Macy's Continued to Dominate in Q4

Investors could not be more thrilled with Macy's (NYSE: M  ) fourth-quarter and fiscal-year 2013 performance. Macy's took to the runway with style and sophistication, as it far exceeded analysts' earnings-per-share estimates. According to Yahoo! Finance, Macy's actually secured its "fifth consecutive year of double digit earnings growth."

The savvy yet trendy department store had much to brag about the other week as it announced solid figures across the board, causing other retailers to worry about their own performance and how they will stack up to Macy's. Senior executives at Macy's are convinced their M.O.M. -- My Macy's localization, omnichannel integration, and magic selling -- business model is a winner and cannot be replicated by any other retailer.

Initial reaction
Macy's impressive earnings performance went over well on Wall Street on Feb. 25.  As trading began, investors reacted positively to the news, sending Macy's stock price climbing 5.8% and higher. Results continued to make headlines and gain recognition from Wall Street analysts, whose EPS estimates were lower than Macy's actual earnings.

From market close on Feb. 24 to market close the following day, Macy's stock jumped 6%, or $3.19, closing at $56.25 per share. Surprisingly, it didn't end there. To add to its already solid performance, Macy's stock price increased another 2.7% in early morning trading on Wednesday, Feb. 26. Let's take a closer look at Macy's fourth-quarter and full-year results to see which areas experienced the most growth and improvement.
Details of the quarter and full year
For the fourth quarter ended January, Macy's knocked earnings out of the park, reporting increases in comparable-store sales and net income. For example, Macy's fiscal fourth-quarter EPS totaled $2.31, exceeding analysts' estimates by $0.14 and increasing 12.7% from a year ago. 

Despite the fact that quarterly revenue declined by 1.6% to $0.202 billion year over year, Macy's net income jumped 11.1% from $730 million to $811 million. Its good fortune didn't stop there. Comparable-store sales also saw improvement over a year ago, increasing 1.4%; the increase was 2.3% when combined with sales from departments licensed to third parties. Macy's also managed to spend less on cost of goods sold as well as selling, general, and administrative expenses, which is something to brag about. 

Macy's also had quite a successful year overall. Although revenue fell short of expectations, Macy's net sales increased from $27.7 billion to $27.9 billion -- growth of 0.9%. In addition, Macy's achieved an annual profit of $1.5 billion from $1.3 billion in the previous year, an increase of 11.2%. Comparable sales also improved year over year, as Macy's reported a 1.9% increase; it was a 2.8% increase when combined with sales from departments licensed to third parties. These sales represent those in stores through Macy' and through Bloomingdale' 

While all of these figures do a fine job of showcasing Macy's continued growth, full-year earnings underscore Macy's success as a leader in the retail industry. For the fiscal year, Macy's earned diluted EPS of $3.86 per share, or adjusted EPS of $4, which when compared with FY 2012 results is an increase of 16%. 

Not only did Macy's exceed analysts' estimates, but it went beyond its own initial full-year guidance of $3.90 to $3.95. According to Macy's CEO, Macy's is on a roll, and the company's M.O.M. business strategy is in large part the secret to its continued success, separating it from other retailers.

Expectations for 2014
With the strength of its M.O.M. strategy along with its recent performance, Macy's offered a strong forecast for FY 2014.  Based on the fact that Macy's has now achieved four consecutive years of continued comparable sales growth, its expectations for comparable sales in 2014 are estimated to increase between 2.5% and 3%. 

Furthermore, its EPS for the full year are estimated to be between $4.40 and $4.50, which if achieved will mean growth of 10% to 20%. While Macy's announced in January that it will close six stores and cut 2,500 jobs, it also stated that it plans to create around the same number of jobs to support further developments and improvements within its omnichannel initiative. 

In addition, it plans on opening three Macy's department stores and one Bloomingdale's store during fiscal year 2014. With Macy's continued dominance in the retail industry and the lack of success at other retailers, such as J.C. Penney and Sears Holdings, Macy's has the edge. It is more than capable of gaining additional customers and sales traction through its many channels to either meet or exceed all expectations in 2014. 

Foolish takeaway
Foolish investors should definitely keep an eye on Macy's. It continues to dominate the retail industry, stealing customers left and right from other department stores.

Despite the effects of the Great Recession, Macy's annual performance year after year since 2008 tells us that this retailer is not only quick on its feet, but it can take on a challenge with confidence and sail through with flying colors. Its stock will likely climb even higher as its competition begins to release their fourth-quarter and full-year earnings for 2013.  Regardless, Macy's is certainly worth a closer look by Foolish investors looking for a top-notch retailer.

What other great retailers are out there?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

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