Macy's reported a fourth quarter profit that beat Wall Street expectations as its strategy of tailoring merchandise to local markets paid off during the key Christmas season.

The department store chain also operates Bloomingdale's stores.

It said it expects that same strategy to help increase revenue at stores open at least a year by 3.5% in fiscal 2013. That is on top of the increase of 3.7% for 2012.

The measure is a key indicator of health because it strips out the impact of newly opened and closed locations.

"Going into 2013, our team is moving ahead with new plans and actions to sharpen our approach to localised merchandise assortments and marketing," chief executive Terry Lundgren said in a statement.

Like many retailers, Macy's had a slow start to the fourth quarter because of the lingering effects of Superstorm Sandy on the US east coast and ongoing economic uncertainty. But sales bounced back in January.

Gross margin, or revenue after the cost of sales, slipped to 40.6% during the quarter, from 41% a year earlier, suggesting the company may have had to discount more heavily to sell items.

Competitor JC Penney reports its results tomorrow. Penney is expected to report its fourth quarter of big losses and sales drops in a row.

The two companies are also locked in a lawsuit that alleges Penney violated Macy's exclusive deal with home diva Martha Stewart.

For the period ended February 2, Macy's said it earned $730m, or $1.83 per share. That compares with $745m, or $1.74 per share, a year earlier, when the company had more shares outstanding.

Not including one-items such as expenses associated with the early retirement of debt, it earned $2.05 per share.

Revenue was $9.35 billion, up from $8.72 billion a year ago. Analysts had expected a profit of $1.99 per share on revenue of $9.35 billion.

For the year, the company earned $3.24 per share on revenue of $27.69 billion. In 2013, the company expects earnings per share of $3.90-$3.95.