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Earnings Aren't Enough In the Retail Space

This earnings season has been rife with companies reporting better-than-expected bottom line numbers on lower-than-anticipating quarterly revenues. On Wednesday, Aug. 12, retailer Macy's (M) provided the latest example of this phenomenon. The company posted Q2 earnings of $7 million, or 20 cents per share, which beat the consensus forecast of 15 cents per share profit. But that number is tiny when compared with $73 million the company earned a year ago this quarter.

In terms of revenue, Macy's came in with sales of $5.16 billion in Q2, down almost 10% from a year ago and below analysts' forecasts of $5.18 billion. Moreover, the all-important same-store sales numbers were down 9.5% in July from a year earlier.

Now I am not knocking the Macy's earnings beat, but given the substantial number of companies beating estimates in this fashion, I think we need a bit more information than just earnings to determine who the likely winners will be going forward, and that's especially true in the fickle back-to-school retail space.

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