Why Are Retail Giant Target's Shares Soaring Today?

Target Corp TGT reported a third-quarter FY23 sales decline of 4.22% year-on-year to $25.398 billion, beating the analyst consensus estimate of $25.31 billion.

Comparable sales declined 4.9% in the third quarter, reflecting comparable store sales declines of 4.6% and comparable digital sales decline of 6%.

Gross margin for the quarter expanded by 270 basis points to 27.4%. The gross margin rate reflected lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix.

Operating income margin rate of 5.2% was 1.3 percentage points higher than last year, driven by a higher gross margin rate, and the operating income for the quarter shot up by 28.8% to $1.3 billion.

The company held $1.9 billion in cash and equivalents as of October 28, 2023. Operating cash flow for nine months totaled $5.3 billion.

Adjusted EPS of $2.10 beat the analyst consensus estimate of $1.48.

Related: Target Q3 Earnings Preview: Modest Downside Risk With Margin Recovery Prospects

Inventory at October end was $14.7 billion, down 14% Y/Y.

The company paid dividends of $507 million in the third quarter, compared with $497 million last year.

As of Q3 end, TGT had approximately $9.7 billion remaining capacity under the prior August 2021 repurchase program.

"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," said Brian Cornell, chairman and CEO of Target.

Outlook: Target sees Q4 adjusted EPS of $1.90 - $2.60 against the Street view of $2.22; expects a mid-single-digit decline in comparable sales.

Price Action: TGT shares are trading higher by 18.3% at $131.11 on the last check Wednesday.