NEW YORK — Macy’s posted a surprise third-quarter profit and its strongest comparable sales in more than three years as an extensive overhaul of the 167-year-old New York department store begins to resonate with shoppers.

Macy’s on Wednesday raised its financial guidance for the year, but its outlook for the crucial fourth quarter was more reserved, reflecting the mood of many customers who have grown more selective in what they buy during the holiday season.

Trading was volatile Wednesday as investors weighed what appeared to be growing momentum for Macy’s under new CEO Tony Spring, and anxiety over the U.S. economy that threatens to curb holiday spending.

Comparable sales, a good barometer of a retailer’s health, have been an ominous sign at Macy’s for several years now, serving each quarter as a reminder that the storied department store chain had a long way to go.

On Wednesday, however, Macy’s posted a solid 3.2% increase for the quarter ended Nov. 1, following a 1.9% increase during the second quarter. Those sales includes licensed businesses like cosmetics.

Macy’s also owns higher end stores like Bloomingdales and Bluemercury. Consumer spending has been uneven with higher income households continuing to spend more freely, while lower income families pull back in what is often referred to a “K-shaped economy.”

“The K economy is is real,” Spring told The Associated Press during a phone interview on Wednesday. “We’re fortunate. Bloomingdales and Bluemercury are solidly in the upper part of the K and about half of the Macy’s customers are in the upper part of the K. But we do also appeal to an aspirational customer and one that is choiceful. And so our job is to make sure that we get our fair share of the business. “

Spring said Macy’s had to be “realistic” and “sensible” with fourth-quarter guidance.

The company has leaned into promotions to lure shoppers who are tight with their budgets, he said.

Under Spring, who took over the top job in early 2024, Macy’s has closed unprofitable stores while investing heavily in modernizing locations. The company has beefed up customer service in the fitting areas as well as the shoe department. It’s also been trying to differentiate its luxury business from its rivals with exclusive merchandise.

Roughly 50% of customers at the Macy’s have a household income of over $100,000, and at Bloomingdale’s and Bluemercury, there’s a larger percentage with household incomes over $150,000.

Macy’s reported net income of $11 million, or 4 cents per share, for the quarter. Adjusted earnings per share was 9 cents, catching industry analysts who had expected a loss of 13 cents off guard.

The company last year earned $28 million or 10 cents per share.

Net sales fell slightly to $4.71 billion, from $4.73 billion, reflecting the closure of poorly performing stores. But that still outperformed projections of $4.55 billion from analysts.

The stores it’s overhauled, 125 of them, booked comparable sales growth of 2.7% growth, outperforming the pace when all stores are included.

“While it would be an exaggeration to say that Macy’s is a retailer at the very top of its game, there is no doubt that it is now becoming a more proficient player on the retail field,” said Neil Saunders, managing director of GlobalData. “The sloppy and slapdash execution that once plagued the chain has largely disappeared.”

Macy’s now expects annual earnings per share of between $2 and $2.20, well above its previous guidance of $1.70 to $2.05 per share. It also projected annual 2025 sales in the range of $21.47 billion to $21.62 billion, up from its previous guidance of $21.15 billion to $21.45 billion.

Wall Street had been projecting earnings of $2 per share on sales of $21.3 billion, according to FactSet.