• by Sarah Mahoney  @mahoney_sarah, August 12, 2009

Despite the pummeling department stores have been taking, Macy's says its second-quarter earnings bested expectations, and even raised its earnings outlook for the remainder of the year.

"We were able to exceed our expectations with strong earnings and cash flow in the second quarter, despite lower sales in an economic environment that continues to be very difficult," Terry J. Lundgren, Macy's, Inc. chairman and CEO, says in a release announcing the results. "We successfully lowered inventories and managed expenses... . Our second-quarter same-store sales performed as well as or better than most department store retailers even while we were completing the largest organizational transition in Macy's recent history."

Net income was $7 million, down from $73 million a year ago. (Results include restructuring charges of $34 million related to those transitions, announced back in February.) Sales in the second quarter fell to $5.16 billion, down 9.7% from $5.72 billion in the same period a year ago. And on a same-store basis, sales sank 9.5%.

But the Cincinnati-based chain says same-store sales in the "My Macy's" stores - the 20 pilot districts that converted to the new system in 2008 -- "continued to outpace the remainder of the company, and the gap continued to widen in the second quarter."

Even more bullish? The company says that while it is still expecting same-store sales in the second half of its fiscal year to be in the range of down 5 to 6%, it substantially raised its full-year earnings estimate. It now says it expects to earn between 70 and 80 cents a share, compared to the 40- to-55-cent range it predicted earlier.

That may bode well for other retailers, too, especially as most are chewing their fingernails over back-to-school spending. NPD Group just released its back-to-school survey, and while it does anticipate a decline, it's forecasting a smaller dip than last year.

"This year, there was a 5% increase in the number of consumers saying they either 'haven't started' or 'don't plan to shop' for back-to-school as of July 2009," the Port Washington N.Y.-based market research company says in its report. That's "enough of a shift to show us that there is no real rush by consumers to shop, even with the deep discounts being offered early in the season."

Still, it says, last year revealed an even bigger drop-off in spending intentions. "So the good news is that the bigger drop-off is behind us," it says. "And the 'not so bad news' is that back-to-school is in line with the current trend of consumers cutting back but not out."