Target Reports Disappointing Q3 Earnings, Lowers Full-Year Outlook
Target Corporation (NYSE) shares were down in the premarket session on Wednesday after the retailer reported weaker-than-expected third-quarter results. The company posted adjusted earnings per share (EPS) of $1.85, missing analysts’ consensus estimate of $2.30.
Total revenue for the quarter amounted to $25.67 billion, marking a 1.1% year-over-year increase, but falling short of the $25.90 billion analysts had anticipated.
Brian Cornell, Chairman and CEO of Target, attributed the miss to “unique challenges and cost pressures” that impacted the company’s bottom-line performance. One key factor was a decrease in the third-quarter gross margin rate, which dropped by 0.2 percentage points to 27.2%.
This was mainly due to higher digital fulfillment costs and supply chain expenses, driven by elevated inventory levels, increased digital sales volume, and the expansion of new supply chain facilities. As a result, operating income decreased by 11.2% to $1.2 billion compared to the same period last year.
Despite these challenges, Target’s comparable sales rose by 0.3%, supported by increased guest traffic and strong digital performance. Guest traffic grew by 2.4%, while digital comparable sales surged by 10.8%.
The company saw nearly 20% growth in same-day delivery services powered by Target Circle 360, alongside double-digit growth in Drive Up services.
Key categories, such as Beauty, saw more than 6% growth in comparable sales, while Food & Beverage and Essentials experienced low-single-digit increases.
As of the end of the quarter, Target held $3.43 billion in cash and equivalents, with inventory valued at $15.17 billion. The company’s long-term debt stood at $14.35 billion.
Outlook Revision: Target also revised its full-year forecast for FY24, lowering its adjusted EPS guidance to between $8.30 and $8.90, down from the previous estimate of $9.00 to $9.70.
The new forecast is also below the consensus estimate of $9.55. For the fourth quarter, Target expects adjusted EPS to range from $1.85 to $2.45, which is below the consensus estimate of $2.66.
As a result of the disappointing earnings report and lowered outlook, Target’s stock is down 16.9% in the premarket session, trading at $129.95.
