CINCINNATI, Ohio, February 21, 2006 - Federated Department Stores, Inc. today reported diluted earnings per share from continuing operations of $2.45 for the fourth quarter of 2005, ended Jan. 28, 2006. This compares with diluted earnings per share from continuing operations of $2.55 for the same 13-week period last year.

Excluding May Company merger integration costs and related inventory valuation adjustments of $131 million ($82 million after tax or 29 cents per diluted share), fourth quarter diluted earnings per share from continuing operations was $2.74. This exceeds the company's prior guidance of $2.60 to $2.65 per share.

Federated's sales and earnings for September 2005 through January 2006 include results of The May Department Stores Company, which was acquired Aug. 30, 2005. Sales and earnings from the company's Lord & Taylor and Bridal Group divisions, which the company intends to divest, are being treated as discontinued operations.

For the full 52 weeks of fiscal 2005, Federated reported earnings per diluted share from continuing operations of $6.32, compared to $3.86 per share in the same period of 2004. Excluding the May Company merger integration costs and related inventory valuation adjustments of 56 cents per diluted share ($194 million pre-tax, $121 million after tax) and a gain on the sale of receivables of $1.77 per diluted share ($480 million pre-tax, $384 million after tax), earnings from continuing operations per diluted share for fiscal 2005 were $5.11.

Terry J. Lundgren, Federated's chairman, president and chief executive officer, said, "We are very pleased with our results for the fourth quarter, which exceeded our guidance. The quarter included stronger-than-expected performance in both the Federated and former May Company divisions, as well as a benefit from a tax settlement and related adjustments. Across the organization, our executives and associates demonstrated exceptional discipline and focus through the holiday selling season, despite potential distractions related to the merger.

"As we have said in the past, 2006 will be a transition year in which sales and earnings performance will be difficult to predict. Keep in mind that each of the next three quarters presents a unique set of challenges that may affect short-term sales and/or earnings, given the process of store divestitures, assortment assimilation and brand conversions between now and this fall," Lundgren said.

Sales in the fourth quarter totaled $9.571 billion, an increase of 86.9 percent compared to sales of $5.120 billion in the same period last year. On a same-store basis, Federated's fourth quarter sales were up 1.1 percent.

Federated's fiscal 2005 sales totaled $22.390 billion, an increase of 41.9 percent from sales of $15.776 billion in the same period last year. On a same-store basis, Federated's sales for fiscal 2005 were up 1.3 percent.

The company opened no new department stores in the fourth quarter of 2005.

Five Macy's stores in south Florida and New Orleans remain closed from damage related to Hurricanes Wilma and Katrina in 2005. These locations accounted for $59 million in sales in the fourth quarter of 2004. At least three of these stores are expected to reopen in fiscal 2006.

Federated's operating income totaled $1.194 billion or 12.5 percent of sales for the quarter ended Jan. 28, 2006, compared to operating income of $763 million or 14.9 percent of sales for the same period last year.

The company's operating income for fiscal 2005 was $2.424 billion or 10.8 percent of sales, compared to $1.400 billion or 8.9 percent of sales in fiscal 2004.

Federated's fourth quarter 2005 operating income includes $131 million in May Company integration costs and related inventory valuation adjustments. Fiscal 2005 operating income includes a pre-tax gain of $480 million on the sale of receivables to Citigroup and May Company integration costs and related inventory valuation adjustments of $194 million. Federated's fourth quarter 2004 operating income included $13 million in store closing, centralization and consolidation costs, as well as inventory valuation adjustments. Fiscal 2004 operating income included $99 million in store closing, centralization and consolidation costs, as well as inventory valuation adjustments.

In fiscal 2005, Federated generated $1.95 billion in cash flow from continuing operating activities, compared to $1.51 billion in fiscal 2004. Federated used $2.5 billion of cash for continuing investing activities in fiscal 2005, compared to $727 million in fiscal 2004. Cash used by continuing financing activities was $58 million in fiscal 2005, compared to $837 million the previous year.

Cash flow in fiscal 2005 was impacted by two major transactions: the acquisition of May Company on Aug. 30 and the sale of proprietary and Visa accounts receivable to Citigroup on Oct. 24. The May Company acquisition was funded with $1.1 billion cash on hand and $4.6 billion in short-term borrowings. Pretax proceeds from the sale of the credit receivables, after elimination of $1.2 billion in receivables backed debt, was used to pay down $2.8 billion in short-term borrowings. At Jan. 28, 2006, approximately $1.2 billion of short-term borrowings were outstanding. At the time of the May Company acquisition, the company established a $5 billion bridge line, of which $2.25 billion is still available to the company.

The company repurchased no shares of its common stock in the fourth quarter.

