Target reported shopper caution in discretionary spending pressured the retailer’s third-quarter sales and earnings, which fell short of expectations.
Target missed an analyst consensus estimate published by Zacks Investment Research that called for earnings per diluted share of $2.29. Revenue fell short of a Zacks estimate by 0.94%.
Comparable sales gained 0.3% in the quarter year over year driven by a 2.4 % increase in traffic, the company noted. Digital comps advanced 10.8%. Same-day services, including drive up and delivery, experienced almost 20% growth year over year, Target maintained.
Net sales were $25.23 billion and total revenue was $25.67 billion versus $25 billion and $25.4 billion, respectively, in the year-prior quarter. Operating income was $1.17 billion versus $1.32 billion, in the year-earlier period.
Brian Cornell, Target chair and CEO, in a third quarter conference call, said beauty and everyday necessities sales were strong. Apparel sales, although somewhat soft, were solid versus the market, as warm weather has cut into demand for cold weather goods. Some other categories lagged. “Home and hardlines saw continued softness in Q3 as consumers continue to spend cautiously in these categories,” Cornell said.
Cornell added consumers have been waiting until the last moment to make purchases, focusing more on value and deals, with strong responses to promotions. “Yet,” he said, “consumers are still willing to spend when they find the right combination of newness and value and they continue to celebrate important seasonal moments throughout the year.”
“I’m proud of our team’s efforts to navigate through a volatile operating environment during the third quarter,” Cornell said. “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. At the same time, we encountered some unique challenges and cost pressures that impacted our bottom-line performance. 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.
