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	SECURITIES AND EXCHANGE COMMISSION
	WASHINGTON, D.C. 20549
	FORM 10-K
	Annual Report Pursuant to Section 13
	of the Securities Exchange Act of 1934

Federated Department Stores, Inc.

151 West 34th Street

Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:

None

      The Company has filed all reports required to be filed by Section 13 or 15(d) of the Act during the preceding 12 months and has been subject to such filing requirements for the past 90 days.

      Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

      There were 211,548,809 shares of the Company’s Common Stock outstanding as of April 1, 2000, excluding shares held in the treasury of the Company or by subsidiaries of the Company. The aggregate market value of the shares of such Common Stock, excluding shares held in the treasury of the Company or by subsidiaries of the Company, based upon the last sale price as reported on the New York Stock Exchange Composite Tape on March 31, 2000, was approximately $8,964,400,000.

Documents Incorporated by Reference

      Portions of the definitive proxy statement (the “Proxy Statement”) relating to the Company’s Annual Meeting of Stockholders to be held on May 19, 2000 (the “Annual Meeting”), are incorporated by reference in Part III hereof.

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      Unless the context requires otherwise, (i) references to “the Company” are, for all periods prior to December 19, 1994 (the “Merger Date”), references to Federated Department Stores, Inc. (“Federated”) and its subsidiaries and their respective predecessors, and for all periods following the merger (the “Merger”) of Federated and R.H. Macy & Co. Inc. (“Macy’s”) on the Merger Date, references to the surviving corporation in the Merger and its subsidiaries and (ii) references to “1999,” “1998,” “1997,” “1996” and “1995” are references to the Company’s fiscal years ended January 29, 2000, January 30, 1999, January 31, 1998, February 1, 1997 and February 3, 1996, respectively.

      This report and other reports, statements and information previously or subsequently filed by the Company with the Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words “may,” “will,” “could,” “should,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “estimate” or “continue” or the negative or other variations thereof and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including (i) risks and uncertainties relating to the possible invalidity of the underlying beliefs and assumptions, (ii) possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions, and (iii) actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials. In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as “Risk Factors” and “Special Considerations” in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those reflected in such forward-looking statements.

Item 1.  Business.

      General. The Company, through its subsidiaries, is one of the leading operators of full-line department stores in the United States, with over 400 department stores in 33 states as of January 29, 2000. The Company’s subsidiaries operate department stores under the names “Bloomingdale’s,” “The Bon Marché,” “Burdines,” “Goldsmith’s,” “Lazarus,” “Macy’s,” “Rich’s” and “Stern’s.” These department stores sell a wide range of merchandise, including men’s, women’s and children’s apparel and accessories, cosmetics, home furnishings and other consumer goods, and are diversified by size of store, merchandising character and character of community served. The department stores are located at urban or suburban sites, principally in densely populated areas across the United States.

      The Company, through its division, Federated Direct, also operates direct-to-customer mail catalog businesses under the names “Bloomingdale’s By Mail,” “Macy’s By Mail” and “Fingerhut,” and electronic commerce businesses which provide goods and services online through its subsidiary Fingerhut Companies, Inc. (“Fingerhut”) and under the names “bloomingdales.com” and “macys.com.” Through Fingerhut, the Company operates a database marketing business that sells a broad range of products and services through catalogs, direct marketing and the Internet, including (i) Figi’s, a food and gift catalog business; (ii) Arizona Mail Order and Bedford Fair, both apparel catalog businesses; and (iii) Popular Club, a membership-based general merchandise catalog business. Fingerhut also offers a broad range of services to third parties,

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      The Company provides various support functions to its retail operating divisions (except Fingerhut) on an integrated, company-wide basis.

