Federated's Slow Ride On The Up Escalator

Allen Questrom doesn't look like a man who has been to hell and back. Tall, slim, tan, and well-dressed, the top executive at Federated Department Stores Inc. epitomizes the soigne Seventh Avenue look. It complements the message that he is trying to impart to employees, suppliers, investors, and the press: After two years of the most complex and expensive bankruptcy ever seen in retailing, Federated emerged from Chapter 11 a full six months ago and is doing just fine, thank you. The new Federated, says Chairman and Chief Executive Questrom, "is on an incline, not a decline."

True, Federated seems to be climbing out of its hole. For the six months ending Aug. 1, operating earnings from the seven Federated chains, including Bloomingdale's, A&S/Jordan Marsh, Burdines, and Rich's, rose 115%, to $107.5 million, on flat sales of $3 billion. But Questrom vows he can raise Federated's profits to the levels of rivals Dillard Department Stores Inc. and May Department Stores Co.--and that will be a far steeper climb. Federated's estimated 1992 cash flow is 8.3% of sales, compared with 12.1% for Dillard's and 13.3% for May. To hit Dillard's-style cash flow, Federated would need to boost sales to $200 a square foot from the current estimated level of $150.