NEW YORK (AP) — Macy's Inc. is expected to announce solid fourth-quarter financial results on Tuesday that should show a decent holiday shopping season. But investors will be focused more on whether shoppers have been feeling pinched in recent weeks because of the 2 percent payroll tax hike that's pinching their paychecks.

WHAT TO WATCH FOR: The department store chain, which also operates the upscale Bloomingdale's stores, has been reaping the benefits of its strategy of tailoring merchandise to local markets, which is expected to be reflected in the results. Analysts will listen for comments about how it was able to grab share during the holiday season, and will also want to know whether Macy's executives see shoppers scaling back on purchases because of new financial pressures on top of old worries like sluggish job growth.

On Jan. 1, Social Security payroll taxes rose 2 percentage points after a temporary tax cut expired. That will slice about $1,000 from the take-home pay of a household earning $50,000. Since the Social Security tax is levied against income only up to $114,000, it disproportionately affects middle- and lower-income households. Macy's targets middle- to upper- income shoppers, so analysts will want to know if shoppers who buy lower-tier goods at Macy's are buying less.

Analysts will also be looking for details on how Macy's has benefited from the woes of J.C. Penney, which implemented a new pricing plan early last year that ditched hundreds of sales in favor of "everyday pricing." The move has turned off shoppers, who are used to seeing big sales signs. Penney is expected to report its fourth straight quarter of big losses and sales drops on Wednesday.

Macy's is also locked in a legal battle with Penney over a partnership with Martha Stewart. Macy's filed a lawsuit against Penney in January 2012, arguing that the struggling department store chain breached its long-standing contract with the home diva with a deal in late 2011 to open Martha Stewart shops in most of its stores by spring of this year. The trial, which started last week, is expected to last for nearly three weeks.

Like many retailers, Macy's had a slow start to the fourth quarter because of the lingering effects of Superstorm Sandy and ongoing economic uncertainty. But sales bounced back in January. The company reported earlier in the month that revenue at stores open at least a year, a key gauge of a retailer's performance, rose 11.7 percent in January. That handily topped the 6.4 percent increase analysts polled by Thomson Reuters expected.

Revenue at stores open at least a year excludes results from stores recently opened or closed.

Chairman, President and CEO Terry Lundgren said in a statement that Macy's January sales were helped by putting new fashion items into its stores for post-holiday shoppers.

Total revenue for the five weeks ended Feb. 2 rose 34.6 percent to $1.8 billion. Online sales for the month jumped 48.9 percent. For the fourth quarter, total revenue climbed 7 percent to $9.35 billion, topping the consensus analysts' estimate of $9.29 billion, as online sales surged 47.7 percent. Revenue at stores open at least a year was up 3.9 percent.

Macy's now foresees quarterly earnings of $1.94 to $1.99 per share, up from $1.91 to $1.96 per share.

WHY IT MATTERS: Macy's is seen as a barometer of spending among middle- to upper-income shoppers nationwide.

WHAT'S EXPECTED: Analysts surveyed by FactSet, on average, expect earnings of $1.99 per share on revenue of $9.33 billion.

LAST YEAR'S QUARTER: Macy's, based in Cincinnati, earned $1.70 per share on revenue of $8.72 billion.