By Juveria Tabassum

Dec 3 (Reuters) – Macy’s on Wednesday warned of picky consumers during the crucial holiday season as inflation pressures spending on non-essential goods even as the department store operator posted a surprise quarterly profit and raised annual targets.

“Consumers are more discerning about how and where they spend their dollars,” said CEO Tony Spring on a post-earnings call. It forecast holiday-quarter profit largely below expectations, pushing its shares down about 1%.

While the company was “pleased” with the start of the holiday quarter, it was being prudent with its expectations, Spring added.

The comments mark the first from a retailer after the critical discount-heavy Black Friday and Cyber Monday shopping period, which was driven by strong online sales, particularly from wealthy shoppers.

The company expects fourth-quarter adjusted earnings per share of between $1.35 and $1.55, compared with estimates of $1.55, according to data compiled by LSEG.

“The tension between consumers knowing that great deals often ramp up during the second half of December and retailers hunting when the ducks are flying typically makes December especially volatile,” said Steve Dennis, president of SageBerry Consulting.

Department store operators have invested heavily in refreshing their stores after several years of losing out to online retailers and off-price chains. Macy’s has underperforming stores and tested smaller store formats as part of its turnaround plan.

On an adjusted basis, Macy’s reported a surprise profit of 9 cents per share, compared with estimates of a 14-cent loss, helped by demand at its upscale Bloomingdale’s label and the high-end beauty chain Bluemercury.

Macy’s expects 2025 net sales to be between $21.475 billion and $21.625 billion, above prior forecast of $21.15 billion to $21.45 billion. It also sees annual adjusted earnings per share of $2 and $2.20, up from $1.70 to $2.05.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Shinjini Ganguli)