“(We are) entering the holiday period in a healthy inventory position,” Macy’s outgoing CEO Jeff Gennette

Merchandise inventories at the Bloomingdale parent were down 6% year-over-year and down 17% compared to 2019.

Gross margins improved 160 basis points in the third quarter, driven by a 110 basis points jump in merchandise margins, bolstered by lower markdowns within the Macy’s brand and reduced freight costs.

Macy’s plans to be “nimble and competitive with promotions as needed”, executives said on an earnings call.

Still, the company, like Target and Walmart, provided a cautious outlook on consumer spending for the holidays.

“Looking to holiday outlook, customers across nameplates continue to be under pressure and discerning in how they spend,” Tony Spring, Macy’s incoming CEO, said on the call.

Credit card revenues again declined, down 100 basis points year-on-year, indicating its core middle-income consumer faced difficulty in repaying debts as interest rates climbed.

Net sales fell 7.1% to $4.86 billion, the sixth straight quarter of declines. Analysts had estimated a 7.9% drop, according to LSEG data.

“The retailer is seeing strength in its beauty and off-price offerings, which is helping to offset weakness in other discretionary categories,” Insider Intelligence analyst Rachel Wolff said.

Excluding items, Macy’s earned $59 million, or 21 cents per share, against expectations of 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, the mid-point of which was above analysts estimates.