(Reuters) - Macy's Inc (N:M) raised its annual earnings forecast on Wednesday, signaling a strong holiday shopping season ahead, as the department store chain builds on a recovery strategy that focuses on its well-performing stores and expanding online.
Macy's, which has closed more than 100 stores and cut thousands of jobs since 2015, also reported much better than expected profit for the third quarter ended Nov. 3 thanks to double-digit growth at its online shopping service.
Like other major U.S. retail names, Macy's has had to face plummeting mall traffic and a defection of customers to a new range of online and fast-fashion stores.
In response, the 160-year old company has invested heavily in its off-price Backstage stores, loyalty program, mobile app and website, while also improving brick-and-mortar stores by equipping them with mobile checkouts and new shop layouts.
Even with all of the upbeat numbers in Wednesday's release, shares in the company rose 1 percent at opening. They are up around 40 percent this year but still worth only half what they were at a peak in 2015.
"There is still a lot of work to do with physical stores," said Neil Saunders, an analyst at research firm GlobalData Retail. "We are conscious that Macy's has a long tail of underinvested-in properties, many of which are underperforming and do not reflect the company's latest thinking."
Sales from Macy's stores and third-party licensees open for more than 12 months rose for the fourth straight quarter to 3.3 percent. That topped analysts' average estimate of a 2.82 percent increase, according to IBES data from Refinitiv.
Macy's now expects adjusted earnings of between $4.10 and $4.30 per share in fiscal year 2018, compared with an earlier forecast of $3.95 to $4.15 per share.
"We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter," Chief Executive Officer Jeff Gennette said in a statement.
"Our strategic initiatives are gaining momentum and delivering results."
The owner of the Macy's and Bloomingdale's chains said net income attributable to shareholders rose to $62 million in the third quarter from $30 million a year earlier.
Excluding one-time items, Macy's earned 27 cents per share, nearly two times analysts' average estimate of 14 cents. Net sales rose 2.3 percent to $5.40 billion, matching expectations.