Target Q3 Earnings Beat Estimates, Margin Shrinks; Racks Up Inventory

Target Corp TGT reported third-quarter FY21 total revenue growth of 13.3% year-on-year, to $25.65 billion, beating the analyst consensus of $24.78 billion.
The comparable sales grew 12.7% versus 20.7% growth last year. Store comparable sales rose 9.7%, and digital comparable sales climbed 29%.
Adjusted EPS of $3.03 beat the analyst consensus of $2.83.
The gross margin for the quarter fell 260 basis points Y/Y to 28%.
The operating margin contracted 70 basis points to 7.8%, while operating income for the quarter rose 3.9% to $2 billion.
Target held $5.7 billion in cash and equivalents as of October 30, 2021.
Inventory as of October 30, 2021, rose 40.4% to $14.9 billion from $10.65 billion as of January 30, 2021.
As of Q3 end, the company had $14.6 billion of remaining capacity under the repurchase program.
Outlook: Target sees Q4 comparable sales growth of high-single-digit to low-double-digit (prior view for a high-single-digit increase).
The company continues to expect the FY21 operating income margin rate to be 8% or higher.
Price Action: TGT shares are trading lower by 4.28% at $255 in premarket on the last check Wednesday.

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