Macy's on Thursday reported an improvement in margins and a lower-than-expected drop in quarterly sales, sending its shares 10% higher in premarket trading.

The Bloomingdale parent said its gross margins improved 160 basis points in the third quarter due to lower markdowns within the Macy’s brand, as well as easing freight charges.

The U.S. department store operator's net sales fell 7.1% to $4.86 billion in the third quarter ended Oct. 28, while analysts' had estimated a 7.9% drop to $4.82 billion, according to LSEG data.

The company logged an adjusted net income of $59 million, or 21 cents per share, from $143 million, or 52 cents per share last year.

(Reporting by Savyata Mishra in Bengaluru; Editing by Sriraj Kalluvila)