We're now just two weeks away from the start of the holiday shopping season. I hate playing the Grinch. It's just what I do in this weekly column, where I bash a stock to bits.

I'm not angling to be on the "naughty" list. I just think that some stocks are better than others. That doesn't make me an Ebenezer Scrooge, does it? I do come right back with three related recommendations that I feel will be better in your portfolio.

Who gets tossed out this week? Come on down, Macy's (NYSE:M).

Macy's gray
Shares of Macy's were deflating this morning faster than the balloons at the end of Macy's Thanksgiving Day Parade. The department store giant posted quarterly results for its preholiday quarter that were more ho-hum than ho, ho, ho.

Yes, Macy's did post a narrower loss than a year ago during the seasonally forgettable period, but this doesn't mean that the retailer is heading in the right direction. Sales still fell by 3.9%, to $5.3 billion, weighed down by a 3.6% decline in same-store sales (aka comps).

Hold up a sec. Let me rifle through my pockets for an asterisk.

In a dubious move, Macy's also began lumping website sales into its bricks-and-mortar comps earlier this year. Since online sales are improving for most chains, this practice pads results. Comps at the physical store level actually fell by 4.2%.

The company is upbeat about the holidays, but is still projecting slightly negative comps during its fiscal year's final quarter. That's surprising, given how brutal last year's holiday shopping season was. Rivals Nordstrom (NYSE:JWN) and Saks (NYSE:SKS) posted positive comps for October, so why is Macy's still in the red?

"We continue to see encouraging results from our My Macy's approach to local markets," CEO Terry Lundgren notes in this morning's report.

Hold up a sec. Let me rifle through my pockets for a second asterisk.

Don't let Macy's get away with patting its own back for this year's localization initiatives. Making its stores more responsive to regional tastes isn't some magical elixir. In fact, it is exactly what Macy's already had five years ago, when it decided to replace the signage of local faves in its portfolio, including Burdines, Rich's, and Marshall Field's, with cookie-cutter Macy's locations.

"I'm not one to stand defiantly before the wrecking ball of change," I wrote at the time. "However, I'd be willing to bet that my feelings for Burdines are probably echoed by locals in other regions who will be affected by the name swap."

Imagine that? Five years later, Macy's realizes that folks like a little more local color and indie spirit in their Macy's and Bloomingdale's chains.

That said, Macy's has come a long way over the past year. It had originally projected a per-share profit between $0.40 and $0.55 this year. It is now eyeing earnings of $1.01 to $1.06 a share, before restructuring charges.

Hold your applause, because that is still less than both the $1.29 a share of adjusted earnings from a year ago and the $1.11 a share that Wall Street expects. Not living up to heightened expectations is a biggie here, because shares of Macy's have roughly tripled from their lows of this year.

Macy's is a laggard and the soft economy is driving shoppers to lower-priced chains.

You can do better than that.

Good news
As I do every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting tossed. Let's go over three fill-ins.

  • Kohl's (NYSE:KSS) -- When it comes to Macy's apparel stronghold, Kohl's is a fierce discounter. Fashion snobs may turn their noses at Kohl's, but thrifty shoppers keep filing in. The company reports quarterly results tomorrow, but there are no minefields here. Kohl's has posted positive comps for four consecutive months. It also raised its third-quarter guidance last week -- the same one in which Macy's posted a loss -- to a profit of $0.60 to $0.61 a share.

  • Amazon.com (NASDAQ:AMZN) -- Macy's may have posted a healthy 21% spike in online sales this past quarter, but it obviously wasn't enough to grow overall sales. Amazon is in a league of its own. Net sales shot up 28% in its latest quarter, with earnings skyrocketing 68% higher. The valuation on Amazon is a bit lofty, but this company owns the dot-com retailing space.

  • Target (NYSE:TGT) -- I like the discount department store prospects of Target and Wal-Mart Stores (NYSE:WMT), but I'll go with Target since that's the discounter that Macy's shoppers often trade down to if there isn't a Kohl's nearby. I'll admit that Target hasn't proven to be the recessionary standout it should have been, but at least it's more than holding its own. Analysts see earnings growing 9% this year and 13% next year.

Sorry, Macy's. We'll talk again when you give Marshall Field's back to Chicago and Burdines to Miami.