NEW YORK (AP) -- Macy's Inc. is expected to report higher earnings and strong holiday spending when it reports its fiscal fourth-quarter earnings results on Tuesday before the markets open. The department store chain has been outperforming its mid-price peers like Kohl's Inc. and J.C. Penney Co.
WHAT TO WATCH FOR: Any details on how a slowly improving economy affecting its customers in the quarter that ended in January. Wall Street analysts will want to know how Macy's plans to respond to a new pricing strategy that rival J.C. Penney launched Feb. 1. Focusing on everyday prices and deeper promotions that last an entire month, Penney slashed initial prices at least 40 percent so shoppers can rely on getting a decent bargain every time they shop, instead of having to time their trips for sales. The new prices are based on what shoppers have been willing to spend.
According to a recent survey of 10 identical products under various brands on Penney.com and Macys.com, Citi Investment Research analyst Deborah L. Weinswig found that Penney's prices were almost 21 percent below Macy's.
Investors will also want an update on Macy's legal battle with supplier Martha Stewart Living Omnimedia Inc., which it sued last month in a bid to block a licensing deal the housewares company made with Penney. Macy's claims the deal violates an exclusive pact Macy's has to sell Martha Stewart Living products. The lawsuit followed the announcement that J.C. Penney, based in Plano, Texas, bought a 16.6 percent stake in Martha Stewart Living and plans to start opening mini-Martha Stewart shops inside most of its stores next year.
Macy's has been reaping the benefits of its strategy for tailoring merchandise to local markets, which has helped it overcome the economic doldrums. The department store chain also has succeeded in locking up more exclusive brands. It reported this month that January revenue at its stores open at least a year rose 2.4 percent. That was short of Wall Street expectations, but the company raised its profit forecast for the quarter and the full year well above analysts' estimates.
Revenue at stores open at least a year is an important indicator of a retailer's health because it excludes stores that recently opened or closed.
The retailer now expects adjusted fourth-quarter profit of $1.63 to $1.65 per share, up from $1.55 to $1.60 per share. For the full year, Macy's now expects to earn between $2.81 and $2.83 per share, up from $2.73 to $2.78.
WHY IT MATTERS: Macy's is seen as a barometer of spending among middle- and-upper-income shoppers.
WHAT'S EXPECTED: Analysts surveyed by FactSet on average expect earnings of $1.65 per share on revenue of $8.70 billion, according to a FactSet survey.
LAST YEAR'S QUARTER: Macy's, based in Cincinnati, earned $1.55 per share on revenue of $8.27 billion.
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