	•	The Company’s financial and credit services subsidiary, FACS Group, Inc. (“FACS”), supports the proprietary credit programs of the Company’s retail operating divisions in respect of all proprietary credit card accounts owned by the Company except support relating to statement mailing and payment processing, which is provided by GE Capital Consumer Card Co. (“GE Bank”). GE Bank owns all of the “Macy’s” credit card accounts originated prior to the Merger and an allocated portion of the “Macy’s” credit card accounts originated subsequent to the Merger. In addition, FACS provides payroll and benefits services to the Company’s retail operating and service divisions.
	•	The Company’s data processing subsidiary, Federated Systems Group, Inc. (“FSG”), provides (directly and pursuant to outsourcing arrangements with third parties) operational electronic data processing and management information services to each of the Company’s retail operating and service divisions.
	•	Federated Merchandising Group (“FMG”), a division of the Company, helps the Company to centrally develop and execute consistent merchandise strategies while retaining the ability to tailor merchandise assortments and strategies to the particular character and customer base of the Company’s various department store franchises. FMG is also responsible for all of the private label development of the Company’s retail operating divisions except for Bloomingdale’s and Stern’s, which source some of their private label merchandise through Associated Merchandising Corporation. Bloomingdale’s also has its own private label program and sells some of FMG’s merchandise.
	•	Federated Logistics, a division of a subsidiary of the Company, provides warehousing and merchandise distribution services, store design and construction services and certain supply purchasing services for the Company’s retail operating divisions.
	•	A specialized staff maintained in the Company’s corporate offices provides services for all divisions of the Company in such areas as accounting, real estate and insurance, as well as various other corporate office functions.

      FACS, FSG, FMG and certain departments in the Company’s corporate offices also offer their services to unrelated third parties.

      Fingerhut conducts its retail business though its principal subsidiaries Fingerhut Corporation, Figi’s Inc., Arizona Mail Order Company, Inc., Bedford Fair Apparel, Inc., Popular Club Plan, Inc. and Axsys National Bank, which provides credit for customers’ purchases in the form of revolving credit card loans. Other subsidiaries of Fingerhut support such retail operations by providing data processing, customer service, telemarketing and fulfillment services, as well as other corporate office functions.

      The Company and its predecessors have been operating department stores since 1820. Federated was organized as a Delaware corporation in 1920. On May 26, 1994, Federated acquired Joseph Horne Co., Inc. pursuant to a subsidiary merger. On December 19, 1994, Federated acquired Macy’s pursuant to the Merger. On October 11, 1995, the Company acquired Broadway Stores, Inc. (“Broadway”) pursuant to a subsidiary merger. On March 18, 1999, the Company acquired Fingerhut pursuant to a subsidiary merger.

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      The Company’s executive offices are located at 151 West 34th Street, New York, New York 10001, telephone number: (212) 494-1602 and at 7 West Seventh Street, Cincinnati, Ohio 45202, telephone number: (513) 579-7000.

      Employees. As of January 29, 2000, the Company had approximately 133,000 regular full-time and part-time employees. Because of the seasonal nature of the retail business, the number of employees peaks in the Christmas season. Approximately 10% of the Company’s employees as of January 29, 2000 were represented by unions. Management considers its relations with employees to be satisfactory.

      Seasonality. The retail business is seasonal in nature with a high proportion of sales and operating income generated in the months of November and December. Working capital requirements fluctuate during the year, increasing somewhat in mid-summer in anticipation of the fall merchandising season and increasing substantially prior to the Christmas season when the Company must carry significantly higher inventory levels.

      Purchasing. The Company purchases merchandise from many suppliers, no one of which accounted for more than 5% of the Company’s net purchases during 1999. The Company has no long-term purchase commitments or arrangements with any of its suppliers, and believes that it is not dependent on any one supplier. The Company considers its relations with its suppliers to be satisfactory.

      Competition. The retailing industry, in general, and the department store and direct-to-customer businesses, in particular, are intensely competitive. Generally, the Company’s stores compete with other department stores in the geographic areas in which they operate. In addition, both the Company’s department stores and direct-to-customer operations compete with numerous other types of retail outlets, including specialty stores, general merchandise stores, off-price and discount stores, new and established forms of home shopping (including the Internet, mail order catalogs and television) and manufacturers’ outlets.

      Operating Segment Information. The information set forth in Note 16 to Consolidated Financial Statements appearing elsewhere in this report is incorporated by reference into this Item 1.

Item 1A.  Executive Officers of the Registrant.

