Federated Department Stores has cut its profit guidance for the 2006 financial year.

The company projected a loss of 5 cents, to 15 cents per share, on sales of US$5.75bn to $6bn - less than Wall Street expectations of profits of 70 cents a share, according to the Associated Press.

Federated chairman, president and chief executive Terry Lundgren said: "Forecasting for 2006 with precision is particularly challenging because of the number of variables related to the integration.

"While 2006 is a transition year, we expect significant improvement in 2007 and a return to our historical peak levels of profitability, adjusted for the impact of the sale of credit portfolios, by the 2008-2009 period."

Retail industry analyst Burt Flickinger told the AP: "For the first time in nearly five years, there is a real softness in the upper-tier department store sector. Middle- to mid-upper-income consumers are more cash and credit constrained."