The rebound many retailers enjoyed since the economy was allowed to reopen completely bypassed Macy's (M -2.35%), whose third-quarter earnings report showed the retailer still in freefall.

In a harbinger of what might be expected if businesses are forced to close again, the department store chain said revenue fell 23% to $3.99 billion as comparable store sales cratered 20% from the year-ago period. Adjusted profits of $21 million, or $0.07 per share loss last year, swung to $60 million, or $0.19 per share loss this time around.

Yet Wall Street actually thought Macy's was going to do even worse, having forecast sales of $3.86 billion and losses of $0.79 per share.

Macy's Herald Square store in Manhattan in the early evening.

Image source: Macy's.

Fighting from a position of weakness

Despite the retailer surpassing expectations, CEO Jeff Gennette said in a statement Macy's continues "to watch the resurgence of COVID-19 and its potential impact on our business." Although he assured investors Macy's had the right assortment of products heading into the Christmas-selling season, the results this quarter were worse in many instances than those of the disastrous second quarter.

Digital sales, for example, grew just 27% in the just-ended period compared to a 53% surge in the second quarter when comps plummeted 35% year over year.

The weakened position may hasten Macy's retreat from the shopping mall. It previously said it would close 125 of its 771 stores over the next few years; any new store openings that did occur would be smaller and sited in off-mall locations. 

While Gennette said he wasn't abandoning shopping malls, he thought it was only the top-tier class A malls that would survive.

A further degradation in its operations, even if it's better than Wall Street's lowered expectations, may cause the retailer to revisit its strategy with an eye on further closures.