Macy's (NYSE:M) stock has gotten off to a rough start in 2019, due to the company reporting subpar holiday season sales results last month. This forced Macy's to reduce its full-year earnings guidance dramatically and revived fears about the "death of the department store" among investors.

Slowing economic growth, the government shutdown, and lower-than-expected tax refunds for many taxpayers have created additional headwinds for retailers like Macy's in early 2019. On the other hand, the stock market has bounced back and economists still expect healthy increases in consumer spending this year. With all this in mind, investors are sure to take a close look at Macy's fourth-quarter results -- due out on Tuesday -- and especially its outlook for fiscal 2019.

Check out the latest Macy's earnings call transcript.

A disappointing end to a good year

Through the first three quarters of fiscal 2018, Macy's posted a solid 2.7% comp sales increase. Adjusted earnings per share rocketed higher, reaching $1.45, up from $0.93 in the first three quarters of fiscal 2017. (Some of that increase was driven by a lower tax rate, the result of U.S. federal tax reform.)

Macy's faced a much tougher year-over-year comparison last quarter. But as of November, it still expected to end fiscal 2018 in strong fashion, with full-year comp sales up 2.3% to 2.5% and full-year adjusted EPS between $4.10 and $4.30, up from $3.77 a year earlier.

Unfortunately, Macy's experienced a sales slowdown during the middle of December. As a result, comp sales rose just 1.1% for the combined November-December sales period. Based on this performance, management cut its full-year comp sales growth forecast to 2% and its EPS forecast to a range of $3.95 to $4.00.

The exterior of Macy's San Francisco flagship store

Macy's reduced its fiscal 2018 guidance last month. Image source: Macy's.

There were only a few (relatively low-volume) weeks left in the year when Macy's updated its outlook. Still, it will be interesting to see where its results come in relative to this guidance. Analysts, on average, expect EPS of $2.53 in Q4, bringing Macy's full-year EPS to $3.98.

Will comp sales growth continue in 2019?

The really big question for investors right now is whether Macy's holiday-season sales slowdown represents a new trend.

On the one hand, strong U.S. GDP growth, modest wage gains, and lower taxes supported big increases in consumer spending in 2018. Macy's can't count on these macroeconomic tailwinds to support sales growth to the same extent in 2019. Meanwhile, mall traffic continues to decline and department stores face new challenges from an abundant list of competitors.

On the other hand, Macy's is still early in the process of implementing some of the turnaround initiatives that have helped it return to sales growth since late 2017. After making a variety of improvements at 50 stores last year under its "Growth50" program, it will upgrade another 100 stores in 2019. Macy's is also rolling out new virtual-reality-assisted furniture departments at many stores and expanding its promising Macy's Backstage off-price concept.

To some extent, investors will just have to be patient and wait to see how the next few quarters play out. Nevertheless, it will be interesting to see what management projects in terms of sales growth and earnings growth for fiscal 2019. The analyst consensus currently calls for revenue to be roughly flat at $24.94 billion but for adjusted EPS to plunge 17% to $3.30.

Lots of other questions

Macy's real estate activity will also be in focus next week. First, the company's strategic alliance with Brookfield Asset Management (NYSE:BAM) to redevelop some of its properties may be close to bearing fruit. Macy's and Brookfield recently sought approval to add four outparcel buildings at a Macy's store in the Chicago suburbs. Furthermore, Brookfield Asset Management's two-year exclusivity window to create pre-development plans for 50 real estate assets recently ended, so the two companies may be ready to proceed on various other projects.

There have also been some preliminary signs that Macy's could soon unveil a plan for cashing in on the massive value of its Manhattan flagship store. It could also continue to sell stores where it finds that the real estate value outweighs the value of continuing to operate the store. Together, all of these factors suggest that Macy's could continue to reap substantial asset sale gains this year. That could help it beat analysts' earnings estimates.

The exterior of Macy's Manhattan flagship store

Macy's may be ready to monetize part of its Herald Square flagship store. Image source: Macy's.

Additionally, Macy's likely met or exceeded its leverage target by the end of fiscal 2018. Management may have set a new, even more conservative leverage target, paving the way for further debt reduction this year. But if not, it will be interesting to see what the company does with its excess cash -- a resumption of share buybacks could be in order.

Investors seem to fear the worst heading into Macy's fourth-quarter earnings report. That means it might not take much to get the stock moving in the right direction again. Indeed, a forecast of modest sales growth and meaningful asset sale gains from the Brookfield partnership and other real estate deals could go a long way toward reassuring investors.