      The following table sets forth certain information regarding the executive officers of the Company:

      James M. Zimmerman has been Chairman of the Board and Chief Executive Officer of the Company since May 1997; prior thereto he served as the President and Chief Operating Officer of the Company since May 1988.

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      Terry J. Lundgren has been President and Chief Merchandising Officer of the Company since May 1997 and served as the Chairman of the Company’s Federated Merchandising Group division from February 1994 until February 19, 1998.

      Ronald W. Tysoe has been Vice Chairman, Finance and Real Estate of the Company since April 1990 and served as Chief Financial Officer of the Company from April 1990 until October 31, 1997.

      Thomas G. Cody has been Executive Vice President, Legal and Human Resources of the Company since May 1988.

      Dennis J. Broderick has been Secretary of the Company since July 1993 and Senior Vice President and General Counsel of the Company since January 1990.

      Karen M. Hoguet has been Senior Vice President of the Company since April 1991 and Chief Financial Officer of the Company since October 31, 1997. Prior to July 6, 1999, Mrs. Hoguet served as the Treasurer of the Company since January 1992.

      Joel A. Belsky has been Vice President and Controller of the Company since October 1996. Prior thereto, he served as Divisional Vice President and Deputy Controller of the Company since March 1993.

Item 2.  Properties.

      The properties of the Company consist primarily of stores and related retail facilities, including warehouses and distribution and fulfillment centers. The Company also owns or leases other properties, including corporate office space in New York and Cincinnati and other facilities at which centralized operational support functions are conducted. As of January 29, 2000, the Company operated 403 department stores in 33 states, comprising a total of 81,914,000 square feet. Of such department stores, 197 were entirely or mostly owned and 206 stores were entirely or mostly leased. Pursuant to various shopping center agreements, the Company is obligated to operate certain stores within the centers for periods of up to 20 years. Some of these agreements require that the stores be operated under a particular name.

Item 3.  Legal Proceedings.

      The Company and its subsidiaries are involved in various proceedings that are incidental to the normal course of their businesses. The Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

Item 4.  Submission of Matters to a Vote of Security-Holders.

      None.

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PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters.

      The Common Stock is listed on the New York Stock Exchange (the “NYSE”) under the trading symbol “FD.” As of January 29, 2000, the Company had approximately 16,000 stockholders of record. The following table sets forth for each fiscal quarter during 1999 and 1998 the high and low sales prices per share of Common Stock as reported on the NYSE Composite Tape:

      The Company has not paid any dividends on its Common Stock during its two most recent fiscal years, and does not anticipate paying any dividends on the Common Stock in the foreseeable future.

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Item 6.  Selected Financial Data.

      The selected financial data set forth below should be read in conjunction with the Consolidated Financial Statements and the notes thereto and the other information contained elsewhere in this report.

(a)	The extraordinary items for 1998 and 1997 were after-tax expenses associated with debt prepayments.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      The Company acquired Fingerhut on March 18, 1999. The acquisition is being accounted for under the purchase method of accounting and, accordingly, the Company’s results of operations do not include any revenues or expenses related to the acquisition prior to the closing date. The results of operations of Fingerhut have been grouped with the Company’s Bloomingdale’s By Mail, Macy’s By Mail and macys.com operations and certain other direct marketing activities as the direct-to-customer segment.

Results of Operations

      Comparison of the 52 Weeks Ended January 29, 2000 and January 30, 1999. Net sales for 1999 totaled $17,716 million, compared to net sales of $15,365 million for 1998, an increase of 15.3%. Net sales for department stores for 1999 were $15,850 million compared to $15,365 million for 1998, an increase of 3.2%. On a comparable store basis (sales from stores in operation throughout all of 1998 and 1999), net sales for 1999 increased 4.5% compared to 1998. Net sales for the direct-to-customer segment were $1,866 million for 1999.

