Target (TGT) Q3 2021 earnings beat

Target (TGT) Q3 2021 earnings beat

Goal shares fell Wednesday, because the big-box retailer opted to emphasise its deal with worth as costs of groceries, gasoline and different items rise.

The inventory closed down 4.73% to $253.80, regardless of beating earnings expectations for the fiscal third quarter.

Goal CEO Brian Cornell mentioned on an earnings name with reporters that the corporate is absorbing a number of the increased prices it is seeing, reasonably than passing them on to clients. That technique may squeeze margins.

“We’re defending costs,” he mentioned. “It is as essential to our friends this yr as security has been all through the pandemic.” 

Goal Chief Progress Officer Christina Hennington acknowledged on the decision the stress on the retailer’s margins as the corporate tries to maneuver stock shortly, regardless of provide chain challenges. She described that as “an applicable long-term funding within the relationship with our friends.”

Sees increased vacation gross sales

Goal topped analysts’ predictions as gross sales jumped 13% after buyers purchased Halloween costumes, stocked up on back-to-school provides and kicked off the seek for vacation items early.

It additionally raised its fiscal fourth-quarter forecast, predicting comparable gross sales may rise at between a excessive single-digit and low double-digit tempo within the vacation interval. Beforehand, it estimated a excessive single-digit improve.

This is what Goal reported for the fiscal third quarter ended Oct. 30, in contrast with Refinitiv consensus estimates:

  • Earnings per share: $3.03 adjusted vs. $2.83, anticipated
  • Income: $25.65 billion vs. $24.78 billion

Web revenue jumped to $1.49 billion, or $3.04 per share, from $1.01 billion, or $2.01 per share, a yr earlier. Excluding objects, the retailer earned $3.03 per share, increased than the $2.83 per share anticipated by analysts surveyed by Refinitiv.

Whole income rose 13% to $25.65 billion from the identical interval a yr in the past, barely above analysts’ expectations of $24.78 billion. 

Comparable gross sales within the third quarter grew 12.7%, as buyers made extra journeys to Goal’s shops and visits to its web site. That exceeded the 8.2% improve that analysts anticipated, in line with a StreetAccount survey. 

Goal’s strongest month of the quarter was August, as dad and mom and college students purchased pencils, notebooks and extra to organize for a return to in-person studying, Chief Monetary Officer Michael Fiddelke mentioned on the decision. Its comparable gross sales dipped to about 10% in September and accelerated again into the low teenagers in October, he mentioned.

Retailer comparable gross sales elevated 9.7%, whereas digital comparable gross sales grew 29%. (These metrics had been up 9.9% and 155%, respectively, within the year-ago quarter.)

Goal mentioned gross sales by means of its same-day providers — which embrace curbside pickup service, Drive Up, in-store retrieval of orders known as Order Pickup and residential supply service Shipt — grew practically 60% within the quarter. That is on prime of greater than 200% development within the year-ago interval.

Because it gears up for vacation buyers, Chief Working Officer John Mulligan mentioned the corporate is making long-term investments to organize for a spike in demand and regulate to the brand new ways in which customers store.

Goal makes use of its shops to satisfy nearly all of its on-line orders, together with ones retrieved within the parking zone and delivered to clients’ houses. Greater than 95% of third-quarter gross sales had been fulfilled in its shops.

Mulligan mentioned on the earnings name that the retailer is including storage capability at greater than 200 high-volume shops, including non permanent storage areas to help seasonal peaks and doubling the variety of parking spots for curbside pickup in contrast with final yr. Additionally it is designating parking spots with numbers to assist its staff extra shortly get on-line orders to clients’ vehicles.

‘Key seasonal moments’

Cornell mentioned gross sales have been sturdy all year long, however have been “punctuated throughout key seasonal moments.” He mentioned he expects that sample to play out once more in the course of the holidays, as customers purchase toys, decorations and meals.

Goal is prepared for the vacations, Cornell mentioned. He defined that the retailer has gotten artistic to verify objects arrive at shops and warehouses in time, regardless of clogged ports. It has contracted a few of its personal ships, unloaded about 60% of its containers at off-peak instances and despatched extra of its items to less-trafficked ports in Georgia, Virginia or the Pacific Northwest.

That is led to a virtually 20%, or $2 billion, improve in stock yr over yr, he mentioned.

Hennington mentioned Goal has new points of interest that can draw buyers. It has opened further Disney and Apple shops inside of its stores. Plus, she said, it now is playing up beauty — a popular holiday category — with about 100 Ulta Beauty at Target shops inside of its stores and on its website. It will also launch a limited-time collection with Lego in early December with brightly colored hoodies, home goods and more.

Target began its first holiday deals in early October and has pledged price matches for early birds. He said the company is bulking up operations by hiring 100,000 seasonal employees, filling 30,000 new supply chain roles and giving about 5 million extra hours to current staff.

“The holiday season is off to a great start, but we’ve got many weeks in front of us and think we’re going to continue to see that strength throughout the holiday season right up to Christmas Eve,” Cornell said.

As of Tuesday’s close, Target’s shares are up about 51% this year. The stock closed at $266.39 on Tuesday, bringing the retailer’s market value to $130.01 billion.

Read the company’s press release here.

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