Coming out of a strong holiday season, Macy's is reaping the benefits of healthy consumer spending.
The department store has kept its clearance racks in check and has less stale inventory on the floor. The result: Macy's managed to outpace analysts' first-quarter earnings and sales expectations and raised its full-year outlook.
Its shares closed up more than 10 percent Wednesday, the best day since Dec. 17, 2008, when the stock closed up 10.98 percent. Including Wednesday's gains, Macy's shares have risen more than 30 percent so far this year.
Here's what Macy's reported compared with what analysts were expecting, based on a survey by Thomson Reuters:
- Earnings per share: 48 cents, adjusted, vs. 37 cents expected
- Revenue: $5.5 billion vs. $5.4 billion expected
- Same-store sales: an increased of 4.2 percent vs. an increase of 1.4 percent expected
The company said all three of its divisions — Macy's, Bloomingdale's and Bluemercury — exceeded expectations during the first quarter of fiscal 2018.
The company also saw a boost from international tourism but said it would be ending its joint venture with Fung Retailing Limited in China. Instead, Macy's will remain on Alibaba's TMall platform and focus its efforts there. The retailer's top markets overseas include China, the United Kingdom and Brazil.
"After a good holiday season, there was a question as to whether Macy's could continue to deliver a recovery," said Neil Saunders of GlobalData Retail. "Today's results answer in the affirmative ... suggesting that Macy's recovery is gaining momentum."
Net income climbed to $139 million, or 45 cents per share, in the period ended May 5, from $78 million, or 26 cents a share, a year ago. Excluding one-time items, Macy's earned 48 cents a share, 11 cents better than what analysts had expected.
Revenues rose roughly 3.6 percent to $5.5 billion, again surpassing analysts' expectations. The company said some of its best-selling categories were fine jewelry and dresses.
Same-store sales on an owned plus licensed basis were up 4.2 percent, nearly 3 percentage points higher than the Street's forecast. Part of the jump can be attributed to the fact that Macy's shifted a friends and family promotional event to the first quarter from the second quarter this year.
The retailer now expects full-year earnings per share to fall within a range of $3.75 to $3.95, 20 cents higher than a prior forecast. Analysts were calling for earnings of $3.61 a share, according to a Thomson Reuters survey.
Total sales in 2018 are predicted by Macy's to climb as much as half a percent. Same-store sales on an owned plus licensed basis could rise as much as 2 percent.
Just last week, Morgan Stanley downgraded Macy's shares, citing declining sales and profit "pressure" from online players for the ratings change. A few days earlier, Deutsche Bank said in a note that there's "limited upside" for investors in the department store space.
But the results from Macy's on Wednesday paint a better-than-expected picture, and the company said momentum will continue into the latter half of the year. Its online sales increased by a double-digit percentage during the first quarter alone.
Still, many retailers, including Macy's, face the threat of Amazon becoming the nation's No. 1 apparel retailer by the end of 2018.
To combat rivals, the department store chain has been focused on rolling out new concepts in stores, like branded pop-up shops, and expanding its off-price business, Macy's Backstage. In the first quarter alone, Macy's opened about 20 Backstage locations, with plans to open 100 this fiscal year.
Macy's just recently announced its acquisition of Story, a New York-based concept shop, and will be bringing on Story's founder, Rachel Shechtman, as "brand experience officer" to steer the company's creative strategy.
Last week, Macy's opened up its loyalty program to all customers. It used to be limited to the chain's credit card holders. The platform allows shoppers to rack up points on purchases that can be redeemed at Macy's stores or online.
The company is also in the midst of rolling out mobile checkout to all of its locations by year's end and is adding a virtual reality shopping experience to some stores.
"Our best customer is responding well to the improvements we've made to her experience in our stores, on .com and through the Macy's app," CEO Jeff Gennette said Wednesday in a statement.
The positive results from Macy's set the tone for a slew of other retailers, including J.C. Penney, Kohl's and Nordstrom, which are set to report earnings in the coming days. Those retailers' stocks, among others, all climbed higher Wednesday following the report.
— CNBC's Courtney Reagan contributed to this reporting.