CORRECTED - UPDATE 3-Macy's holiday quarter outlook sends shares down

(Corrects figure for third-quarter restructuring costs to $33 million in 9th paragraph)

* Sees Q4 EPS $1-$1.05, below Street view of $1.17/shr

* Q3 loss/shr 3 cts ex-items; Wall Street view 7 ct loss

* Q3 sales fell 3.9 pct to $5.28 bln, online up 21.1 pct

* Shares down 7 pct in morning trade (Adds analyst comments, details, byline; updates shares)

By Phil Wahba

NEW YORK, Nov 11 (Reuters) - Department store operator Macy's Inc (M.N) forecast earnings for the fourth quarter, which includes the crucial holiday shopping season, far below Wall Street expectations on Wednesday, sending shares down 7 percent.

Department stores have been hit hard in the recession as consumers reined in their discretionary spending. But recent hints of an economic recovery may have raised the hopes of retail investors, setting Macy's up to fall, one analyst said.

"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 in a slew of department store chains, including JC Penney Co (JCP.N), Nordstrom Inc (JWN.N) and Kohl's Corp (KSS.N), reporting financial results this week.

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.

Despite disappointing Wall Street, Macy's improved 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.

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 its losses had narrowed on the strength of its Bloomingdale's stores and online sales, which rose 21.1 percent during the quarter.

Last week, Macy's said 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.

Macy's shares fell $1.34, or 7 percent, to $18.09 in late morning trade. (Reporting by Phil Wahba; Editing by Derek Caney, Dave Zimmerman)