Target (TGT) earnings Q3 2023

Target shares jump after retailer posts a big earnings beat, even as sales fall again

Target on Wednesday topped Wall Street’s quarterly sales expectations and blew past earnings estimates, as purchases in high-frequency categories like food and beauty helped prop up weaker customer spending. 

Shares of the company closed nearly 18% higher Wednesday after the news, partially a reflection of the stock’s drop so far this year.

Yet the big-box retailer stared down the same challenges that it has faced over the past year. Shoppers aren’t buying much more than the necessities. They’re hungry for lower prices. And when they do make purchases, they’re postponing them – such as waiting until the temperature drops to buy a pair of jeans or a sweatshirt, CEO Brian Cornell said on a call with reporters.

For the second straight quarter, Target’s comparable sales declined. The industry metric, also called same-store sales, takes out the impact of store openings, closures and renovations. 

Chief Financial Officer Michael Fiddelke said on the call with reporters that the Minneapolis-based company is “laser focused on moving both traffic and sales back into positive territory.”

Yet he and Target’s leadership team cautioned that won’t happen this year, even as holiday shoppers hit stores and websites for decorations, gifts and more.

Here’s what the retailer reported for the fiscal third quarter ended Oct. 28 compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $2.10 vs. $1.48 expected
  • Revenue: $25.4 billion vs. $25.24 billion expected

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Sales have slowed across the retail industry as consumers feel a budget crunch from elevated prices and choose to spend on experiences instead. Yet Target, which sells a heavier mix of clothing, home goods and impulse purchases than key rivals, has been particularly squeezed. 

Plus, it has faced its own challenges. Target got blowback for a collection of merchandise for Pride month, a celebration of LGBTQ+ people and issues, that it has sold for more than a decade. It got hit by higher levels of organized retail crime. And it recently shuttered nine stores in major cities, blaming the closures on theft and threats of violence.

Target’s stock has suffered, too. It had fallen nearly 26% this year as of Tuesday’s close, with its value cut by more than half since the highs of the Covid pandemic.

In the fiscal third quarter, Target’s total revenue fell from $26.52 billion in the year-ago period. Comparable sales dropped nearly 5% year over year, as customers bought fewer discretionary items. Digital sales declined by 6% compared with the year-ago period.

Target CEO Brian Cornell: Shoppers are pulling back, even on groceries

While discretionary categories remain soft, Chief Growth Officer Christina Hennington said on the call with that trends “improved markedly” compared with the fiscal second quarter. She chalked up those better results to trendy merchandise, including Target’s new brand of kitchenware, fall fashion apparel for women and jewelry from its new line with Kendra Scott.


Read More: Target (TGT) earnings Q3 2023

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