Large retailers Macy's (M) and Lowe's (LOW) both reported their fourth-quarter earnings with mixed results. In addition, the Conference Board's Consumer Confidence reading came in lower than expected for February. With economic headwinds and shifting consumer habits, the future of retail comes into question.

Forrester Research Retail Analyst Sucharita Kodali joins Yahoo Finance to discuss the latest developments for Macy's and Lowe's and how the shape of retail may reform going forward.

Kodali elaborates on department stores in particular: "I don't think it's a great story in the department store sector, and it's not a great story for a lot of mall merchants to have these large physical footprints, especially because in many of Macy's categories like apparel, footwear, more and more of their shares of sales are migrating to e-commerce and the web anyway. But, that's not to say every large store is suffering. You look at the warehouse club sector, it's doing very well, mass merchants like Walmart (WMT) and Target (TGT) are generally doing very well."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

AKIKO FUJITA: Well, retail results out this morning for Macy's and Lowe's. Both stocks surging as they beat expectations in their latest quarters despite seeing sales fall. We also got a somewhat downbeat report from the Conference Board Consumer Confidence, falling to 106.7 in February. That is from a revised 110.9 in January.

Joining us now on this is Sucharita Kodali, Forrester Research Retail Analyst. Good to talk to you today. Let's start with Macy's because we are seeing that stock up in a big way, nearly 4%. What did you like based on the results we got?

SUCHARITA KODALI: Well, Macy's exceeded the expectations, but the numbers, by no stretch of the imagination, were wonderful. The sales for the last several quarters had been down in the mid-single digits. And this past quarter, I think was perceived positively because it was down but only in the very, very low single digits.

Some of the things that actually concern me are that its digital sales numbers were down lower than its bricks and mortar numbers. That is unheard of. Typically in retail, everyone's digital sales numbers are stronger. But for them to have softer digital sales in a world where more shoppers are consuming through e-commerce suggests to me that they may be losing disproportionately a lot of market share.

And certainly, as they are closing 150 stores over the next several years, some of that market share presence, that story doesn't look great when you look ahead.

AKIKO FUJITA: Yeah. It doesn't look great. And as you point out, I mean, this was a company that is still trying to find the right turnaround mix, right? We are seeing the company close those Macy's stores. They're trying to focus more on the high-end with Bloomingdale's Bluemercury. What does that mean for the Macy's brand?

SUCHARITA KODALI: Well, I think that the Macy's brand ends up being some of the really, really premium flagship locations. I think that they're going to try to hold on to the Herald Square store for the sake of their balance sheet. Hopefully they're able to hold onto it. But they may end up doing some sort of a sale leaseback and unlocking some of the cash that is in that store.

So certainly, there is some real estate. That is really the big asset that Macy's has. But your point is a good one, which is that they do seem to be diversifying to these other brands. So they're opening nearly as many Bluemercury stores as they're closing Macy's stores. So Bluemercury is often in some of the newer malls. It's in higher foot traffic locations.

And it's good margin because it's beauty products. But it's a small store. And each individual location is not going to make up for what they're probably losing from a top line from the closure of a Macy's store. So I think really, it's becoming a smaller company, but the hope is that the profitability story improves by investing in high-end luxury Bloomingdale's and beauty with Bluemercury.

AKIKO FUJITA: Sucharita, with Macy's specifically though, I mean, it feels like the company is moving away from the large department stores we know Macy's used to have to a smaller footprint. Is that where retail is going? Is that the right strategy here when you consider what you pointed out, they're not even getting the bump in digital right now?

SUCHARITA KODALI: Right. Well, I don't think that it's a great story in the department store sector. And it's not a great story for a lot of mall merchants to have these large physical footprints, especially because in many of Macy's categories like apparel, footwear, more and more of their shares of sales are migrating to e-commerce and the web anyway. But that's not to say that every large store is suffering.

I mean, you look at the warehouse club sector, it's doing very well, mass merchants like Walmart and Target are generally doing very well. There are large box stores that are continuing to grow like Tractor Supply. So I don't think that the story of large box is a bad one. But keep in mind all of those companies that I just mentioned, none of them really have presence in the indoor malls that Macy's is in.