Q. Can Macy's Inc. stock continue to do well?—B.D., via the Internet

A. This nationwide operator of about 800 Macy's stores and 40 Bloomingdale's stores increasingly is thinking local these days.

It has grouped its stores into 69 districts with 10 to 12 stores in each in order to localise merchandise offerings. This should blunt the past criticism that it doesn't take distinct local tastes into account.

A promising start is that the initial districts that were included in this localisation strategy have recently recorded the highest sales of the chain. Meanwhile, the company is increasing the penetration of its private-label and exclusive-label brands while speeding up the process of getting trendy merchandise quickly onto shelves.

This retailer famous since 1924 for the Macy's Thanksgiving Day Parade in New York City is undergoing a major restructuring that has included cutting costs, streamlining operations, tightening inventory and eliminating thousands of jobs.

Macy's (M) shares rose 64 percent last year following their drop of 58 percent the year before. Its loss in the third quarter of its 2009 fiscal year narrowed to $35 million and it has raised its profit and sales outlook. Online sales rose 21 percent in the quarter.

Sunglass Hut in-store shops will be opened in 430 more Macy's stores beginning in spring 2010, raising the total number of those shops in Macy's to 670. Sunglass Hut is owned by Luxottica Group.

In a weak economy, the competition for the consumer dollar is fierce and promotional activity can be costly. Competitors such as JC Penney and Kohl's have improved their merchandise quality, while Wal-Mart and Target continue to attract discount shoppers.

The consensus analyst rating on Macy's stock is "buy," according to Thomson Reuters, consisting of four "strong buys", five "buys" and seven "holds."

Chairman and CEO Terry Lundgren has been CEO for the past five years and has 25 years of experience with the retailer. While he has made Macy's more efficient and reduced its debt level, its debt is still larger than some of its competitors and that limits the chain's financial flexibility.

The company's stores, mostly located in malls, sell family apparel, accessories, cosmetics, home furnishings and other consumer goods. Its enormous size gives it pricing clout in dealing with apparel manufacturers and other suppliers, though the economy will always be a concern.

Macy's earnings are expected to decline 12 percent in the 2010 fiscal year ending in January and increase 28 percent in the 2011 fiscal year. The five-year annualised return is projected to be 10 percent vs. 12 percent expected for the department store industry.

Q. What are penny stocks? I can't find any for pennies.—D.U., via the Internet

A. Penny stock is a misnomer, for the term generally refers to a stock trading over the counter for $5 or less, not for pennies.

It has been an intriguing category since the economic downturn because many larger, well-known companies such as Ford Motor Co. saw their stocks tumble to penny-stock levels. In Ford's case, it rebounded subsequently to more than $10 a share.

Penny stocks are a high-risk investment area, since some promoters produce biased, upbeat reports because they've been paid to do so. You must always be careful to understand inherent risks of penny stocks, such as the fact they're illiquid, speculative and meet only limited filing and standards requirements.

"We try to find the 10 percent of penny stocks that are good quality companies with strong fundamentals, low debt, proven management and increasing revenue," said Peter Leeds, CEO of PennyStocks.com (www.pennystocks.com) in Toronto, who does not receive compensation for recommending a stock. "Remember that if you get involved in the wrong penny-stock companies, or get involved at the wrong time, you could lose your money."

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N. Central Ave., Suite 302, Phoenix, Ariz. 85004-1248, or by e-mail at andrewinvaol.com.