Federated Consolidates Midwest Distribution Network

Federated Department Stores, Inc. (Cincinnati) will close three Midwest distribution centers in early 2007 to reduce duplication, increase efficiency and streamline operations. Acquired in 2005 as part of The May Department Stores Company and currently operated by the Federated Logistics division, the facilities are in Kansas City, Kans. (142,000 sq. ft., 30 employees), Warren, Mich. (212,000 sq. ft., 115 employees) and Minneapolis (550,000 square feet, 151 employees).

The three facilities will reportedly begin phasing out operations on Feb. 4, 2007, in a process that should be completed by the end of February. Volume currently handled at these centers will be absorbed by other Federated distributions centers in the region, including those in St. Louis, Chicago, Bridgeton, Mo., and North Jackson, Ohio.

In addition Federated announced plans to reduce the workforce at its distribution centers in Chicago, St. Louis and Bridgeton, also beginning in February. In Chicago, the company intends to outsource responsibilities for delivery and merchandise transportation to an outside supplier, affecting about 85 delivery and shuttle driver positions. The company will also eliminate a number of merchandise processing and furniture customer service positions.

"The difficult decision to consolidate facilities was necessary because we simply have too much distribution capacity for the company's needs going forward. In addition, the work performed in some facilities no longer is needed," said Federated vice chair Tom Cole. "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."

The distribution center consolidations are consistent with Federated's previously announced estimates to realize approximately $175 million in cost synergies in 2006 and at least $450 million in annual cost synergies in 2007 and beyond as a result of the May Company merger. Expenses associated with the consolidations are included in a previously announced estimate of approximately $1 billion in one-time costs.

Federated, with corporate offices in Cincinnati and New York, forecasts fiscal 2006 sales of around $27 billion. It operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's and Bloomingdale's.

Source: Federated Department Stores, Inc.

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