Macy's net profit fell to $7 million, or 2 cents a share, in the second quarter ended August 1, from $73 million, or 17 cents a share, a year earlier.
Excluding one-time items, it earned 20 cents a share, above the 17 cents analysts polled by Reuters Estimates had expected.
We successfully lowered inventories and managed expenses to align more closely with current levels of business, Macy's CEO Terry Lundgren said in a statement.
Earlier in August, Macy's had said it expected a profit before one-time items in the range of 15 to 17 cents a share, above the 5 cents analysts had forecast at the time.
Second-quarter sales fell 9.7 percent to $5.16 billion. Same-store sales fell 9.5 percent.
The company said it now expects to earn 70 cents to 80 cents a share for the year excluding one-time items, up from its prior forecast of 40 to 55 cents a share. However, analysts were already expecting 80 cents.
Shares of Macy's fell to $15.12 in premarket trading from Tuesday's closing price of $15.47 on the New York Stock Exchange.
(Reporting by Ben Klayman, editing by Gerald E. McCormick)