Fitch analyst David Silverman said the quarter was “a step in the right direction for Kohl’s to position 2023 as a year of operating income and cash flow growth.”

Shares of Kohl’s, which lost nearly half their value in 2022, were up about 8% at $20.86 after the company also reported a 67 basis point improvement in quarterly gross margin from a year earlier and a drop in operating expenses.

Earnings per share came in at 13 cents, beating analysts’ average expectation of a loss of 42 cents, according to Refinitiv IBES data.

The company’s inventory also fell 6%, compared to a 4% rise in the prior quarter.

“We made progress against each of our key priorities for 2023 despite continuing to operate in a challenging macroeconomic backdrop … it will take time for the full impact of our efforts to be realized,” Kingsbury said on an analyst call.

For full-year 2023, Kohl’s maintained its forecast for sales and profit.

“The middle-income customer is being squeezed,” Kohl’s Kingsbury said, as the company flagged weaker consumer spending.

Several U.S. retailers are facing slowing demand as inflation-hit customers curb spending on non-essential items. Target

The challenging retail environment drove a 4.3% decline in Kohl’s first-quarter comparable sales, compared with estimates of a 3.9% fall.