Macy’s posted a bigger-than-expected drop in first-quarter sales on Tuesday, hobbled by stiff competition from off-price retailers for shoppers increasingly cautious about spending on products such as apparel and footwear.

The upscale department store operator’s net sales fell 2.7% to $4.85 billion. Analysts on average had expected sales to drop 2.42% to $4.86 billion, according to LSEG data.

Macy’s has struggled to revive demand at its store as shoppers cut back on discretionary spending due to sticky inflation and higher borrowing costs.

The company, however, raised the low end of its annual sales forecast and said the updated outlook assumes customers will continue to be discerning in their discretionary purchases.

It now expects annual adjusted earnings per share to be in the range of $2.55 to $2.90, compared with its prior forecast of $2.45 to $2.85.

Shares of the New York-based company were up 1% before the bell.