After seeing online sales rise 38 percent in 2006 over 2005, Federated Department Stores decided to invest $100 million in its direct-to-consumer business in the next two years, with hopes that its online presence will help generate more store visits.
The company also wants to grow its macysweddingchannel.com, bloomingdales.com, bloomingdalesweddingchannel.com and Bloomingdale's By Mail business lines. Federated will also build a 600,000-square-foot distribution center in Goodyear, Ariz. and expand its warehouse management system to support its projected increases in traffic to the Web. Terry J. Lundgren, Federated president and CEO, says the company's online and catalog business lines are growing faster than anticipated.
While its brick-and-mortar department stores have posted mixed results, Federated expects online sales growth of $1 billion in 2008, from 2006, a figure $250 million higher than its initial projection of $750 million.
“We anticipate that [online operations] will strengthen sales and profits from the former May stores over the next 6 to 12 months,” writes Bernard Sosnick, an analyst with Oppenheimer & Co. Inc. He predicts the investment in its online sites will push Federated stock to more than $50 per share, from its current position of $45.55 per share.