      Cost of sales was 58.9% of net sales for 1999, compared to 60.0% for 1998. Cost of sales as a percent of net sales for department stores improved 0.2% in 1999 compared to 1998, benefiting from continued strength in consumer demand. This improvement in the cost of sales rate for department stores, together with a relatively lower cost of sales rate for the direct-to-customer segment, contributed to the overall 1.1% improvement in the cost of sales rate for 1999. The valuation of department store merchandise inventories on the last-in, first-out basis did not impact cost of sales in either year.

      Selling, general and administrative (“SG&A”) expenses were 31.5% of net sales for 1999, compared to 30.5% for 1998. Department store SG&A expenses improved 1.3% as a percent of department store net sales, reflecting the impact of higher sales with relatively flat nonpayroll expenses and lower bad debt expense, which was partially offset by reduced finance charge income resulting from lower average accounts receivable billings. A relatively higher SG&A expense rate for the direct-to-customer segment, including recently launched businesses, and increased amortization expense resulting from the Fingerhut acquisition combined to offset the improvement in the department store SG&A expense rate and produce a 1.0% increase in the overall SG&A expense rate for 1999.

      Net interest expense was $355 million for 1999 compared to $292 million for 1998. The higher interest expense for 1999 is due mainly to the increased outstanding debt resulting from the Fingerhut acquisition and the consolidation of the Fingerhut Master Trust for financial reporting purposes.

      The Company’s effective income tax rate of 40.9% for 1999 differs from the federal income tax statutory rate of 35.0% principally because of the effect of state and local income taxes and permanent differences arising from the amortization of intangible assets and from other non-deductible items.

      Comparison of the 52 Weeks Ended January 30, 1999 and January 31, 1998. Net sales for 1998 were $15,365 million compared to $15,220 million for 1997, an increase of 1.0%. Excluding sales of the specialty stores division that was sold in July 1998, net sales increased 1.7% in 1998. On a comparable store basis (sales from stores in operation throughout all of 1997 and 1998), net sales increased 2.2% in 1998.

      Cost of sales was 60.0% of net sales for 1998, compared to 60.5% for 1997. The 0.5% improvement in the cost of sales rate reflects positive customer response to the merchandise assortments in the stores during the second and fourth quarters, attributed partially to an improved merchandise receipt flow. The valuation of merchandise inventory on the last-in, first-out basis did not impact cost of sales in either year.

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      Selling, general and administrative expenses were 30.5% of net sales for 1998, compared to 30.7% for 1997. Selling, general and administrative expenses include finance charge income and expenses for doubtful customer accounts receivable. Finance charge income was $345 million for 1998, down from $391 million in 1997, primarily due to lower average accounts receivable balances as a result of accelerated payments. Amounts charged to expense for doubtful accounts receivable were $112 million for 1998, compared to $167 million for 1997. The decrease primarily reflects a reduction in the amount of uncollectible balances written off in 1998, also due to lower average accounts receivable balances and accelerated payments.

      Net interest expense was $292 million for 1998, compared to $383 million for 1997. The lower interest expense for 1998 is principally due to lower levels of borrowings and lower interest rates resulting from refinancings completed in 1998 and 1997.

      The Company’s effective tax rate of 41.1% for 1998 differs from the federal income tax statutory rate of 35.0% principally because of the effect of state and local income taxes and permanent differences arising from the amortization of intangible assets and from other non-deductible items.

      The extraordinary items of $23 million and $39 million for 1998 and 1997, respectively, represent after-tax expenses associated with debt prepayments.

Liquidity and Capital Resources

      The Company’s principal sources of liquidity are cash from operations, cash on hand and certain available credit facilities.

      Net cash provided by operating activities in 1999 was $1,263 million, compared to $1,690 million provided in 1998. The Company’s improved operating results were more than offset by an increase in accounts receivable in 1999 compared to a decrease in 1998. The increase in accounts receivable in 1999 resulted from higher credit sales and a post-acquisition increase in Fingerhut’s accounts receivable.

      Net cash used by investing activities was $2,432 million for 1999, including the purchase of Fingerhut. Investing activities for 1999 also included purchases of property and equipment totaling $770 million, capitalized software of $52 million and investments in companies engaged in complementary businesses totaling $117 million. The Company opened four new department stores and two new furniture galleries during 1999.

