Saturday, September 09, 2000

Federated could dump Fingerhut


$1.7 billion acquisition not paying off

By John J. Byczkowski
The Cincinnati Enquirer

        Just 17 months after paying $1.7 billion for the Fingerhut catalog company, Federated Department Stores Inc. is exploring its possible sale and other efforts to resuscitate the troubled division.

        Chief executive officer James Zimmerman told an investors' conference in New York on Wednesday that the acquisition “does not look like as good of an idea as it did back then,” Women's Wear Daily reported.

        Federated spokeswoman Carol Sanger said Friday the company has already made a number of moves to more tightly integrate Fingerhut's operations with Federated's, but said the sale of some or all of the operations acquired is being considered.

        Federated acquired Fingerhut in March 1999, hoping the catalog company's expertise in order fulfillment would kick-start the retailer's own Internet efforts, such as Macys.com.

        But “that has not materialized to the extent we'd originally anticipated or hoped,” Ms. Sanger said. She said differences between the two companies' technology platforms have hampered their integration.

        In addition, credit delinquency problems at Fingerhut's flagship catalog have been a drag on Federated's earnings. The company announced in July that Fingerhut's credit delinquencies would cut $150 million from second-quarter pretax earnings. The company's stock dived from $35 to as low as $23.50, and Friday closed at $28.00, down 13 cents.

        Federated has moved the Fingerhut credit operations under its FACS Group credit organization. It has also moved the catalogs into the Federated Direct division, and the fulfillment operations into Federated Logistics.

        What would Federated sell? It could be any piece of the whole — any of the stable of catalogs or facilities.

        In any event, Federated is unlikely to get the $1.7 billion it paid for Fingerhut, said Jeffrey Stein, managing director at McDonald Investments in Cleveland.

       



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