Tickers in this Article: M, JCP, JWN, SHLD, SKS
So far this year, mid-market department store retailer Macy's (NYSE:M) has reported stellar stock performance, compared to its peers and the market in general. A focus on the basics, including a localized merchandise strategy and store remodeling programs, are key reasons for its revival among customers and investors alike. Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Recent Results Recap
The most recent data point pointing to Macy's sales momentum, was a same-store sales increase of 4.8% in the month of November. This included the all-important Black Friday shopping day following Thanksgiving. Macy's was one of many retailers to open at midnight and the strategy appeared to pay off. In contrast, rival JC Penney (NYSE:JCP) chose to open at 4 a.m., in what had been a traditional opening time prior to this year. Its spin was that it chose to "respect Thanksgiving Day for families" by opening later, but the move backfired, as comps fell 2% and total sales dropped 5.9%, from last year's November. In contrast, Macy's total sales improved 5.3% to $2.5 billion.

The strong November followed an equally impressive third quarter period that ended Oct. 29, 2011. Quarterly sales increased 4.1% to $5.6 billion, as comps grew 4%. Online sales jumped almost 40% at Macy's.com and Bloomingdales.com, the last of which competes with the likes of Nordstrom (NYSE:JWN) and Saks (NYSE:SKS) at the higher end of the department store industry. Operating income jumped 64.4% to $291 million, while earnings per diluted share jumped to 32 cents from 8 cents, in last year's third quarter. Management cited improved performance at the namesake store, Bloomingdales, and stronger credit performance from customers who use its credit cards.

Analysts currently project full-year sales growth north of 5% and total sales of $26.3 billion. Following the solid third quarter, Macy's upped its earnings guidance to between $2.70 and $2.75 per diluted share, which would represent very robust growth from last year's earnings of roughly $2.10 per share.

The Bottom Line
Macy's continued sales and profit momentum are a key reason the stock has returned more than 30% so far in 2011. This is well ahead of the market and peers, with the worst performer, Sears Holdings (Nasdaq:SHLD), down more than 20% year-to-date. Comparing the two firms is a useful exercise, as Sears has failed to grow sales for six years now. Sears has a reputation for trying to squeeze its stores for short-term profits, while avoiding investing in merchandise and store improvements. Macy's has taken the opposite strategy and has pushed local merchandise and remodeling strategies to re-energize and re-engage its customer base.

As the share price performance clearly demonstrates, Macy's strategy is paying off in spades. At a very reasonable forward P/E of only about 12, there is still plenty of room for the stock to run, as long as the impressive operating performance is sustained. (For related reading, see Can Investors Trust The P/E Ratio?)

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At the time of writing Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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