(Reuters) - Macy’s Inc (M.N) on Wednesday reported higher-than-expected quarterly sales and earnings, helped by more promotions, and the department store chain said business was improving as the holidays near.
Shares of Macy’s rose 9 percent to $50.48 in morning trading on relief that the retailer was back on track after posting disappointing sales in August for the prior quarter.
Business picked up markedly in the third quarter ended November 2, especially in October. Macy’s said comparable sales, which include those online and at stores open at least a year, rose 3.5 percent, while analysts were expecting an increase of 2.1 percent, according to Thomson Reuters I/B/E/S.
Despite the strong results, Macy’s did not raise its full-year forecast for comparable sales, which it expects to be up between 2.5 percent and 4 percent.
Edward Jones analyst Brian Yarbrough attributed some of the sales increase to more-aggressive promotions and extended sales events, which reflect shoppers’ continued caution. Those efforts hurt gross profit margin, which fell slightly to 39.2 percent of sales from 39.6 percent.
Nonetheless, Yarbrough said Macy’s was ahead of many rivals in its ability to leverage its stores to fill online orders, and he praised the retailer’s merchandise selection.
“They’re in good shape,” he said. “Unless something changes abruptly in consumer sentiment, they should have a great holiday season.”
Macy’s results echoed those of retailers like Gap Inc (GPS.N), Victoria’s Secret parent L Brands Inc LTD.N and J.C. Penney Co Inc (JCP.N). Las week, all three reported much stronger sales for October than for September and August.
Those numbers suggest that apparel sales have picked up after a weak back-to-school season and that the mood of shoppers is improving after consumer confidence in September fell to its lowest level of the year.
In another sign of optimism, fashion company Ralph Lauren (RL.N), whose biggest single customer is Macy‘s, said last week that it expected wholesale orders to be up “significantly” for the rest of the year.
Macy‘s, which also operates the upscale Bloomingdale’s chain, stuck by its previous forecast for a profit of $3.80 to $3.90 per share for the year, higher than Wall Street projections of $3.78.
The retailer reported net income of $177 million, or 47 cents a share, for the quarter, compared with $145 million, or 36 cents per share, a year earlier. Analysts had been expecting 39 cents per share.
Kohl’s and Nordstrom report quarterly results on Thursday and Penney on November 20.
Reporting by Phil Wahba in New York; Editing by Lisa Von Ahn and Gerald E. McCormick