Fly Intel: What to watch in Macy's earnings report

Macy's (M) is scheduled to report results of its third fiscal quarter before the market open on Wednesday, November 14, with a conference call scheduled for 9:30 am EDT. What to watch for: 1. TURNAROUND: Last year, Macy's CEO Jeff Gennette said he was "committed" to stabilizing its brick and mortar business, and that customers had been confused by "very complex" pricing. On Tuesday, Genette told the Wall Street Journal that Macy's is planning to reduce the amount of merchandise and number of workers at its slower-performing locations, walling off entire sections at some stores and leaving the space empty. The smaller-store footprint, currently being tested at four locations, is an effort to save money on staffing and inventory while improving the chain's shopping experience. 2. COMPETITIVE LANDSCAPE: Macy's has been faced with competition from fast-fashion retailers like H&M, as well as an increase in online shopping on Amazon.com (AMZN). Macy's and other retailers are also looking to delve further into the beauty products market in a move to compete with Amazon and brick-and-mortar retailers like Wal-Mart (WMT) and Target (TGT). At Code Commerce in September, Genette said he believes its harder for internet giants like Amazon (AMZN) to go into brick and mortar locations than for physical retailers to move into e-commerce. "You see the investment that brick-and-mortar retailers are willing to make in order to be more competent online, and that is a voracious level of funding," Gennette added. "What all retailers are figuring out is that you can't starve your home base of brick and mortar while you're taking care of what your needs are going to be online." In October, Amazon announced plans to raise its minimum wage to $15 and advocated for a broader rise in the minimum wage to that level, putting pressure on retail peers. Earlier this month, Facebook (FB) opened its first small business pop-up concept in nine Macy's locations. "Macy's is focused on providing customers with fresh experiences, and we are always looking for new ways to engage our customers in store, online and via our mobile app," said Hal Lawton, president of Macy's. 3. GUIDANCE: In August, Macy's again raised its FY18 adjusted EPS view to $3.95-$4.15 from $3.75-$3.95, above analysts' expectations at the time of $3.87, though the consensus has since moved higher to $4.07. Total sales are now expected to be flat to up 0.7%, against analysts' current estimates of $24.96B, and comparable sales on an owned plus licensed basis up 2.1%-2.5%. The company previously forecast total sales down 1% to up 0.5%. Cleveland Research analyst Rusty Wilson said earlier this month that Macy's owned comp trends appear to have improved in October driven by cold-weather seasonal product. The analyst raised his Q3 owned comp estimate to 2.5% from 2%-2.5%, versus consensus of 2.6%.