      Net cash provided to the Company by all financing activities was $1,080 million. The Company funded the acquisition of Fingerhut through a combination of cash on hand and short-term borrowings. During 1999, the Company issued $350 million of 6.3% Senior Notes due 2009 and $400 million of 6.9% Senior Debentures due 2029, the proceeds of which were used to refinance a portion of the short-term borrowings used by the Company to acquire Fingerhut. The Company repaid debt of $650 million in 1999, consisting principally of $490 million of receivables backed financings and the $125 million of Senior Notes assumed in the Fingerhut acquisition.

      The Company purchased 5.6 million shares of its common stock in 1999 at an approximate cost of $267 million. On January 27, 2000, the Board of Directors approved a new stock repurchase program that authorizes the Company to purchase up to $500 million of its common stock. The Company may from time to time commence, continue or suspend repurchases of shares under the repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors. During 1999, the Company issued 9.0 million shares of its common stock upon the exercise of the Company’s Series C Warrants.

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      In 1999, the Company took certain actions which resulted in the consolidation of the Fingerhut Master Trust for financial reporting purposes. The principal assets and liabilities of the Fingerhut Master Trust consisted of accounts receivable transferred by Fingerhut to the Trust in transactions treated as sales under Statement of Financial Accounting Standards No. 125, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and the related debt issued by the Trust. As a result of the Company’s actions, the transfer of receivables and debt are being treated as secured borrowings as of and subsequent to July 31, 1999. These actions increased the Company’s consolidated net assets and debt by $1,132 million at July 31, 1999 and by $1,300 million at January 29, 2000.

      The Company intends to open eight new department stores and four new furniture galleries in 2000 and its budgeted capital expenditures are approximately $3,000 million for the 2000 to 2002 period. Management presently anticipates funding such expenditures from operations.

      Management believes the department store business and other retail businesses will continue to consolidate. Accordingly, the Company intends from time to time to consider additional acquisitions of, and investments in, department stores, Internet-related companies, catalog companies and other complementary assets and companies.

      Management believes that, with respect to its current operations, cash on hand and funds from operations, together with its credit facilities, will be sufficient to cover its reasonably foreseeable working capital, capital expenditure and debt service requirements. Acquisition transactions, if any, are expected to be financed through a combination of cash on hand and from operations, and the possible issuance from time to time of long-term debt or other securities. Depending upon conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, the proceeds of which could be used to refinance current indebtedness or for other corporate purposes.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

      The Company is exposed to market risk from changes in interest rates which may adversely affect its financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposures through its regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The Company does not use financial instruments for trading or other speculative purposes and is not party to any leveraged financial instruments.

      The Company is exposed to interest rate risk primarily through its borrowing activities, which are described in Note 8 to the Consolidated Financial Statements. The majority of the Company’s borrowings are under fixed rate instruments. However, the Company uses interest rate swap and interest rate cap agreements to help manage its exposure to interest rate movements and reduce borrowing costs. See Notes 8 and 15 to the Consolidated Financial Statements, which are incorporated herein by reference.

      Based on the Company’s market risk sensitive instruments (including variable rate debt and derivative financial instruments) outstanding at January 29, 2000, the Company has determined that there was no material market risk exposure to the Company’s consolidate financial position, results of operations or cash flows as of such date.

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Item 8. Consolidated Financial Statements and Supplementary Data.

      Information called for by this item is set forth in the Company’s Consolidated Financial Statements and supplementary data contained in this report and is incorporated herein by this reference. Specific financial statements and supplementary data can be found at the pages listed in the following index.

INDEX

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

      None.

PART III

      Information called for by this item is set forth under Item 1 “Election of Directors” and “Compliance with Section 16(a) of the Securities and Exchange Act of 1934” in the Proxy Statement, and in Item 1A “Executive Officers of the Registrant,” and incorporated herein by reference.

Item 11.  Executive Compensation.

      Information called for by this item is set forth under “Executive Compensation” and “Compensation Committee Report on Executive Compensation” in the Proxy Statement and incorporated herein by reference.

Item 12.  Security Ownership and Certain Beneficial Owners and Management.

