Macy's, Inc. (M - Free Report) is executing its turnaround strategy as it enters 2020. But can it succeed? This Zacks Rank #1 (Strong Buy) is still paying its dividend, which is currently yielding in the double digits.

Macy’s is a fashion retailer with three retail brands, Macy's, Bloomingdale's and Bluemercury.

An Earnings Beat in the Fourth Quarter

On Feb 25, Macy's reported its fourth quarter fiscal 2019 results and beat on the Zacks Consensus by 8.7%. Earnings were $2.12 compared to the consensus of $1.95. It was the second consecutive beat in a row.

Sales declined in the quarter to $8.3 billion from $8.4 billion a year ago.

Fourth quarter comparable sales for owned and licensed fell 0.5%.

Full year comparable sales for owned and licensed slumped 0.7%.

Full year 2019 sales also fell compared to the year ago period at $24.56 billion compared to 2018 at $24.97 billion.

Reiterated 2020 Guidance

On Feb 25, the company confirmed its earlier 2020 guidance which included fiscal 2020 comparables of a decline between 2.5% and 1.5%.

Additionally, net sales are expected to fall again, declining to a range of $23.6 billion to $23.9 billion.

Macy's still considers 2020 to be a "transition" year.

Earnings are expected to be in the range of $2.20 to $2.40, which is well under the fiscal 2019 earnings of $2.91.

Why Is Macy's a Zacks Rank #1?

Given the decline expected in sales and earnings for fiscal 2020, how could Macy's be a Zacks Rank #1 (Strong Buy)?

The Rank is determined by revisions to analyst earnings estimates.

After the report, 6 analysts revised their earnings estimates for fiscal 2020 higher, pushing the Zacks Consensus Estimate up to $2.49 from $2.32.

That is above the company's guidance range.

The analysts were too pessimistic going into the earnings report and had to revise their estimates higher.

Shares are Dirt Cheap

Should you bite?

Shares have gotten hammered in the coronavirus correction. They're down 33.6% over the last month and are hitting new 5-year lows.

They're dirt cheap with a forward P/E of just 5.1.

But with falling earnings expected this fiscal year, it does have value trap characteristics.

Macy's is still paying that big dividend, now yielding 11.9%. Last quarter's dividend is payable to shareholders of record as of March 13, 2020 on Apr 1, 2020.

Competitor Nordstom, Inc. (JWN - Free Report) is also cheap, with a forward P/E of 9.4. Shares have fallen 27% over the last month. It's a Zacks Rank #3 (Hold), however.