“Larry: Macy’s is the first of the major retailers to report quarterly results this week. The department store chain announced this morning better than expected earnings and raising full-year guidance. The stock is trading up about 3%, almost $16. Rebecca Jarvis has been monitoring Macy’s conference call and joins us now. Hello, Rebecca.

Rebecca: Hey, Larry, the first retailer, but hearing a very similar song out of Macy’s as we have heard from a number of companies this earning season. They are cutting costs, watching inventories, and they hope that that will make the difference between earnings in the future and potential losses in the right now, that sales picture at Macy’s is still looking somewhat disappointing. Where they are seeing the biggest uptick in sales is with this new concept called My Macy’s, a much more regional approach to the way they do business. Tastes and watching what people in particular regions want.” CNBC’s The Call 8/12/2009

This is a huge week for the retail sector as many big earnings reports are on tap for the second half of the week, including Walmart (WMT) and JC Penny (JCP). Most retailers have endured a tough stretch as consumers have pulled back on spending whenever possible. Macy’s (M) got things started for the major retailers as they reported a quarter in which sales fell 9% and net income slipped 90% from $73 million to $7 million. Diluted earnings per share were just 2 cents, but when taking out the effects of restructuring charges the company actually made $.20. Wall Street expectations were for $.15. Revenue came in a little bit weak, but more importantly Macy’s raised it full year guidance from a range of 40 to 55 cents per share up to 70 to 80 cents per share.

M The stock got a nice 6% bounce today after the relatively upbeat earnings release. Like so many companies this quarter, Macy’s has been able to cut costs aggressively and that has translated to a better bottom line. In this environment, we cannot blame them for trimming whatever fat possible out of their cost structure. Perhaps we have simply become weary of the same old song and dance (sales declines, cut costs, better than expected profits), but we would of course have liked to have seen sales at least match expectations, knowing that growth is certainly asking too much right now. This is the fourth straight quarter of declining sales volumes, in addition to 15 consecutive months of comparable store sales declines.

Macy’s management hopes that the My Macy’s concept will be able to liven up sales going forward, and the preliminary results are encouraging. So far, the 20 district pilot stores reported better same store sales than the rest of the company and the gap widened in the second quarter. The program is spreading to more stores and regions of the country, so we will be curious to see how this strategy pans out.

For now, we are reaffirming our Fairly Valued rating on M shares. While the last quarter did show some improvement, we are not yet confident that the consumer is ready to spend again. Management expects same store sales to decline by about 5% to 6% for the second half of the year. With revenues continuing to slide and a cautiously optimistic outlook for slower declines, we are not recommending shares even at this low price level.

Macy’s Does Better than Expected, Lifts Guidance