Macy’s reported an 11th straight quarterly decline in same-store sales but its stock rose 11% as the retailer’s tight control of inventory drove a beat on earnings.
For the third quarter, Macy’s comparable store sales fell 3.6% following a 2.8% drop in the prior reporting period. Total net sales dropped 6.1% to $5.28 billion, due in part to an 11% decline in tourist traffic to Macy’s stores.
Analysts had expected revenue of $5.31 billion and a same-store sales decline of 2.6%.
But Macy’s net income attributable to shareholders was $36 million, or 12 cents a share, in the third quarter, compared to $17 million, or 5 cents a share, one year ago. Excluding one-time items, Macy’s earned 23 cents a share, beating estimates of 19 cents a share.
On news of the earnings, Macy’s stock jumped 11% to $19.50 in trading Thursday.
“Overall, we’re pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017,” CEO Jeff Gennette said in a news release. “Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position.”
Inventory fell 6.9% compared to last year, while gross margin edged up to 39.9% from 39.8%. Gennette also said customers were responding positively to the new Star Rewards loyalty program, the e-commerce business saw continued double-digit growth, and the Backstage off-price locations in Macy’s stores are showing potential.
But in a client note, GlobalData Retail Managing Director Neil Saunders called the third-quarter results mixed, with “gains on the bottom line overshadowed by the continuing slide in sales.”
As CNBC reports, Macy’s and other American department stores “are struggling to keep pace with e-retailers that are successfully drawing more customers their way. The upcoming holiday season is a crucial time for traditional retailers.”
Gennette said the loyalty program, special in-store experiences and a strong mobile and online presence will help drive holiday sales and the company expects to “head into 2018 with momentum.”