Macy's gives an early holiday gift: Will retailers benefit?

Terry Lungren, chairman and CEO of Macy's Inc.
Adam Jeffery | CNBC

Macy's was the first big retailer to report (most have an August-October quarter), and its results this morning were certainly encouraging. Both earnings and revenues were above expectations, while comparable store sales were up 3.5 percent.

That was quite a bit above expectations. Earnings were up 30 percent year over year--a contrast from the average retailer, which is expected to increase earnings by only four percent in this quarter, according to RetailMetrics.

My reaction is: Huh? Back to school was not great, there were lots of promotions, and everyone believed the shutdown must have had some negative impact. So what gives?

The magic of Macy's

Expectations were VERY depressed--leaving Macy's with room to jump over an already lowered bar. Many analysts were only expecting a 1 to 1.5 percent comparable store numbers. There was a lot of cost cutting that saved the day, apparently.

But Macys noted the October period was strong (even J.C. Penney indicated they would have a positive comp for October).

CEO Terry Lundgren went out of his way to highlight the unusually strong sales trend. "We saw improvement in the sales trend in every region of the country compared with the spring season," Lundgren said. "Our business improved during the quarter, with particular strength in October, so we are entering the fourth quarter with confidence," he added.

Will this spill over into other big retailers? Wal-Mart reports tomorrow, as does Nordstrom and Kohls. Macy's is a little higher end than Kohls, but not nearly as much as Saks is. I still I would be surprised if Wal-Mart or Target put up similar surprises. Their consumers still do not have a lot of disposable income to spend. The wildcard here is gas, where prices are near two-year lows.


The IPO business keeps chugging along.

Online college textbook company Chegg (CHGG) priced 15 million shares at $12.50 each, above the range. This is all about disrupting the expensive, book-bound textbook business by transitioning to an 'eTextbook' platform. It was founded by three Iowa State University students, and the company has grown fast: they have 7.2 million student users, including 40 percent of college-bound high school seniors and 30 percent of all college students.

Hotel chain Extended Stay (STAY) priced 28.3 million shares at $20 apiece, in the middle of the price talk. The company was acquired out of bankruptcy in 2010 by Blackstone, Centerbridge and Paulson & Co. They are in the middle of $625 million renovation program designed to upgrade the vast majority of it 682 hotels.

Limited partnership Dynagas LNG (DLNG) priced 12.5 million shares at $18 each, below the range.

Finally today is the first day the NYSE is not an independent company. The deal with Intercontinental Exchange (ICE) closed last night and the NYSE is now trading under the symbol ICE.

By CNBC's Bob Pisani