Department store chain Macy's today reported a bigger-than-expected drop in third-quarter comparable store sales.

But the company said it managed to grow margins and topped earnings estimates by keeping a tight hold on inventory. 

US department stores have been struggling with declining mall traffic and tough competition from off-price retailers and Amazon.com. 

In response, Macy's has closed stores, tightly controlled inventory, built its Backstage discount business and monetised key real estate properties. 

Macy's said its net income attributable to shareholders rose to $36m, or 12 cents per share, in the third quarter ended October 28, from $17m, or 5 cents, a year earlier. 

Excluding items, Macy's earned 23 cents per share, beating the average analyst estimate of 19 cents. 

Sales at Macy's stores open more than 12 months, including sales in departments licensed to third parties, were down 3.6%. The average analyst estimate was for a 2.6% decline, according to Thomson Reuters I/B/E/S.

The company's net sales fell 6.1% to $5.28 billion, declining for the 11th quarter in a row due to fewer stores from a year earlier. The average analyst estimate was $5.31 billion. 

The cost of sales declined to $3.18 billion from $3.39 billion, Macy's added.