Federated Department Stores Inc. reported a fiscal fourth-quarter net loss on Tuesday as costs to dispose of its Fingerhut catalog ate up profits, but the parent of Bloomingdale's and Macy's raised its 2002 outlook.

Federated said it now expects earnings from continuing operations of $3.30 to $3.55 a share, up from a Jan. 16 forecast of $3.25 to $3.50 as share. In 2002, sales at stores open at least a year--a key measure of retail performance--are seen rising 1 to 1.5 percent.

"I have to imagine they are feeling a little more confident going forward on the comp (same) store sales numbers," Jeff Stinson, retail analyst at Midwest Research, said. "It looked like they may have hit the number they were looking for in February."

On Monday, Federated said February same-store sales were tracking in line with its expectation of a decline of 2 to 3 percent.

Federated shares were up 83 cents, or 2.13 percent, at $39.85 in morning New York Stock Exchange trading. Since January, the stock is down about 1 percent, compared with a flat performance from rival May Department Stores Co. .

The retailer reported a net loss of $447 million or $2.23 a diluted share compared with a profit of $332 million or $1.65 in the same quarter a year earlier.

Federated recorded an after-tax loss of $770 million to wind down its Fingerhut business, below the forecast range of $800 million to $950 million. That figure includes $292 million in estimated operating losses expected as it disposes of the business.

In January, Federated said Fingerhut was no longer a strategic fit, and last week the retailer said it had signed a letter of intent to sell the business. Fingerhut, beset by credit problems, has been a drag on Federated's earnings.

The 2001 fourth quarter also includes $43 million in charges related to the closure of Stern's department stores, $8 million related to the acquisition of Hawaii-based Liberty House, and $44 million in charges to shut the company's bloomingdales.com Web site and scale back its macys.com site.

Income before restructuring charges in the fourth quarter ended Feb. 2 fell to $310 million or $1.90 per diluted share from $400 million or $2.23 a share in the same quarter a year earlier. Analysts polled by Thomson Financial/First Call on average expected a profit of $1.86 a share. Their estimates ranged from $1.83 to $1.90 a share.

Department stores were hit particularly hard in the recession as consumers pulled back on purchases of clothing and other items. Steep markdowns were needed to move holiday merchandise, which also cut into profits.

Federated said it was able to generate $775 million in free cash flow in 2001, compared with $600 million a year earlier.

"The earnings were good, but the real key here is good cash flow out of what was a disappointing operating year," said Stinson of Midwest Research. "This is one of the companies that is better situated in the department store industry if we do see any consolidation moving forward."

On Jan. 16, Federated said it expected fourth-quarter earnings of $1.80 to $1.90 a share, down from an earlier forecast of $1.85 to $2.02.

For the first quarter, Federated said it expects a profit excluding items of 25 cents to 30 cents a share. For the second quarter, the retailer sees a profit of 50 cents to 60 cents a share.

Analysts polled by First Call on average expected a first-quarter profit of 31 cents a share. For the second quarter, the mean was 56 cents a share.

Federated said its total sales for the fourth quarter declined to $5.13 billion from $5.6 billion a year ago. Sales at department stores open at least a year fell 6 percent.