at Aventura Mall in Miami opened in 1999 to rave reviews

and edited assortments of merchandise – such as music and

for store architecture and visual presentation.

books – beyond apparel and accessories. In some stores, the

departments will have leased kiosks where customers can buy

technology-related products such as beepers and cellular phones.

Store environments also are improved through the use of technology to speed customer transactions

and enhance convenience, such as electronic sign and scanner systems, and telephone headsets.

In some stores, for example, headsets allow sales specialists in large, busy women’s shoe departments

to communicate with runners assigned to locate and retrieve merchandise from storeroom shelves. This

permits sales specialists to serve several customers simultaneously, rather than one at a time.

Federated also will continue to build new stores to fortify its presence in important markets, expand

to adjacent markets, and serve growing population centers. The three-year capital budget for new

stores is approximately $900 million. Four new department stores and two new furniture galleries

opened in 1999, consistent with the planned pace of opening five to eight new locations each year in

the early part of the decade. And in 2000, the company plans to open eight new department stores and

four furniture stores.

N ew H o r i zo n s
N ew H o r i zo n s

Mastering the future requires vision and common sense. Federated is and will remain at heart a department

store company, yet not just a department store company. Never have there been so many alluring opportunities to

pursue new directions – especially considering the impact of emerging technologies such as e-commerce. It seems

that each new day brings new developments beckoning investment and promising silver bullets.

The faster and more complex our business becomes, however, the more disciplined we must be in focusing on

the single unwavering and inevitable ingredient for success – taking care of the customer. That means continuously

improving our ability to deliver excitement, quality, convenience and value.

Federated will pursue new channels of growth aggressively, but never recklessly. We will listen to our customers

and seek ways to take them into the future. We will position ourselves thoughtfully to foster relationships with new

market segments and demographics down the road. We will invest whatever is necessary to attract, develop and

retain the best people in the retailing business. We will keep our infrastructure well-toned for continued efficiency.

We will continue to build our retail nameplates into genuine brands with meaning and excitement for our shopper.

Federated is a company dedicated to sustaining success at retail’s cutting edge. That means never forgetting

who we are and where we came from, never being quite satisfied with today, and knowing that what we will

become tomorrow won’t be good enough to stay ahead for long.

Recognizing that talented

and motivated people are the

key to ongoing success at

Federated, the company once

again recognized its top

selling service professionals

by inducting them into the

Star Academy for superior

performance. Honored in

1999 were the following

individuals, photographed

at Macy's Herald Square

store in New York prior to

the induction ceremony:

Standing, left to right: Jose Aguilar, Macy’s East, Arlington, VA; Joyce Yavenue, Burdines, West Palm Beach Gardens, FL;
George Wetzler, Macy’s, White Plains, NY; Robert Lytle, Macy’s West, Costa Mesa, CA; David Hayes, The Bon Marché,
Tacoma, WA; Celinda Puente, Stern’s, Jersey City, NJ; Jim Young, Lazarus, Cincinnati, OH; Bharat Parekh, Stern’s,
Bridgewater, NJ; Maureen O’Farrill, Bloomingdale’s, Hackensack, NJ; Dexter Rosenblatt, Burdines, Sarasota, FL.

Seated, left to right: Richard Vollkommer, Bloomingdale’s, New York, NY; Jaleh Samandar, Macy’s West, Santa Monica,
CA; Joan Glasspoole, Lazarus, Dublin, OH; Greg Watters, The Bon Marché, Roseburg, OR.

Visit Us On The Web
Corporate Website
www.federated-fds.com
Community
www.federated-fds.com/community
Customer Service
www.federated-fds.com/contact

www.bloomingdales.com reflects the fashion-forward
excitement associated with the Bloomingdale’s brand.

Board of Directors
Meyer Feldberg
Dean
Columbia Business School,
Columbia University

Earl G. Graves, Sr.
Chairman &
Chief Executive Officer
Earl G. Graves, Ltd.

George V. Grune
Chairman
DeWitt Wallace &
Lila Wallace-Reader’s
Digest Funds

Sara Levinson
President
NFL Properties, Inc.

Terry J. Lundgren
President & Chief
Merchandising Officer
Federated Department
Stores, Inc.

Joseph Neubauer
Chairman &
Chief Executive Officer
ARAMARK Corporation

Joseph A. Pichler
Chairman &
Chief Executive Officer
The Kroger Co.

Ronald W. Tysoe
Vice Chairman
Finance & Real Estate,
Federated Department
Stores, Inc.

Karl M. von der Heyden
Vice Chairman
PepsiCo, Inc.

Craig E. Weatherup
Chairman &
Chief Executive Officer
The Pepsi Bottling
Group, Inc.

