Macy’s, the US department store group, reported a smaller third-quarter loss and raised its full-year earnings outlook as tight inventory controls and a move to localize merchandise by region begin to pay off.

For the three months to October 31, the company made a net loss of $35 million (£21 million), or eight cents a share, from a loss of $44 million, or 10 cents a share, in the same period last year.

Total sales were $5.277 billion, down 3.9 per cent from $5.493 billion in the third quarter of 2008. On a same-store basis, third quarter sales, including online sales, were down 3.6 per cent.

Sales forecast for the Christmas shopping period came in lower than analysts expectations, sending shares 1.2 per cent lower to $18.24 in early trading.

Like other department stores, Macy’s has been hit hard by the recession because it relies so heavily on discretionary spending. It has now reduced inventory levels by 7.4 per cent from a year ago.

Terry Lundgren, the chairman, president and chief executive officer of Macy's, said that the company’s results had been helped by its long-term programme of tailoring merchandise in its 800 Macy's department stores and furniture galleries and its 40 Bloomingdales stores, to local and regional tastes.

The programme, known as its My Macy’s approach, was announced in February 2009.

"We continue to see encouraging results from our My Macy's approach to local markets. Of our Top 10 districts in same-store sales in the third quarter, seven were among the original My Macy's pilot districts," Mr Lundgren said.

Other bright spots in the third quarter included “outstanding growth” in the company’s internet businesses, he said.

Online sales at macys.com and bloomingdales.com combined were up 21.1 per cent in the third quarter and 15.6 per cent for the year to date. Online sales positively affected the company's same-store sales by 0.6 percentage points in the third quarter and 0.5 percentage points in the year to date.

The company raised its outlook for fourth quarter sales to a fall of one to two per cent. It now projects full year earnings of $1.01 to $1.06 a share, up from its August's view for 70 to 80 cents but still below analysts' average estimate of $1.11, according to Thomson Reuters. The company also improved its outlook for same-store sales, and is now expecting a decline of 5.4 to 5.7 per cent of the year.

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