Federated Department Stores Inc. (FD), parent of Macy's and Bloomingdale's, Wednesday said it planned to invest $130 million over the next two years to improve its Internet business, which it said was the fastest growing part of the company.

The announcement comes after Chairman Terry Lundgren said earlier this month that he expected traffic to the Macys.com site to surge as Federated converts May Department Stores to the Macy's nameplate.

He also said at the time that Federated, which is integrating its $11 billion acquisition of May, had no limitations in terms of the resources that were available to expand the dot-com business.

In its release on Wednesday, Federated said it expected direct-to-consumer sales to grow to more than $750 million by 2008 from $450 million in 2005, and it would invest in upgrading order management software systems.

The company also said it would construct a new 595,000-square-foot distribution center to handle its direct-to-consumer orders.

Federated ultimately expects to operate roughly 850 stores under the Macy's name, up from about 450.