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Macy's earnings: 17 cents per share, vs expected EPS of 41 cents

Macy's on Thursday reported sales and earnings that fell short of analysts' expectations, though it reaffirmed its full-year earnings per share guidance and raised its sales outlook.

The department store chain also said that it had entered into a joint venture with Brookfield Asset Management to potentially redevelop 50 of its stores. That announcement comes as investors are clamoring for Macy's to find ways to make money from its massive store fleet.

The company's shares were 3 percent higher in premarket trading, after initially falling.

During the fiscal third quarter, Macy's said it earned 17 cents a share, adjusted, on revenue of $5.626 billion. Wall Street had expected Macy's to report earnings of 41 cents per share, compared with 56 cents a share in the prior-year period, according to a consensus estimate from Thomson Reuters.

Analysts predicted the department store's revenue would contract to $5.64 billion, down from $5.87 billion a year earlier.

Comparable sales declined by 3.3 percent, excluding licensed departments. That's steeper than analysts' expectation of a 2.8 percent decline. It also marked the seventh consecutive month that metric has declined.

Despite that shortfall, Macy's raised its forecast for full-year comparable sales on owned and licensed items, saying they should decrease in the range of 2.5 percent to 3 percent. That compares with its prior outlook of a 3 percent to 4 percent decline. The company expects same-store sales excluding licensed items to be approximately 50 basis points lower.

Macy's also reiterated its forecast for annual diluted earnings per share, saying it expects them to fall in a range of $3.15 to $3.40, excluding asset impairment and retirement settlement charges.

"We are right on track with what our own expectations were," CEO Terry Lundgren told CNBC.

The major department store chains have taken a beating over the past year, after a spate of unseasonably warm weather bit into their year-ago sales. That left them with too much inventory for the holiday quarter, sparking a firesale at Macy's and its competitors.

With its merchandise levels finally in line, analysts have recently pointed to Macy's opportunity in the fourth quarter.

"Inventory is in such different shape today than it was one year ago," Lundgren reiterated to CNBC. "[Last year] we were loaded with it. All we did was mark it down... Now our inventory's in perfect shape because we planned for this."

He added that a more solid economic backdrop — and the conclusion of the presidential race — have put the consumer "in a position to buy."

Yet fine-tuning its merchandise levels isn't the only challenge the chain is facing. Consumers have shown an ongoing reluctance to spend on apparel; and when they do, they're increasingly making those purchases at off-price stores and Amazon.

Sales at department stores shrunk 4.8 percent over the nine months ended September, compared with a 2.9 percent increase for the broader industry. Meanwhile, Cowen & Company predicts Amazon will surpass Macy's as the largest clothing retailer in the U.S. next year.

Like others in the retail space, department stores are also battling ongoing, excessive promotions that have led to deflation. That likely contributed to Macy's decision to once again open on Thanksgiving Day, this time an hour earlier.

To fight back against its headwinds and fuel more profitable growth, Macy's said in August that it would close 100 of its stores. And last month, management said it had sold five of its stores to General Growth Properties. The retailer expected to realize a gain of $32 million from the sales in the third quarter.

On Thursday, the company said it has signed a contract to sell its men's flagship in San Francisco's Union Square for $250 million. It expects the transaction to close in January, and to recognize a roughly $235 million gain a year later.

It's also signed a contract to sell its downtown Portland, Oregon, store for $54 million, with that transaction seen closing in the fourth quarter. At that time it expects to recognize a $36 million gain.

Macy's "continues to explore options" for its downtown Minneapolis, Chicago and New York City stores.

Investors are keeping a keen eye on the company's plans for further real estate maneuvers, which many say will drive the company's stock higher.

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