Marna C. Whittington
Chief Operating Officer
Morgan Stanley Dean Witter
Investment Management

James M. Zimmerman
Chairman &
Chief Executive Officer
Federated Department
Stores, Inc.

Corporate Management
Executive Officers

Senior Vice Presidents

Dennis J. Broderick
General Counsel &
Secretary

Karen M. Hoguet
Chief Financial Officer

Rudolph V. Javosky
Design & Construction

James M. Zimmerman
Chairman & CEO

Terry J. Lundgren
President & CMO

Ronald W. Tysoe
Vice Chairman
Finance and Real Estate

Thomas G. Cody
Executive VP
Legal & Human Resources

Vice Presidents

Joel A. Belsky
Controller

David W. Clark
Executive and
Organizational
Development, Diversity/
Training/Compensation

Neal J. Glueck
Tax

Gary J. Nay
Real Estate

Carol A. Sanger
Corporate Communications
& External Affairs

John R. Sims
Deputy General Counsel

Joseph F. Vella
Employee Relations

Fingerhut customers can shop its web site,
www.fingerhut.com or mail order catalogs
24 hours a day, 7 days a week.

Division Principals
Department Stores

Support Operations

Federated Direct

Jeffrey Sherman
Chairman

Bloomingdale’s
Michael Gould
Chairman

The Bon Marché
Daniel H. Edelman
Chairman

Timothy M. Adams
President

Burdines
Susan Kronick
Chairman

Michael J. Osborn
President

J. David Scheiner
Vice Chairman &
Director of Stores

Macy’s East
Harold D. Kahn
Chairman

James E. Gray, President

Peter R. Sachse
Vice Chairman &
Director of Stores

Macy’s West
Jeremiah J. Sullivan
Chairman

Robert Mettler, President

Rudolph J. Borneo
Vice Chairman &
Director of Stores

Rich’s/Lazarus/
Goldsmith’s
Arnold Orlick
Chairman

Edwin J. Holman
President

Stern’s
Ronald Klein, Chairman

James N. Andress
President

Federated
Merchandising
Group
Janet E. Grove
Chairman

Leonard Marcus
President

Financial and
Credit Services
James J. Amann
Chairman

Federated Logistics
& Operations
Tom Cole, Chairman

Federated Systems
Group
James J. Amann
Chairman

Larry A. Lewark
President

www.macys.com, the industry’s leading online department
store, is part of a “bricks-and-clicks” strategy for Macy’s.

The partnership between weddingchannel.com
and Federated creates the ideal union of the in-store
and online bridal registry worlds.

S h a re h o l d e r I n fo rm a t i o n

Visit:
Our website at www.federated-fds.com/financial to

• Sign up to have Federated’s news releases sent to you via e-mail by subscribing to News Direct

• Get the latest stock price and chart, or take advantage of the historical price look-up feature

Call:
Federated Investor Relations Department, Monday-Friday, 8:30 a.m.- 5 p.m. Eastern: 1-513-579-7028
Federated News & Information Request Hotline: 1-800-261-5385
For copies of past news releases & corporate background data: 1-800-853-9150

Write:
Federated Department Stores, Inc. • Investor Relations Department
7 West Seventh Street • Cincinnati, OH 45202

Common Stock:
Shares of Federated common stock are traded on the New York Stock Exchange.

The company’s trading symbol is FD.

The approximate number of Federated shareholders of record, as of January 29, 2000, was 16,066.
Also, as of this date there were approximately 213 million shares of Federated common stock
outstanding, excluding shares held by Federated.

Transfer agent for Federated shares:
The Bank of New York • Shareholder Relations Department • Church Street Station
P.O. Box 11258 • New York, NY 10286-1258 • 1-800-524-4458

Quarterly Trading Volume & Share Price Data are as follows:

1999

Traded

Average

Prices

Daily Volume

Low

High

First Quarter

85,833,000

1,362,000

36 7/16

47 1/8

Second Quarter

68,486,000

1,087,000

45 15/16

57 1/16

Third Quarter

63,412,000

991,000

38 7/16

52 7/8

Fourth Quarter

75,121,000

1,212,000

40 15/16

53 7/8

1998

First Quarter

57,181,000

908,000

42 3/4

Second Quarter

52,655,000

836,000

49 13/16

56 3/16

Third Quarter

102,912,000

1,608,000

32 13/16

53 5/16

Fourth Quarter

82,512,000

1,353,000

35 15/16

46 3/8

The next annual meeting of shareholders will be held at 11a.m. Eastern, on

Friday, May 19, 2000 at the Westin North Perimeter in Atlanta, GA.

Environmental Report

In recognition of the importance of preserving a healthy environment for future generations, Federated uses recycled
paper and soy ink in the production of its annual report.

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CINCINNATI, OHIO 45202
www.federated-fds.com