(Bloomberg) -- Macy’s Inc. reported third-quarter profit that beat expectations thanks to better inventory management, though same-store sales fell for a third straight quarter.

The results underscore an emerging trend for retailers this quarter, which have reported improvements to profitability but have struggled to maintain the sales growth that powered them through the pandemic period. On Wednesday, Target Corp. also showed improved operational competence, with fewer markdowns and better inventory management driving profits despite a drop in comparable sales.

Macy’s is “entering the holiday period in a healthy inventory position,” Chief Executive Officer Jeff Gennette said in a statement. Inventories were down 6% in the quarter from a year ago. 

Adjusted earnings per share were 21 cents, compared with the average analyst estimate of 0 cents compiled by Bloomberg. Gross margin of 40.3% improved from a year ago thanks to fewer product promotions than prior periods. 

In addition to economic headwinds like student-loan payments resuming and higher interest rates, Macy’s has been confronting a broader move away from department-store spending and toward specialty and off-mall retail. The same-store sales decline of 7% on an owned basis came in better than the 8.2% decline compiled by Consensus Metrix.

The shares rose as much as 14% in Thursday trading in New York, the most intraday in about a year, before paring the gain. Macy’s stock had fallen 37% for the year through Wednesday’s close, compared with a 5% rise for the S&P Midcap 400 Index. 

“Inventory is in a reasonable place, costs have been kept under control, and markdown activity is relatively modest,” Neil Saunders, managing director at GlobalData Plc, wrote in a note. “There is nothing at all wrong with this but in our view, it needs to be accompanied by strategies to grow the top line – otherwise it is something of a process of managed decline.”

Third-quarter same-store sales at the Macy’s namesake brand were down 7.6% on an owned basis in the third quarter, while sales at the higher-end Bloomingdale’s fell 3.2%. Bluemercury, which sells beauty and skin-care products that have been more resilient, rose 2.5%. The company said beauty and cosmetics performed well across all three nameplates in the third quarter, a category that Target also highlighted as an outperformer.

Consumers are under pressure and “they are in some cases shifting toward experiences and away from our discretionary categories,” Gennette said on a call with analysts.

For the full year, Macy’s now expects comparable sales to decline between 6% and 7% on an owned and licensed basis, and narrowed its adjusted earnings guidance to $2.88 to $3.13 a share.

In early 2024, the company will announce about 10 stores it plans to close. That said, Macy’s said in October that it will open an additional 30 small-format stores by the fall of 2025 as it works to expand its presence outside of traditional malls and drive foot traffic. 

“More than half of the brick-and-mortar customers are now shopping off-mall versus on-mall,” he said in an interview. “We’re encouraged by the beginning and just have a lot of work to do to scale it.”

(Updates with CEO quote in final paragraph. Previous versions corrected the day of the share move in the sixth paragraph and the same-store sales result in the fifth paragraph.)

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