Macy's storefront
A sign marks the entrance to a Macy's store in Dallas, Texas September 3, 2009. The Cincinnati-based national department store chain is expected to see revenue up, profit down, a week after it surprised Wall St. with a better-than-expected October, despite temporarily closing stores due to the Hurricane Sandy. Reuters/Jessica Rinaldi

While department store chain Macy's, Inc. (NYSE:M) is expected to announce lower third-quarter profit on Wednesday, it may beat analyst estimates because of strong October same-store sales and its recently increased guidance for the holiday shopping season, which could be the strongest since the 2008-09 recession.

Analysts polled by Thomson Reuters expect the retailer, which operates about 840 mid-range department stores in 45 states and 37 upscale Bloomingdale’s outlets in 11 states, to report earnings per share of 28.5 cents, 12 percent lower than the 32 cents from the same period last year. Revenue is expected be up, however, to $6.06 billion, a 3.5 percent gain from last year.

Last month’s same-store sales were better than expected, up 3.7 percent to $6.08 billion, despite closing more than 200 stores (from a few hours to a number of days) due to the superstorm. Those lost sales are expected to be regained in November as shoppers in the Northeast return to their regularly scheduled holiday shopping.

The rebound has been robust, and the National Retail Federation expects this holiday shopping season to fully rebound from the last recession -- despite the impending so-called fiscal cliff and lackluster job growth.

Part of the reason for the decline in Macy's income, despite an uptick in revenue, is the added costs of the Cincinnati-based company’s “Search and Send” program that offers free shipping for purchases over $99 for out-of-stock items on any given store that would be fulfilled by another outlet – an attempt to compete with online retailers, especially Seattle’s Inc. (Nasdaq: AMZN), which regularly takes a revenue hit by offering free shipping as an buying incentive and a way to build customer loyalty.

“Despite added costs related to free shipping ... we anticipate operating margin expansion, supported by sales growth in private label merchandise and disciplined inventory and expense management,” said Standard & Poor’s equity analyst Esther Kwon in a research note.

Analysts have praised what company CFO Karen Hoguet has called its “fulfillment logic” – which seeks to process online and “Search and Send” orders from stores and warehouses that have the largest stock of a particular item and which are closest to the customer’s shipping address.

In order to compete with its brick-and-mortar competitors such as Kohl's Corporation (NYSE:KSS) of Menomonee Falls, Wis., J.C. Penney Company, Inc. (NYSE:JCP) of Plano, Tex., and Dillard's, Inc. (NYSE:DDS) of Little Rock, Ark., Macy’s embarked in 2008 on an effort to customize each outlet to accommodate the specific demands of local customers in an effort to improve same-store sales. That effort, called “My Macy’s,” appears to have paid off. It now defines 69 geographic regions in the U.S., each with about a dozen stores, where marketing, stock and even apparel sizes are tailored for each specific region.

“We believe M is benefitting from successful execution of My Macy’s, as well as improved confidence among its higher-income customer base at Bloomingdale’s,” said Kwon, pointing also to the company’s investments in its online operations and sales associate training as positive factors.

If the company does beat expectations Wednesday, it will be continuing a trend. Macy's has topped estimates for the last five consecutive quarters and is expected to finish the year in early 2013 with an annualized EPS of $3.38 a share, up 17.4 percent from the last fiscal year. The company’s share price has gained 27 percent in the calendar year despite an industry-wide summertime slump that wiped out most of its first-half gain.

Shares on Monday were near the top of their 52-week range, up 1.21 percent to $41.10. Dillard’s, Kohl’s, J.C. Penney and Seattle-based Nordstrom, Inc. (NYSE: JWN) are some retailers scheduled to announce their earnings this week.