After a cutthroat holiday season filled with heavy discounting and long-running promotions, retailers are preparing to announce their fourth quarter and full-year earnings to the public. All eyes will be on Macy's (M -1.96%), as well as its arch-rivals J.C. Penney (JCPN.Q) and Sears Holdings (SHLDQ) as they release their fourth quarter figures during the last week of February. Not only will the results show just how the American consumer spent this holiday season, but investors will also get a crucial glimpse into what amounts to the most important three months of the entire year for department stores. Of note to Foolish investors will be how Macy's, which has been the dominant department store as of late, faired and if it continued to take away customers from its peers.

Performance a year ago
Going into the fourth quarter of 2013, Macy's is standing on several years of strong results. It was expected to earn between $1.94 and $1.99 a share in the fourth quarter of fiscal 2012, and instead pulled off an EPS of $2.05 ($0.06 higher than the highest estimate).  Fourth quarter revenue was also surpassed as analysts predicted Macy's earning $9.3 billion in revenue, but Macy's beat this estimate by $100 million to end with $9.4 billion for the 2012 holiday season.

If this was not enough, Macy's same-store sales during that holiday season increased 3.9% thanks to sales during the month of January, which boosted same-store sales by 11.7%. According to Macy's CFO, sales in the month of January "made up for their shortfall during the holiday season." It's quite possible that this was the case for the most recent holiday season as well. Macy's full-year EPS for the 2012 fiscal year came in at $3.46 with $27.69 billion in revenue. While these figures were excellent a year ago, Macy's full-year guidance for the current fiscal year is even better.

Outlook for fourth and analysts estimates
After its solid third quarter performance, Macy's released an optimistic outlook for its fourth quarter along with affirming its full-year guidance for the 2013 fiscal year. The company noted that its three strongest merchandise categories for the holiday season were likely to be jewelry, cashmere items, cold weather gear, and women's clothing.

Macy's used its third quarter performance as the best indicator as to how strong its sales will be in the fourth quarter. Analysts are currently expecting Macy's EPS for the fourth quarter to be $2.17 a share (an increase of $0.12 from a year ago) and sales of $9.27 billion. For the full year, analysts estimate Macy's EPS for fiscal 2013 to be $3.87; if this is met, it will mean that Macy's increased its EPS by 11.8% from a year ago. Revenue for the full year is expected to be slightly higher than a year earlier at $28.02 billion from $27.69 billion. Time will soon tell whether Macy's was able to hold its ground and keep producing a high volume of sales despite heavy discounting, or if it fell short of its sales goal.

In the table below, you can see how Macy's fourth quarter and full-year estimates stack up against retail rivals J.C. Penney and Sears Holdings. Both of these peers appear to be on a better track this year than they were a year ago. Investors interested in any of these three department stores should note that Macy's reports its fourth quarter earnings after market close on Feb. 25, while J.C. Penney reports on Feb. 26 and Sears Holdings reports on Feb. 27. From these estimates, it is clear that analysts expect Macy's to be the strongest retailer among its competitors and will likely produce a solid EPS and revenue.

Company Name

Current Qtr Revenue Estimate

Year Ago 4th Qtr Revenue

 Current Qtr

EPS Estimate

Year Ago EPS

J.C. Penney Co.

$3.88 billion

$3.88 billion




$9.27 billion

$9.4 billion



Sears Holdings

$10.52 billion

$12.3 billion



Foolish takeaway
The most recent fourth quarter was one of the toughest among retailers, who had to try and reel in customers by offering promotion after promotion. When faced with pressure from consumer spending and market trends, Macy's managed to use the pressure to its benefit. It leverraged consumers to its stores and online business while encouraging them to spend more. The company's dynamic business strategy has proven successful time and time again as its sales continue to increase despite an increase of discounts and promotions. Foolish investors should not be thinking the worst outcome with Macy's fourth quarter earnings, but instead should be optimistic that Macy's pulled off another strong performance.