What happened

Shares of Macy's (NYSE:M) leaped on Thursday after the department store chain posted strong third-quarter financial results and announced a potentially powerful new digital growth driver. 

As of 2:15 p.m. ET, Macy's stock price was up 22%.

So what 

Macy's net sales jumped 36% year over year to $5.4 billion. The retailer's in-store traffic recovered from its pandemic downturn, and its online operations continued to grow at a healthy clip. Companywide comparable sales rose 35.6%, while digital sales increased 19%.

"Consumers continue to spend, and we successfully offered a wide range of expanding merchandise assortment to meet their growing demand," CEO Jeff Gennette said in a press release. 

A person is pointing to a digital chart that rises, then falls, then rises again.

Image source: Getty Images.

Moreover, price increases and a lower reliance on discounts helped Macy's gross margin rise to 41%, up from 35.6% in the third quarter of 2020. The company is also reaping rewards from its cost management initiatives. Macy's selling, general, and administrative expenses as a percentage of revenue improved to 36.3%, down from 43.3% in the year-ago period.

Together, Macy's booming sales and improving margins drove a sharp increase in profits. Its adjusted earnings per share checked in at $1.23, compared to a per-share loss of $0.19 in the prior-year quarter.

Now what

Better still, management now expects Macy's to generate full-year net sales of $24.12 billion to $24.28 billion in 2021, up from a prior projection of $23.55 billion to $23.95 billion. The company also boosted its adjusted earnings per share guidance to $4.57 to $4.76, up from $3.41 to $3.75.

Additionally, Macy's said it would launch a digital marketplace to fuel its growth. The e-commerce platform would help to expand the retailer's product offerings by allowing third-party merchants to sell their wares on Macy's websites. It's slated to go online in the second half of 2022.

"Our digital business is targeted to generate $10 billion in sales by 2023, and we expect the new marketplace platform to produce incremental revenue on top of that target," Macy's executive Matt Baer said.

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