Target in big Q3 miss, cites ‘unique challenges,’ higher costs; cuts outlook
Target Corp. reported disappointing third-quarter earnings and revenue despite price-cutting efforts across the board and early holiday promotions.
The discounter, which posted its biggest earnings miss in two years, also lowered its full-year outlook after raising it in August.
“We saw several strengths across the business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel, and continued growth in beauty and frequency categories,” Target CEO Brian Cornell stated in the earnings release. “At the same time, we encountered some unique challenges and cost pressures that impacted our bottom-line performance."
Target released its results the day after rival Walmart reported a strong third quarter and raised its outlook.
On the company’s earnings call, Cornell cited lingering softness in discretionary categories and higher costs related to the October ports strike, which turned out to be short-lived.
“Consumers continue to spend cautiously, most notably on discretionary items,” he told analysts.
In October, Target announced a new round of price cuts (the first was announced in May). The company said it will have lowered prices on more than 10,000 items this year by the end of the holiday season.
Net income fell to $854 million, or $1.85 a share, for the quarter ended Nov. 2, from $971 million, or $2.10 a share, in the same period a year ago. Analysts had expected earnings per share of $2.30.
Total revenue rose 1.1% to $25.67 billion, missing estimates of $25.88 billion. Traffic increased 2.4%.
Comparable sales inched up 0.3%, which also missed expectations. Digital comparable sales rose 10.8%, reflecting nearly 20% growth in same-day delivery and double-digit growth in curbside pickup. Comparable store sales fell 1.9%.
The strongest categories included beauty, where comparable sales grew more than 6%. Food & beverage and essentials categories were up low-single digits compared to the prior year.
"Looking ahead, our team is energized and ready to deliver the unique combination of newness and value that holiday shoppers can only find at Target, and we remain confident in the underlying strength and fundamentals of our business, and our ability to deliver on our longer-term financial goals,” Cornell stated.
Target said it now expects full-year adjusted earnings per share to range from $8.30 to $8.90, down from its previous guidance of $9 to $9.70.
