Federated will sell its Lord & Taylor unit

Federated Department Stores Inc. plans to sell its Lord & Taylor division as it focuses on the Macy's chain.

Goldman, Sachs & Co. and JPMorgan Chase & Co. are advising Federated on the sale, which should be completed by the end of the year, the Cincinnati-based retailer said in a statement yesterday. The company said fourth-quarter earnings from continuing operations will be cut by about 10 cents a share because Lord & Taylor will be treated as a discontinued operation.

Federated, the second-largest US department-store operator, is selling chains it acquired as part of its $11 billion purchase of May Department Stores Co. and converting more than 400 May stores to the Macy's nameplate. Lord & Taylor is worth $745 million after-tax, wrote Citigroup Investment Research's Deborah Weinswig.

''Federated is going through a very methodic process of looking at all the components of May's business to see where it makes sense to integrate, and this is just one piece of that," said Arun Daniel, a senior analyst at New York-based ING Investments LLC, which manages $40 billion in assets, including Federated shares.

''We believe a private-equity buyer could purchase Saks Fifth Avenue and Federated's Lord & Taylor and rebrand them under the Saks Fifth Avenue name," Weinswig wrote.

The 55 Lord & Taylor stores had sales of $1.57 billion in 2004. Known for its handwritten-signature logo, Lord & Taylor operates its stores in the Washington, D.C.-to-Boston corridor and in the Midwest. In the Boston area, Lord & Taylor stores are located in Boston's Prudential Center, Burlington Mall, Natick Mall, Northshore Mall in Peabody, and South Shore Plaza in Braintree.