(Reuters) -Macy’s on Thursday beat quarterly profit well above Wall Street estimates as the department store’s margins benefited from improved inventories and lower freight costs, sending its shares surging more than 11% premarket.
The Bloomingdale parent, whose shares have lost nearly 40% of their value this year, also posted a lower-than-expected drop in quarterly sales.
“(We are) entering the holiday period in a healthy inventory position,” outgoing CEO Jeff Gennette said in a statement.
Merchandise inventories at Macy’s were down 6% year-over-year and down 17% compared to 2019.
The company’s comments come a day after Target forecast holiday-quarter profit largely above expectations partly due to efforts to control inventory and indicates U.S. retailers’ successes in reducing the glut from 2022 highs.
Macy’s gross margins improved 160 basis points in the third quarter, driven by a 110 basis points jump in merchandise margins, also helped by lower markdowns within the Macy’s brand.
The U.S. department store operator’s net sales fell 7.1% to $4.86 billion in the quarter ended Oct. 28, while analysts’ had estimated a 7.9% drop to $4.82 billion, according to LSEG data.
The company logged an adjusted net income of $59 million, or 21 cents per share. Analysts on average had expected the company to roughly break-even.
Macy’s raised the lower end of its full-year profit target and now expects adjusted earnings per share between $2.88 and $3.13, from a prior forecast of $2.70 to $3.20, the mid-point of which was above analysts estimates.
(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)