The company's guidance for 2006 is unchanged. Federated continues to anticipate same-store sales to increase by 2 to 3 percent in 2006, with first quarter sales of $5.75 billion to $6 billion, incorporating a same-store sales decrease of 0.5 to 1.5 percent compared to last year. Earnings of $3.45 to $3.70 per diluted share are expected in 2006 from continuing operations excluding one-time May Company merger integration costs and gain on sale of receivables. This includes a loss of 5 to 15 cents per diluted share in the first quarter from continuing operations excluding one-time May Company merger integration costs.

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.

Federated, with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2006 sales expected to be more than $27 billion. Federated operates more than 850 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 is available on the Internet at www.fds.com/pressroom.. A webcast of Federated's fourth quarter earnings call with analysts will be held beginning at 10:30 a.m. ET on Tuesday, Feb. 21. Pre-registration is requested. Those unable to access the webcast at www.fds.com may call 1-866-215-1938 to listen to the audio in real time. The webcast will be archived for replay beginning approximately two hours after the conclusion of the live call.)

Notes:

(1)  The May Department Stores Company ("May") was acquired August 30, 2005. The results of operations of May have been included in Federated's results of operations from the date of acquisition. Certain reclassifications were made to prior period amounts to conform with the classifications of such amounts for the most recent period.

(2)  Merchandise inventories are primarily valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of this method did not impact cost of sales for the 13 and 52 weeks ended January 28, 2006 or January 29, 2005. For the 13 weeks ended January 29, 2005, cost of sales includes inventory valuation adjustments of $5 million related to the Macy's home store centralization.

(3)  Represents inventory valuation adjustments associated with the combination and integration of Federated and May merchandise assortments.

(4)  For the 13 weeks ended January 29, 2005, SG&A expenses include $8 million of costs incurred in connection with the Macy's home store centralization, the Burdines-Macy's consolidation and other store closings.

(5)  Represents costs and expenses associated with the integration and consolidation of May's operations into Federated's operations, primarily impairment charges for certain Federated stores planned to be closed.

(6)  Interest expense for the 13 weeks ended January 28, 2006, includes $17 million of interest income related to the settlement of various tax examinations.

(7)  Federal, state and local income tax expense for the 13 weeks ended January 28, 2006, includes a $10 million reduction in tax expense related to the settlement of various tax examinations.

(8)  Represents the acquired operations of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear and Priscilla of Boston, which are being divested.

(9)  For the 13 weeks ended January 28, 2006, May integration costs and related inventory valuation adjustments (See Notes 3 and 5) amounted to $.29 per diluted share. For the 13 weeks ended January 29, 2005, store closing and consolidation costs and Macy's home store centralization costs (See notes 2 and 4) amounted to $.04 per diluted share.

Notes:

(1)  The May Department Stores Company ("May") was acquired August 30, 2005. The results of operations of May have been included in Federated's results of operations from the date of acquisition. Certain reclassifications were made to prior period amounts to conform with the classifications of such amounts for the most recent period.

(2)  Merchandise inventories are primarily valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of this method did not impact cost of sales for the 52 weeks ended January 28, 2006 or January 29, 2005. For the 52 weeks ended January 29, 2005, cost of sales includes inventory valuation adjustments of $36 million related to the Macy's home store centralization and the Burdines-Macy's consolidation.

(3)  Represents inventory valuation adjustments associated with the combination and integration of Federated and May merchandise assortments.

(4)  For the 52 weeks ended January 29, 2005, SG&A expenses include $63 million of costs incurred in connection with the Macy's home store centralization, the Burdines-Macy's consolidation and other store closings.

(5)  Represents costs and expenses associated with the integration and consolidation of May's operations into Federated's operations, primarily impairment charges for certain Federated stores planned to be closed.

(6)  Represents the gain recognized on the sale of the Company's proprietary and non-proprietary credit card accounts receivable. For the 52 weeks ended January 28 2006, the after-tax net gain amounted to $1.77 per diluted share.

(7)  Interest expense for the 52 weeks ended January 28, 2006, includes $17 million of interest income related to the settlement of various tax examinations. Interest expense for the 52 weeks ended January 29, 2005 includes $59 million of one-time costs, or 20 cents a diluted share, associated with the repurchase of $274 million of Federated's 8.5% senior notes due 2010.

(8)  Federal, state and local income tax expense for the 52 weeks ended January 28, 2006 was reduced by approximately $85 million to recognize capital loss carryforwards realized as a result of the sale of certain credit card accounts receivable and $10 million related to the settlement of various tax examinations.

(9)  Represents the acquired operations of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear and Priscilla of Boston, which are being divested.

(10) For the 52 weeks ended January 28, 2006, May integration costs and related inventory valuation adjustments (See Notes 3 and 5) amounted to $.56 per diluted share. For the 52 weeks ended January 29, 2005, store closing and consolidation costs and Macy's home store centralization costs (See notes 2 and 4) amounted to $.34 per diluted share.