Tough 3rd Quarter for Target Ahead of Crucial Holiday Period
Target Corp.’s earnings missed the mark in the recently concluded third quarter. The retailer released its latest financial report revealing a total quarterly revenue of $25.7 billion, up 1.1% over last year, and an operating income of $1.2 billion, down 11.2% from the third quarter of 2023.
Wall Street analysts had projected a Q3 revenue of $25.9 billion and also expected earnings per share to come in at $2.30, compared to the actual $1.85. In this still-challenging environment for the retailer, Target adjusted its outlook, pivoting from raising its full-year guidance after the second quarter to cutting it after this period. Now, the company expects flat sales comps for the fourth quarter and an adjusted EPS between $1.85 and $2.45.
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“Consumers tell us their budgets remain stretched and they’re shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation,” reported Brian Cornell, chair and CEO during an earnings call.
Despite the miss in earnings that was linked to general consumer wariness and higher inventories, there were some lifts for the retailer during the three-month period ending Nov. 2. Third quarter overall sales comps went up, albeit a slight 0.3%, attributed to a 2.4% year-over-year (YoY) bump in traffic and a respectable digital performance, as online sales comps spiked 10.8%. In-store sales, however, slid 1.9% during the quarter leading up to the pivotal holiday selling period.
Elsewhere, Target reported that its Circle Week in October was the largest to date, driving sales, traffic and membership growth. The retailer also touted ways that it is helping inflation-wary shoppers save money, through reductions on more than 2,000 food and beverage, essentials and giftable items.
From a category perspective, food and beverage and essentials sales rose in the low-single digits during Q3, while beauty sales increased more than 6%. On the quarterly earnings call, Target’s leaders reported a slowdown in more discretionary categories like home décor, higher-ticket electronics and apparel.
"I'm proud of our team's efforts to navigate through a volatile operating environment during the third quarter. We saw several strengths across the business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel, and continued growth in beauty and frequency categories. At the same time, we encountered some unique challenges and cost pressures that impacted our bottom-line performance," Cornell remarked.
Minneapolis-based Target Corp. is No. 7 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America, with nearly 2,000 locations. PG also included the company on its Retailers of the Century list.
