Macy's (M) reported another quarter of dropping sales as a new CEO looks to engineer a comeback.

The company on Tuesday posted revenue and earnings that were better than the low expectations Wall Street had set for the 165-year-old retailer, which recently rejected a $5.8 billion buyout offer from one of its shareholders, Arkhouse, and its partner Brigade Capital Management.

In the fourth quarter, Macy's revenue declined 1.7% year over year to $8.12 billion, slightly above estimates of $8.11 billion. Its digital sales decreased by 4%, while same-store sales were down 5.4%.

The retailer clocked $685 million in net income, above the expected $554 million, while its adjusted earnings per share (EPS) of $2.45 beat the expected $1.99.

At its namesake Macy's chain, same-store sales dropped 6% as consumers pulled back on discretionary goods like women's shoes and cold-weather apparel. But they continued spending on beauty products like fragrances and cosmetics.

The core of Macy's customers is "more of the middle income consumer," which has a household income of $75,000 or under, CEO Tony Spring told Yahoo Finance over the phone.

"They've been under pressure... the cost of many discretionary items has squeezed their ability to purchase some of the non discretionary items," said Spring.

Sales at the company's luxury chain Bloomingdale's decreased 1.5%, dragged down by softness in men's lines and designer handbags. Its cosmetics chain Bluemercury was a small bright spot, growing its sales by 2.3%.

Spring said these businesses "cater to a more affluent customer," with most of the shoppers having a household income of more than $121,000 per year. He said while these consumers aren't pressured, they are cautious.

"It's not a question of whether they can spend, it's a question of whether they feel it's the right time to extend themselves," he said.

For the full fiscal year 2023, Macy's revenue declined to $23.1 billion, 5.5% lower compared with 2022. Same-store sales were down 6.9%, as digital and in-store sales dropped 7% and 5%, respectively.

Macy's stock jumped more than 4% by midday Tuesday. The original proposal made by Arkhouse on Dec. 1 would see the company go private for $21.00 per share, a 32% premium to Macy’s share price at the time.

Meanwhile, Arkhouse Management is not giving up without a fight, having nominated nine candidates for Macy's board of directors last week in a proxy battle. Now Spring, who only took the helm at Macy's three weeks ago, unveiled the company's growth strategy for 2025 and beyond.

Spring, who joined Bloomingdale’s in 1987 and became its CEO in 2014, is dubbing the new strategy "A Bold New Chapter." The plan is "designed to create a more modern Macy’s, Inc. that is expected to generate meaningful value for our shareholders in the years ahead," he said in Tuesday's release.

As part of the initiative, Macy's is closing 150 underperforming locations, including 50 by year-end. The company did not disclose where these stores are.

It plans to focus its resources on improving existing stores and product assortment, and investing in digital sales, along with an expansion of small-format stores.

It also plans to open 15 Bloomingdale's and 30 Bluemecury stores in the next three years, and to remodel 30 existing Bluemercury locations.

To better compete with retail behemoths like Amazon (AMZN) and Walmart (WMT), Macy's is aiming to "rationalize and monetize" its supply chain, streamline fulfillment, and offer a "scalable" tech platform in the next three years.

"I think the fact that we are focused on the customer, that we are focused on our colleagues, that we are making sure that we have the right content, and we are unlocking real estate value and we are increasing our dividends... that's what creates a much more compelling story about Macy's Inc.," Spring said.

The earnings rundown

Here are Macy's Q4 results versus estimates, according to Bloomberg data.

• Net sales: $8.12 billion versus $8.11 billion

• Adjusted EPS: $2.45 versus $1.99

• Same-store sales: -5.4% versus -5.7%

• Gross margin: 37.5% versus 36.5%

• Adjusted net income: $685 million versus $554 million

Here are Macy's fiscal 2023 results versus estimates, according to Bloomberg data.

• Net sales: $23.1 billion versus $23.2 billion

• Adjusted EPS: $3.50 versus $3.03

• Same-store sales: -6.9% versus -6.3%

• Gross margin: 38.8% versus 38.4%

• Adjusted net income: $973 million versus $844 million

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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