Target Corp. (TGT) -) posted much stronger-than-expected fiscal third-quarter earnings, thanks in part to tighter cost and inventory control, but it hinted at another slowdown in same-store sales over the holiday period.
Adjusted earnings for the three months ended Oct. 28 were $2.10 a share, a 36% increase from the year-earlier period and smashing the Wall Street consensus forecast of around $1.48 a share.
Group revenue fell 4.2% to $25.4 billion, just ahead of analysts' estimates of a $25.24 billion tally. Same-store sales fell 4.9% from a year earlier, inside the Refinitiv forecast of a 5.25% decline. Digital sales were down 6%, extending their recent decline to a fourth consecutive quarter.
Profit margins widened 300 basis points, or 3 percentage points, from the year-earlier quarter to 27.4%, Target said, while overall inventories were down 14% from a year ago.
Looking into the final months of the year, Target said sees comparable sales falling by mid-single digits, with a wide earnings range of between $1.90 and $2.60 per share.
"In the third quarter, our team continued to successfully navigate our business through a very challenging external environment," Chief Executive Brian Cornell said in a statement.
"While third-quarter sales were consistent with our expectations, earnings per share came in far ahead of our forecast. This profit performance benefited from our team's commitment to efficiency and disciplined inventory management, and I'd like to thank them for their tireless efforts."
"Looking ahead, we're continuing to make investments throughout our business — in our assortment, our team and the services we offer — to provide the newness, affordability and convenience our guests want during the holiday season and beyond," he added.
Home goods, apparel sales improved in Target's Q3
At last check Target shares had leaped 17% to $129.46. In 2023 through the close of Tuesday's trading, the stock had fallen 26%.
"Discretionary products were down less this quarter than last quarter, including areas like home, accessories and apparel, which helped drive the gross margin beat," said D.A. Davidson analyst Michael Baker. He carries a buy rating and $177 price target on Target stock.
"Freight and supply chain costs also helped, offsetting a continued drag on shrink," he added. "Mix also helped, perhaps due to smaller declines in discretionary as well as strength in beauty."
Last month, Target closed nine stores across four major U.S. cities, including New York and San Francisco, following losses due to organized crime and theft that could cost the retailer more than $500 million this year.
Cornell told investors in August that Target faced a more than doubling (up 120%) of theft, or threat of theft, over the first five months of the year. He warned that the group continued to face unacceptable levels of risk he linked to organized crime.
Target said in May that theft from its U.S. stores would likely cost $500 million more than it did last year.
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