      Information called for by this item is set forth under “Stock Ownership” in the Proxy Statement and incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions.

      None.

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PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)  The following documents are filed as part of this report:

           1.  Financial Statements:

      The list of financial statements required by this item is set forth in “Item 8 Consolidated Financial Statements and Supplementary Data” and is incorporated herein by reference.

           2.  Financial Statement Schedules:

      All schedules are omitted because they are inapplicable, not required, or the information is included elsewhere in the Consolidated Financial Statements or the notes thereto.

           3.  Exhibits:

      The following exhibits are filed herewith or incorporated by reference as indicated below.

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*	Constitutes a compensatory plan or arrangement.
**	Confidential portions of this Exhibit were omitted and filed separately with the SEC pursuant to Rule 24b-2 under the Exchange Act.

	(b)	Reports on Form 8-K.

	(i)	Current report on Form 8-K, dated December 6, 1999, reporting matters under items 5 and 7 thereof.

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SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FEDERATED DEPARTMENT STORES, INC.

	By:	/s/ DENNIS J. BRODERICK

	Dennis J. Broderick
	Senior Vice President, General Counsel and Secretary

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on April 19, 2000.

     * The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-K pursuant to the Powers of Attorney executed by the above-named officers and directors and filed herewith.

	By:	/s/ DENNIS J. BRODERICK

	Dennis J. Broderick
	Attorney-in-Fact

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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MANAGEMENT’S REPORT

To the Shareholders of

      The integrity and consistency of the consolidated financial statements of Federated Department Stores, Inc. and subsidiaries, which were prepared in accordance with generally accepted accounting principles, are the responsibility of management and properly include some amounts that are based upon estimates and judgments.

      The Company maintains a system of internal accounting controls, which is supported by a program of internal audits with appropriate management follow-up action, to provide reasonable assurance, at appropriate cost, that the Company’s assets are protected and transactions are properly recorded. Additionally, the integrity of the financial accounting system is based on careful selection and training of qualified personnel, organizational arrangements which provide for appropriate division of responsibilities and communication of established written policies and procedures.

      The consolidated financial statements of the Company have been audited by KPMG LLP, independent certified public accountants. Their report expresses their opinion as to the fair presentation, in all material respects, of the financial statements and is based upon their independent audits conducted in accordance with generally accepted auditing standards.

      The Audit Review Committee, composed solely of outside directors, meets periodically with the independent certified public accountants, the internal auditors and representatives of management to discuss auditing and financial reporting matters. In addition, the independent certified public accountants and the Company’s internal auditors meet periodically with the Audit Review Committee without management representatives present and have free access to the Audit Review Committee at any time. The Audit Review Committee is responsible for recommending to the Board of Directors the engagement of the independent certified public accountants, which is subject to shareholder approval, and the general oversight review of management’s discharge of its responsibilities with respect to the matters referred to above.

James M. Zimmerman

Karen M. Hoguet

Joel A. Belsky

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

      We have audited the accompanying consolidated balance sheets of Federated Department Stores, Inc. and subsidiaries as of January 29, 2000 and January 30, 1999, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the fifty-two week periods ended January 29, 2000, January 30, 1999 and January 31, 1998. These consolidated financial statements are the responsibility of management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Federated Department Stores, Inc. and subsidiaries as of January 29, 2000 and January 30, 1999, and the results of their operations and their cash flows for the fifty-two week periods ended January 29, 2000, January 30, 1999 and January 31, 1998, in conformity with generally accepted accounting principles.

	KPMG LLP

Cincinnati, Ohio

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FEDERATED DEPARTMENT STORES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(millions, except per share data)

      The accompanying notes are an integral part of these Consolidated Financial Statements.

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FEDERATED DEPARTMENT STORES, INC.

CONSOLIDATED BALANCE SHEETS

(millions)

      The accompanying notes are an integral part of these Consolidated Financial Statements.

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FEDERATED DEPARTMENT STORES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(millions)

      The accompanying notes are an integral part of these Consolidated Financial Statements.

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FEDERATED DEPARTMENT STORES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions)