Investors have been waiting for a nice rally, and it looks like they've finally gotten one. Thursday brought continued gains to major market benchmarks, as market participants looked on the bright side in watching interest rate increases start to calm in light of fears about an economic slowdown. As of 12:30 p.m. ET, the Dow Jones Industrial Average (^DJI 0.12%) was up 495 points to 32,615. The S&P 500 (^GSPC 0.52%) had picked up 76 points to reach 4,055, and the Nasdaq Composite (^IXIC 0.90%) had gained 299 points to reach 11,733.

Retail stocks have been under pressure, with inflation taking a toll on the amount of discretionary income consumers have at their disposal. However, strong results from Macy's (M -5.27%) and Dollar Tree (DLTR 0.37%) suggest some retailers are finding ways to tap into changing trends and still be successful.

A shopping mall atrium, with people walking and on escalators and stairs.

Image source: Getty Images.

Macy's soars on spring strength

Shares of Macy's were up 18% on Thursday afternoon. The department store retailer gave investors good news in its first-quarter financial report.

Macy's saw revenue rise nearly 14% to $5.35 billion. The move higher came on a 12.4% rise in overall comparable store sales, combining both company-owned stores and licensed locations. Adjusted earnings moved sharply higher from the pandemic-affected first quarter of last year, nearly tripling to $1.08 per share. The company cited extremely strong sales gains for its Bloomingdale's and Bluemercury store concepts. Digital sales growth slowed to 2%, but was still up 34% from where it was three years ago prior to the pandemic.

Other business metrics showed Macy's overall success in handling some challenges. Gross margin climbed a full percentage point to 39.6%, showing promotional discipline. Expenses were down as a percentage of sales. Inventory levels rose 17% year over year as unpredictable supply chain conditions made it tough for Macy's to optimize its inventory handling, but the company was still pleased with its overall performance.

Macy's boosted its full-year 2022 guidance, now expecting adjusted earnings of $4.53 to $4.95 per share. That's $0.40 to $0.43 per share higher than its previous forecast, and it reflects new confidence that the department store has turned the corner.

Money grows on Dollar Tree

Dollar Tree shares saw an even bigger boost, soaring 21%. The discount retailer reported a big jump in its dollar-store business during the first quarter, showing the impact of shoppers looking for more bargains.

Dollar Tree's numbers were solid. Revenue rose 6.5% year over year to $6.9 billion on a 4.4% rise in same-store sales. There continued to be disparities between the company's two primary nameplate businesses, as Family Dollar comparables dropped 2.8% while namesake Dollar Tree store comps were higher by more than 11%. Gross margin jumped 3.6 percentage points to 33.9% on a more favorable product mix, and earnings of $2.37 per share came in at record levels and were up 48% year over year.

Dollar Tree completed its boost of its base price on goods from $1 to $1.25, which played a key role in supporting margins in an inflationary environment. The company is also proceeding with its $3 and $5 Plus assortments, hoping they will further enhance Dollar Tree's value proposition.

Investors got another upgrade in guidance, as Dollar Tree increased its earnings expectations by $0.20 per share to a new range of $7.80 to $8.20 per share. As consumers look for ways to make ends meet, Dollar Tree is in a strong position to benefit.