Federated to Close Five DCs, Build New 595,000-sq.-ft. Facility in Tenn.

Federated Department Stores, Inc. (Cincinnati), announced that it will close five of its 31 distribution centers as part of a nationwide consolidation of its distribution network. The move will reportedly reduce duplication as the company realigns its Macy's operating divisions.

Closing in June 2006 will be distribution centers in: Manchester, Conn. (298,000 square feet; 120 employees) and Baltimore, Md. (421,000 square feet; 200 employees). Closing in August 2006 will be distribution centers in: Aurora, Colo. (291,000 square feet; 150 employees), Portland, Ore. (340,000 square feet; 250 employees) and Salt Lake City, Utah (270,000 square feet; 30 employees).

"Advances in logistics and distribution center technology allow us to handle a larger volume of goods more effectively with fewer facilities that are more regional in nature. This helps us to deliver fresh fashion merchandise to the selling floors of our stores more quickly and consistently across the country," said Federated Vice Chair Tom Cole. "Streamlining our distribution center network to reduce redundancy and expense also is important to our ability to deliver value to our customers and shareholders."

The distribution center consolidations are consistent with Federated's efforts to realize approximately $175 million in cost synergies in 2006 and $450 million in annual cost synergies in 2007 and beyond as a result of its merger with May Company.

In separate news, Federated selected a site near Portland, Tenn., where it will build a new 595,000-sq.-ft distribution center to handle the company’s direct-to-consumer orders. In total the company announced that it will invest $130 million over the next two years in infrastructure and service enhancements to support the growth of its internet and mail channels.

“Portland was an optimal site for this important new facility because of its location central to our customers and suppliers, as well as easy access to the I-65 transportation corridor,” said Cole. “Once in place, the Portland distribution center will allow us to receive goods and process and ship online orders to customers quickly and efficiently. Our company also will benefit from the availability of a quality workforce and low operating costs in northern Tennessee.”

Construction of the new Portland distribution center is expected to begin this month, with completion in spring 2007. Initially, the facility will employ about 500 people. The company worked closely with the Tennessee Department of Economic and Community Development on an economic incentive package.

Including Macy's, Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's and other retail stores, Federated operates 950 department stores and more than 720 bridal and formalwear stores in 49 states, the District of Columbia, Guam and Puerto Rico.

SOURCE: Federated Department Stores, Inc.

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