Why Jim Cramer thinks Macy's is a 'reverse-engineered' Amazon

CNBC's Jim Cramer and the 'Squawk on the Street' team discuss shares of Macy's, which are trading higher ahead of the holiday shopping season. Sign up and learn more about the CNBC Investing Club with Jim Cramer https://www.cnbc.com/investingclub/x

Macy’s on Thursday reported fiscal third-quarter earnings and sales that topped analysts’ expectations, leading the department store chain to raise its full-year forecast ahead of the holidays.

Separately, the company teased the launch of a digital marketplace that’s set to debut in the second half of 2022, and said it had hired consulting firm AlixPartners to review its business structure.

Macy’s shares closed the day up 21.1%. At one point, the stock hit a three-year high of $37.95.

The announcements come as activist Jana Partners has taken a stake in the business and is pressuring Macy’s to spin off its e-commerce operations from its stores, hoping to fetch a greater valuation. Saks Fifth Avenue pursued a similar split earlier this year. Its e-commerce unit is now reportedly preparing for an initial public offering at a higher valuation than it saw after its spin off from Saks’ stores.

“We also recognize the significant value the market is assigning to pure e-commerce businesses,” Macy’s Chief Executive Jeff Gennette said on an earnings call. “And as we look at the landscape today, we are undertaking additional analysis that could help inform our long-term strategy to further unlock value for Macy’s.”

Earnings top estimates

Under Gennette, Macy’s has been trying to woo younger consumers who may have shifted away from shopping at traditional department stores. He said Macy’s added 4.4 million new customers in the quarter and benefited from an “improved economic environment.”

Gennette also tried to ease concerns about ongoing supply chain issues and said Macy’s doesn’t expect to be hurt by bare shelves during the critical holiday shopping season.

“We expect the supply chain issues are going to continue into 2022,” he said. “Some categories are much better, some [challenges] persist. But I think overall we’ve got a great handle on how we’re mitigating that.”

Here’s how Macy’s did in the three-month period ended Oct. 30 compared with what analysts were anticipating, based on a survey by Refinitiv:

Earnings per share: $1.23 adjusted vs. 31 cents expected
Revenue: $5.4 billion vs. $5.2 billion expected
Macy’s reported net income of $239 million, or 76 cents per share, compared with a loss of $91 million, or 29 cents a share, a year earlier. Excluding one-time items, the company earned $1.23 per share, far better than the 31 cents that analysts had predicted.

Sales grew to $5.4 billion from $3.99 billion a year earlier. That came in ahead of estimates for $5.2 billion.

Macy’s reported comparable sales growth, on an owned plus licensed basis, of 35.6% in the quarter. Analysts had been looking for growth of 29.3%, according to Refinitiv estimates.

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