Investors shrugged off Macy's disappointing sales results and lowered full-year forecast on Wednesday, sending shares higher after the retailer reported earnings that blew past estimates.
But underlying weakness in the department store's sales figures—a symptom that's already reared its head in early releases from competitors J.C. Penney and Kohl's—signaled that despite predictions of a consumer rebound this Christmas, things still aren't easy for department stores.
Although softness has been reported across much of the retail sector, the department store set is particularly vulnerable because it relies heavily on dwindling mall traffic, and tends to cater to middle-income consumers.
That shopper is still feeling pinched despite the strengthening economy, which has seen gains in employment and the stock market.
"We've still kind of got a tale of two cities here," Villanova School of Business professor Eric Karson said ahead of Macy's earnings. "It's the middle that always does get attacked."
Macy's, one of the few big winners last holiday, said on Wednesday that its earnings per share rose 30 percent to 61 cents for the third quarter. But its $6.2 billion in revenue fell well shy of the $6.34 billion anticipated by Thomson Reuters consensus forecasts.
What was most jarring, however, was the company's diluted full-year forecast. Many experts have pointed to Macy's—a leader among the department stores for its buy online, pick up in store initiatives and attractive merchandise mix—as a top pick for the critical fourth-quarter season.
Weakness at Macy's would likely translate into softness for the whole department store set, though analysts tend to be more bullish on Nordstrom since it caters to a higher-income consumer.