Macy's (M  ) shares are more than 10% lower following the company's Q4 earnings report despite it beating expectations across the board and issuing guidance above expectations. One factor in the company's weakness is that it decided not to spin off its e-commerce unit as a separate entity which some investors believe could lead to a higher multiple.

Another is that retail stocks have been weak across the board as investors are anticipating a slowdown in consumer spending due to the expiration of stimulus payments, the effect of higher rates, and inflation eroding discretionary spending. Thus, many retailers have sold off despite strong earnings. Overall, Macy's is down 39% from its peak in mid-November.

Inside the Numbers

In Q4, Macy's reported $2.45 in earnings per share, beating expectations of $2 per share. This was a substantial improvement from last year's profit of $0.50 per share. Revenue also topped expectations at $8.7 billion vs $8.5 billion and was a 28% improvement from last year.

Same-store sales were 28% higher, topping expectations of a 24% increase. Overall, same-store sales were 6% higher on a 2-year basis. Time will tell how much of this can be attributed to pent-up demand and stimulus payments vs a recovery in retail. Online sales now account for 39% of overall revenue and were up 12% on an annual basis and 36% on a 2-year basis.

Its guidance for 2022 also came in slightly above expectations. Macy's sees a 1% increase in revenue, while analysts were looking for a slight decline. The company sees earnings coming in between $4.13 and $4.52 while analysts were looking for $4.04 per share.

It also noted positive trends in the early weeks of Q1 including strong consumer demand and some improvements in supply chain issues. It sees some more positive catalysts with international tourism increasing in the latter half of 2022 and increased traveling and people returning to schools and offices, driving more sales in depressed categories.

Some of Macy's growth initiatives are launching more private labels, improving its loyalty program, upgrading its website, and opening smaller stores. It's also seeing success in terms of engaging online shoppers to become repeat customers. It also is seeking to add more third-party sellers to its e-commerce platform as well as offering more personalized style recommendations and fashion advice to consumers.

Macy's stock is quite attractive given its drawdown and strong results. It's also spending $2 billion to buy back shares which is quite significant given its $6.7 billion market cap and 2.6% dividend yield.