Target Q3 Earnings: Supply Chain Chaos Hits Bottomline, Slashes Annual Profit Outlook, Stock Tanks

Target Corporation TGT shares are trading lower in the premarket session on Wednesday.

The company reported third-quarter adjusted earnings per share of $1.85, missing the street view of $2.30. Quarterly total revenue of $25.67 billion (+1.1% year over year) missed the analyst consensus estimate of $25.90 billion.

“We encountered some unique challenges and cost pressures that impacted our bottom-line performance,” said Brian Cornell, chair and chief executive officer of Target. 

The third-quarter gross margin rate decreased by 0.2 percentage points to 27.2%. This was primarily due to higher digital fulfillment and supply chain costs, driven by increased inventory levels, higher digital sales volume, and new supply chain facilities coming online. Operating income of $1.2 billion was 11.2% lower than last year.

Also Read: Target Q3 Earnings Preview: Analysts Expect Revenue, EPS Growth As Attention Turns To Holiday Quarter

Target’s third-quarter comparable sales increased by 0.3%, driven by traffic and digital performance.

Guest traffic grew by 2.4% compared to the prior year. Digital comparable sales rose by 10.8%, reflecting nearly 20% growth in same-day delivery powered by Target Circle 360 and double-digit growth in Drive Up services.

Beauty comparable sales grew by more than 6%, while the Food & Beverage and Essentials categories saw low-single-digit growth compared to the previous year.

Target exited the quarter with cash and equivalents worth $3.433 billion and inventory worth $15.165 billion. The company’s long-term debt and other borrowings as of quarter end was $14.346 billion.

Outlook Lowered: For FY24, the company now forecasts adjusted EPS between $8.30 and $8.90, down from the previous guidance of $9.00 to $9.70. The revised FY24 EPS outlook is also below the consensus estimate of $9.55.

Target expects its fourth-quarter adjusted EPS to range between $1.85 and $2.45, below the consensus estimate of $2.66.

Price Action: TGT shares are trading lower by 16.9% at $129.95 in the premarket session on Wednesday.

Photo via Shutterstock

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