U.S. department store operator Macy's Inc forecast earnings for the fourth quarter, which includes the crucial holiday shopping season, far below Wall Street expectations on Wednesday, sending shares down 8.1 percent.

The falls in same-store sales were less dramatic than they could have been, and there are consumers shopping, said Leah Hartman, an analyst with CRT Capital Group. Expectations might have gotten a little ahead of themselves.

Macy's is the first major U.S. department store chain to report financial results this week. The others include: JC Penney Co , Nordstrom Inc and Kohl's Corp .

On a call to analysts, Chief Financial Officer Karen Hoguet warned that the economy made forecasts more challenging.

There is more uncertainty than usual in the environment, she said.

Macy's forecast same-store sales, or sales at stores open at least a year, to fall between 1 percent and 2 percent in the fourth quarter.

It also said it expects fourth-quarter earnings of $1 to $1.05 per share. Wall Street analysts had expected earnings of $1.17 per share, according Thomson Reuters I/B/E/S.

The company did improve its outlook for full-year same-store sales, forecasting a decline of 5.4 percent to 5.7 percent, compared to an earlier forecast for a decline of 6 percent to 8 percent.

Analysts said Macy's efforts to keep inventories lean resulted in fewer markdowns, better sales and improved gross margins. Macy's gross margin rose to 40.2 percent from 39.5 percent a year earlier.

3RD QUARTER BEAT

In the third quarter, Macy's net loss narrowed to $35 million, or 8 cents a share, from $44 million, or 10 cents a share, a year earlier. Excluding one-time items such as $33 million in restructuring costs, its loss was 3 cents a share.

Last year, the retailer restructured itself under its My Macy's program, designed to help the chain focus on local tastes and reduce head office expenses and duplications. So far in 2009, the company has spent $205 million on its restructuring.

Macy's said sales fell 3.9 percent to $5.28 billion in the third quarter.

Analysts, on average, had been expecting a loss of 7 cents per share and sales of $5.25 billion, according to Thomson Reuters I/B/E/S.

The Cincinnati-based chain said losses had narrowed on the strength of its Bloomingdale's stores and online sales, which rose 21.1 percent during the quarter.

Macy's said last week same-store sales had fallen 0.8 percent in October, a steeper drop than the 0.1 percent expected by analysts, according to Thomson Reuters.

The company operates 800 Macy's stores in the United States and its territories, as well as 40 Bloomingdale's stores. During the quarter, Macy's opened or re-opened six stores.

The drop in Macy's shares came on a day that saw other department stores' shares fall as well. For example, JC Penney shares were down 2.63 percent to $30.33, and Dillard was own 2.5 percent to $13.90 in mid day trade.

The sharp drop in Macy's shares is not surprising, considering their dramatic rise so far this year, said Matt Arnold, an analyst with Edward Jones. They are up 72.6 this year.

Macy's shares fell $1.57, or 8.1 percent, to close at $17.86 on the New York Stock Exchange.

(Reporting by Phil Wahba; Editing by Derek Caney, Dave Zimmerman, Leslie Gevirtz)

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