Macy's Inc beat estimates for holiday quarter results and forecast annual profit largely above expectations as the department store operator looks to rein in promotions to beef up its margins, sending its shares up 10% on Thursday.

​Like many retailers, Macy's offered steep discounts during the holiday season to get rid of excess inventory and attract inflation-weary consumers. But Chief Executive Jeff Gennette said those promotions were "competitive but measured."

 ​"(We) took strategic markdowns and intentionally did not chase unprofitable sales," Gennette added.

As a result, margins fell 2 percentage points to 34.1% at Macy's, compared with a 10 percentage point hit at Kohl's Corp.

With the extra inventory mostly gone, Macy's is just going to be more cautious with the way it offers promotions, M Science analyst Matthew Jacob said.

Macy's forecast adjusted full-year profit per share between $3.67 and $4.11, compared with analysts' average expectation of $3.84.

Although the guidance calls for a small decline in revenues and profit "it is aggressive compared to peers," CFRA Research analyst Zachary Warring said.

Stubbornly high inflation and an uncertain economic environment have forced retailers such as Walmart Inc and Target Corp to provide cautious forecasts for the year.

Macy's executives said discretionary spending would be under pressure across all income tiers, echoing comments from Walmart's top bosses.

"(We) expect the allocation of disposable income to continue shifting towards services and essential goods," Gennette told analysts in a post-earnings call.

The company sees 2023 sales between $23.7 billion and $24.2 billion, compared with the average estimate of $24.29 billion, according to IBES data from Refinitiv.