Federated to Consolidate Distribution Centers.

CINCINNATI -- Federated Department Stores, Inc. (NYSE:FD)(NYSE Arca:FD) today announced a consolidation of its distribution center network in the Midwest to reduce duplication, increase efficiency and streamline operations. As a result, the company will close three distributions centers in early 2007. These centers were acquired in 2005 as part of The May Department Stores Company and now are operated by the Federated Logistics division. They are located in:

* Kansas City, KS (142,000 square feet; 30 employees)

* Warren, MI (212,000 square feet; 115 employees)

* Minneapolis, MN (550,000 square feet; 151 employees).

These three facilities will 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, OH.

In addition, Federated 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 initiate a process to potentially outsource responsibilities for delivery and merchandise transportation to a supplier, affecting about 85 delivery and shuttle driver positions. About 89 merchandise processing and furniture customer service positions in Chicago, as well as 31 merchandise processing and transportation positions in St. Louis, 25 merchandise processing and customer service positions in Bridgeton and 19 merchandise processing and customer service positions in North Jackson, will be eliminated as the result of changes in operating procedures.

"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 company will seek opportunities to offer affected employees transfers to other Federated facilities. Severance packages will be provided to employees who are laid off as a result of this consolidation.

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 the previously announced estimate of approximately $1 billion in one-time costs.

Federated, with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2006 sales expected to be about $27 billion. Federated 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. The company also operates macys.com, bloomingdales.com and Bloomingdale's By Mail.

All statements in this press release that are not statements of historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Federated's management and are subject to significant risks and uncertainties. Actual results could differ materially from those expressed in or implied by the forward-looking statements contained in this release because of a variety of factors, including conditions to, or changes in the timing of, proposed transactions, prevailing interest rates, competitive pressures from specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, new and established forms of home shopping (including the Internet, mail-order catalogs and television) and general consumer spending levels, including the impact of the availability and level of consumer debt, the effect of weather and other factors identified in documents filed by the company with the Securities and Exchange Commission.

(NOTE: Additional information on Federated, including past news releases, is available at www.fds.com/pressroom.)