Dive Brief:

• Macy's on Tuesday reported that fourth quarter sales rose 1.8% to $8.67 billion, up from sales of $8.52 billion in the year-ago quarter and besting the analyst forecast cited by CNBC for $8.68 billion. Same-store sales on an owned basis rose 1.3% in the quarter — blasting past estimates from analysts cited by CNBC for a 0.1% rise — and on an owned plus licensed basis rose up 1.4%. (Total sales in the quarter reflect a 14th week of sales, whereas same-store sales are on the same 13-week basis as fiscal 2016, according to a company press release).

• Shares soared 10% on the report, as the department store also reported adjusted diluted earnings, excluding certain items, of $2.82 per share, up from $2.02 in the year-ago quarter and handily besting the $2.71 analyst expectation cited by CNBC.

• In fiscal 2017, Macy's real estate sales (stores and non-store assets like warehouses), totaled $411 million in cash, the company said. This month the department store signed an agreement to sell seven floors of its Chicago State Street store to Brookfield Asset Management for $30 million and is exploring the sale of the 240,000 gross-square-foot I. Magnin portion of its main San Francisco Union Square building. Brookfield and Macy's have agreed to terms on nine of Macy's 50-asset portfolio, with an estimated cumulative value of $50 million. 

Dive Insight:

Macy's has inevitably lost market share as it closes stores as part of a massive reduction in its overbuilt footprint, but that is starting to yield some serious cash. Macy's said it will close its Redmond Town Center main store in Redmond, WA, in early 2019, bringing the total to 83 of the approximately 100 store closures announced in August 2016.

That's helping foot the bill as the department store also works to improve its merchandise and pull back from discounts. It's all working, CEO Jeff Gennette said in a statement on Tuesday, who called the company's fourth quarter results "solid."

"Consumer spending was strong in the fourth quarter, and we were ready with improved execution and great products across all categories," he said. "We were disciplined with our promotional cadence and maintained a good inventory position. We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy's to growth."

Last year the department store experimented with several merchandising and strategic initiatives as part of its North Star turnaround effort, and it will double down on the successful ones this year, he also said, adding that the retailer is encouraged by customer response to its new Star Rewards loyalty program unveiled in September. It's incumbent upon the retailer to make sure that those successful initiatives find their way into more stores, according to GlobalData Retail Managing Director Neil Saunders.

"That change is not yet established enough nor is it ambitious enough to drive a step up in performance," he warned in an email to Retail Dive, adding that, "In essence, there is a long tail of shops that look dated, are in sub-optimal locations, and where the customer experience is poor. Macy's must remedy this if it is to transform the business."

The retailer is finding a smoother path through its standalone Bluemercury division and off-price Backstage stores. In the fourth quarter the company opened two new Bluemercury stores for a total of 137. All told, Macy's opened 36 Bluemercury stores, two Macy's stores, 30 Backstage off-price stores within existing Macy's stores and one Bloomingdale's licensed location in Kuwait. The company closed 16 Macy's stores, all as previously disclosed. Expanding those and improving existing departments are proven growth areas, Saunders said, and could become "much more significant contributors" to profits.

"The refurbishment of departments such as home furnishings and footwear in some stores have shown that where Macy's makes an effort, sales results follow," Saunders said.

The company aims to return to strong same-store sales growth this year, Gennette said. For fiscal 2018, the company expects same-store sales on both an owned and an owned plus licensed basis to be flat to up 1%. Total fiscal 2018 sales are expected to decline between 0.5% and 2%, and adjusted earnings to land between $3.55 to $3.75 per diluted share, excluding anticipated settlement charges related to the company's defined benefit plans. Adjusted earnings include anticipated asset sale gains of $300 million to $325 million in fiscal 2018, compared to $544 million in fiscal 2017. The company anticipates an effective annual tax rate of 23.25% for fiscal 2018.

"Macy's cannot just wait around for a miracle," he said. "Management needs the strength and will to engineer one."