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Macy's strength masks underlying retail weakness

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Retail sales results are starting to trickle in. While Macy's is a winner, there are many disappointments.

The retail giant is turning into a retail innovator, but don't expect that to carry through to other retailers. Based on what I have seen so far, the holiday shopping season is a disappointment.

Cramer: Macy's winner, Family Dollar loser

Bed Bath & Beyond cut its full year earnings forecast. Signet Jewelers cut is fourth quarter earnings guidance, even though sales rose five percent, saying "additional discounting was necessary." Pier One cut its full year earnings outlook, with CEO Alex W. Smith saying he was "extremely disappointed" with December sales results. He cited, among other things, disruptions due to weather.

Not to be left out, American Eagle and Family Dollar also cut guidance.

December comparable store sales weren't any better. Zumiez reported comps well below expectations. L Brand was also below expectations and Cato also missed.

It wasn't all bad. Haverty Furniture reported a 9.5 percent increase in comparable store sales, above expectations: some home furnishings stores are a relative bright spot.

We were all expecting margins to be hurt, so it's not surprising some are reducing guidance. Still, with 50 percent off sales, we still couldn't get better comparable store sales? It looks like a roughly three percent rise in comp store sales for December, according to RetailMetrics.

That is not a drastic disappointment, but it is when you consider the environment. Consumer net worth at record highs. The job market is showing improvement. And 50 percent off sales! Wouldn't you expect sales to be a bit stronger?

Meanwhile, Macy's is shaping up to be a long-term winner in retail. The company's positive November-December comparable store sales of 3.6 percent, its higher earnings per share (EPS) guidance for 2014, and its cost cutting initiatives are all pleasant surprises.

While much is being made of the 2,500 job cuts announced, it's simply wrong to imply that Macy's is having trouble. The retail icon is showing some real savvy in managing a changing retail environment. They are consolidating, combining the Midwest and North regions, and reducing the number of districts to 60 from 69. They are trying to be more innovative and are upgrading systems to become more efficient.

And those 2,500 jobs lost? The company has announced it will be investing heavily in its online store and direct-to-consumer; they will be doing significant hiring in this area. In the long run the employee count is likely to remain unchanged.

And what about those five stores being closed? The company always announce store openings and closings at the end of the year. Last year, it closed seven, and in 2011 twelve. They also announced they would open five new Macy's and three new Bloomingdale's. But that didn't get nearly as much publicity as five stores closing and 2,500 layoffs.


The first five day indicator was not favorable with the S&P 500 down 0.6 percent in the first five trading days of the year. Some of the names that had the largest gains last year are down this year:

  1. -8%
  2. -7%
  3. -5%
  4. -4%
  5. -4%

By CNBC's Bob Pisani