Macy’s Inc. (NYSE: M) reported third-quarter 2017 results before markets opened Thursday. The department store giant posted quarterly adjusted diluted earnings per share (EPS) of $0.23 on revenues of $5.28 billion. In the same period a year ago, Macy’s reported EPS of $0.17 on revenues of $5.63 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.19 and $5.31 billion in revenue.

Comparable store sales for owned plus licensed stores fell 3.6% in the quarter, and they fell 4% on the company’s owned stores. Net sales fell 6.1% year over year, due in part to store closures.

Operating income as reported totaled $121 million, representing a margin of 2.1%, compared to operating income of $107 million or 1.9% of sales in the year-ago quarter. Excluding restructuring and other costs, third-quarter operating income totaled $176 million, or 3.3% of sales compared with year-ago operating income of $169 million, or 3% of sales.

Macy’s reaffirmed its full-year same-store sales guidance calling for a decline of 2% to 3% on an owned plus licensed basis with same-store sales at owned stores down 2.2% to 3.3%. Total sales are expected to be down between 3.2% and 4.3% year over year. Forecast adjusted EPS guidance falls in a new range of $3.38 to $3.63, up a penny at each end from the prior estimate of $3.37 to $3.62.

Consensus estimates call for fourth-quarter EPS of $2.48 on revenues of $8.51 billion. For the full year, analysts were looking for EPS of $3.39 on sales of $24.71 billion.

CEO Jeff Gennette said:

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. Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position. A highlight of the third quarter was the launch of the new Star Rewards loyalty program – our best customers are responding positively. We also saw continued double-digit growth in digital and are encouraged by the potential of Backstage in Macy’s stores. … We expect continued improvement in our trends in the fourth quarter, including a solid lift from loyalty and digital, and intend to head into 2018 with momentum.

The miss on sales was overshadowed in investors’ minds by the improvement in margins. The fact that Macy’s added a penny to its profit guidance and reiterated its sales guidance also helped lift spirits.

Shares traded up about 5% early Thursday, at $18.45 in a 52-week range of $17.41 to $45.41. The 12-month consensus price target on the stock was $24.18 before results were announced. The high price target was $36 and the low was $20.

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