NEW YORK — Macy's third-quarter loss shrunk as tight inventory controls and a move to localize merchandise at its department stores by region paid off. The company also raised its full-year profit and sales outlook.

The profit outlook, including a tempered forecast for the fourth quarter, didn't go as high as analysts expected, and shares fell $1.57, or more than 8 percent, to close at $17.86.

In a conference call with investors Wednesday morning, Karen Hoguet, chief financial officer at Macy's, said while she is encouraged by improving sales, she warned there is still plenty of uncertainty heading into the holiday season.

Some of Macy's best-performing districts were the original test beds for the locally tailored merchandise. Other bright spots were its growing Internet business and rebounding sales performance at Bloomingdale's, another sign affluent shoppers are slowly going back to shopping after a sudden retreat last fall.

The store, based in Cincinnati, said Wednesday it lost $35 million, or 8 cents per share, in the quarter ended Oct. 31.