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Federated warns on 2Q net
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July 20, 2000: 8:47 a.m. ET
Fingerhut credit problems to cut profit by $150M, or 43 cents a share
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NEW YORK (CNNfn) - Federated Department Stores Inc. warned Thursday that credit problems at its Fingerhut unit would cut second quarter earnings in its direct-to-customer unit by $150 million, or 43 cents a diluted share.
Lower catalog sales combined with the need for increased bad debt reserves may also lower earnings before interest and taxes for the segment by an additional $200 million to $250 million in the fall season, Federated Chairman and Chief Executive James Zimmerman said.
Earnings tracker First Calls had anticipated 65 cents a share for second quarter.
The company has moved responsibility for Fingerhut's credit operations to Federated's Financial and Credit Services group and to the FACS group CEO James Amann.
Federated is increasing collections activity as well as lowering credit lines and introducing new credit scoring to help solve Fingerhut's credit problems. The actions are expected to have a negative impact on short-term sales, Federated direct division chairman Jeffrey Sherman said.
The Cincinnati-based Federated Department Stores (FD: Research, Estimates) expects to show significant improvement in 2001.
On Wednesday, shares of Federated fell 7/16 to close at 26-7/8. 
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