Macy’s Inc. ( M - Analyst Report ) , one of the leading department store retailers in the U.S., posted strong comparable-store sales (comps) for the four-week period ended August 25, 2012, surpassing managements’ expectations.

Comparable-store sales improved 5.1% year over year for the month of August, while, total sales increased 5.7% to $1.81 billion compared with $1.71 billion in the comparable prior-year period.

The increase in comps was attributable to continued strength in its online business. Moreover, results were boosted by healthy back-to-school sales along with enhanced sales in Men’s apparel, beauty products, women’s shoes, home furnishings and handbags.

Year-to-date, Macy’s sales increased 3.9% to $14.1 billion compared with $13.5 billion in the same period last year, while, same-store sales increased 3.8%.

Online sales, which include sales from macys.com and bloomingdales.com, surged 37.4% in August. On a year-to-date basis, online sales shot up 35.2% from the comparable period last year. The company seeks to expand both Macy's and Bloomingdale's brands online.

Despite secular headwinds, Macy’s has been performing well in the current fiscal. The company has been taking a number of initiatives in order to increase its sales, profitability and cash flows. These steps include integration of operations, consolidation of divisions as well as developing e-commerce business and online order fulfillment centers.

We remain optimistic about the company’s customer-centric localization initiative called “My Macy’s.” The program aims at improving comparable-store sales and reducing operating expenses, with stores and merchandise assortments focusing on local customer needs and preferences.

However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels and high household debt levels, which may negatively impact their discretionary spending, and in turn the company’s growth and profitability.

Macy’s, which competes with J. C. Penney Company Inc. ( JCP - Analyst Report ) , Dillard’s Inc. ( DDS - Analyst Report ) and Saks Incorporated ( SKS - Analyst Report ) , currently operates approximately 840 department stores in 45 states, the District of Columbia, Guam and Puerto Rico.

Currently, we have a long-term Neutral recommendation on the stock. Moreover, Macy’s holds a Zacks #3 Rank that translates into a short-term Hold rating.