Federated to Invest for Growth in Direct-To-Consumer Businesses.

CINCINNATI -- Federated Department Stores, Inc. (NYSE:FD)(PCX:FD) today announced it plans to invest approximately $130 million in capital over the next two years in infrastructure improvements and service enhancements to support continued growth of its direct-to-consumer businesses, including macys.com, bloomingdales.com, Bloomingdale's By Mail, macysweddingchannel.com and bloomingdalesweddingchannel.com.

"Online sales represent the fastest-growing part of our business and an outstanding opportunity for continued progress as we serve millions of new customers nationwide through our acquisition of May Company," said Terry J. Lundgren, Federated's chairman, president and chief executive officer. "Our customers have told us they appreciate the convenience of shopping online as well as in our stores. This cross-channel integration is a vital component of our ability to maximize the potential of the nationwide Macy's and Bloomingdale's brands.

"With the initial steps of our planned improvements scheduled to be in place by spring 2007, we expect our direct-to-consumer sales to grow to more than $750 million by 2008 from about $450 million in 2005," he said. These investments are part of the company's capital plan for spending $1.6 billion in 2006 and between $1.1 billion and $1.2 billion in 2007.

Investments include:

--Upgrading and enhancing content and order management software systems that support Internet-based selling functions. These systems will help handle increased traffic and order capacity, as well as improve service levels, enhance efficiency, facilitate additional personalization of gift packages, and provide customers with more detailed information on order status and delivery schedules.

--Constructing a new 595,000-square-foot distribution center designed specifically to handle direct-to-consumer orders and supported by a tailored warehouse management system. Groundbreaking for the new facility, to be built in Portland, TN, is expected in February 2006, with completion in spring 2007. Currently, online orders are being fulfilled from several Federated distribution centers that primarily supply the company's stores.

"Our online businesses have performed very well over the past several years, with consistent double-digit sales growth rates and improving profitability," Lundgren said. "To maintain the momentum, we recognize we need to invest to better serve additional customers who want to shop online for the type of fashion merchandise we sell, especially as Macy's and Bloomingdale's expand their store presence nationwide. We are very serious about capitalizing on this opportunity."

All statements in this press release that are not statements of historical fact are forward-looking statement disclaimers 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.

Federated, with corporate offices in Cincinnati and New York, is one of the nation's premier retailers. With the May Company's more than 490 department stores and more than 720 bridal and formalwear stores in 49 states, the District of Columbia and Puerto Rico, Federated operates about 950 department stores and more than 720 bridal and formalwear stores in 49 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's, Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, The Jones Store, David's Bridal, After Hours Formalwear and Priscilla of Boston. The company also operates macys.com and Bloomingdale's By Mail.

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