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Target Corporation (NYSE: TGT) reported its third-quarter earnings for 2024, showcasing a modest growth in comparable sales by 0.3%, primarily fueled by increased traffic and a robust digital presence. The company experienced a 2.4% rise in guest traffic compared to the previous year, and digital comparable sales surged by 10.8%, significantly driven by Target Circle 360TM and the Drive Up service.

Notably, beauty sales saw a more than 6% increase, while Food & Beverage and Essentials categories recorded low-single-digit growth. Despite these positive trends, the gross margin rate slightly declined by 0.2 percentage points from the previous year, although the year-to-date gross margin rate expanded by a full percentage point.

The company’s GAAP and Adjusted earnings per share (EPS) for the third quarter stood at $1.85, marking an 11.9% decrease from last year’s $2.10. Total revenue for the quarter was $25.7 billion, reflecting a 1.1% increase from the previous year.

However, operating income decreased by 11.2% to $1.2 billion, and the operating income margin rate dropped to 4.6% from 5.2% in 2023. This decline was attributed to higher digital fulfillment and supply chain costs, exacerbated by managing increased inventory levels and new supply chain facilities.
 

Target Fails to Meet EPS and Revenue Expectations in the Third Quarter

Comparing Target’s third-quarter results to market expectations, the company fell short in terms of earnings per share. Analysts had anticipated an EPS of $2.3, but the actual EPS was lower at $1.85. This underperformance can be attributed to several factors, including increased cost pressures and unique challenges that impacted the bottom line.

Despite the shortfall in EPS, Target’s revenue was close to expectations, with actual revenue at $25.7 billion compared to the anticipated $25.87 billion.

The disparity between expected and actual performance highlights the challenges Target faced during the quarter. The increase in SG&A expenses, which rose to 21.4% from 20.9% the previous year, reflects higher costs related to team member pay, benefits, and general liability expenses.

These factors, combined with the pressures of a volatile operating environment, contributed to the gap between anticipated and actual earnings.
 

Target Projects Approximately Flat Comparable Sales for Q4, Expects Full Year Adj. EPS Between $8.30 and $8.90

Target has provided guidance for the fourth quarter of 2024, projecting approximately flat comparable sales. The company anticipates GAAP and Adjusted EPS to range between $1.85 and $2.45.

For the full year, Target expects GAAP and Adjusted EPS to be between $8.30 and $8.90. This guidance reflects Target’s cautious optimism amid ongoing market challenges and cost pressures.

Target’s CEO, Brian Cornell, expressed confidence in the company’s ability to deliver value and newness for holiday shoppers, emphasizing the underlying strength and fundamentals of the business. The company remains focused on its long-term financial goals, despite the near-term challenges.

Target’s strategic initiatives, including enhancements in digital sales channels and supply chain capabilities, are expected to support future growth and profitability.

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