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Target (TGT) Q3 Earnings Top Estimates, Comps Decline 4.9% Y/Y
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Target Corporation (TGT - Free Report) came up with third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. However, total revenues declined year over year due to the cautious consumer environment. Target witnessed continued demand in frequency categories but a pullback in discretionary categories. Nonetheless, disciplined cost and inventory management helped the retailer to post meaningful improvement in earnings from the year-ago period.
Sales & Earnings Picture
Target reported adjusted earnings of $2.10 per share, which surpassed the Zacks Consensus Estimate of $1.48. Markedly, the bottom line meaningfully increased from the earnings of $1.54 reported in the year-ago period.
Consumers are grappling with a triple challenge, marked by a high interest rate environment, persistent inflation in food prices and the resumption of student loan payments.
The big-box retailer generated total revenues of $25,398 million, which decreased 4.2% year over year. However, the metric marginally came ahead of the Zacks Consensus Estimate of $25,242 million. We note that sales fell 4.3% to $25,004 million, while other revenues declined 0.6% to $394 million.
Meanwhile, comparable sales decreased 4.9% in the quarter. The metric reflected a comparable store sales decline of 4.6% and a comparable digital sales decline of 6%. We had expected a comparable sales drop of 5.3% and a comparable store sales decline of 3.6% for the quarter under discussion.
Target Corporation Price, Consensus and EPS Surprise
The gross margin expanded 270 basis points to 27.4%, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs and a favorable category mix. These were partly offset by higher inventory shrink. We had expected year-over-year improvements of 200 basis points in the gross margin for the quarter under review. Meanwhile, the operating margin increased to 5.2% from 3.9% in the year-ago period.
Other Financial Details
This Zacks Rank #4 (Sell) company ended the quarter with cash and cash equivalents of $1,910 million, long-term debt and other borrowings of $14,883 million and shareholders’ investment of $12,514 million. During the quarter, Target paid out dividends of $507 million.
Target did not buy back any shares during the quarter under review. At the end of the quarter, the company had about $9.7 billion remaining under the repurchase program approved in August 2021.
Outlook
Target foresees a mid-single-digit decline in comparable sales in the final quarter of fiscal 2023. It expects both GAAP and adjusted earnings per share between $1.90 and $2.60 compared with $1.89 reported in the year-ago period.
We note that shares of Target have fallen 25.7% year to date against the industry’s rise of 4.6%.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings suggests growth of 14.2% and 67.9%, respectively, from the year-ago reported numbers. Ollie's Bargain has a trailing four-quarter earnings surprise of 1.3%, on average.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7.1% and 19.6%, respectively, from the year-ago reported numbers. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 5.2% and 2.7%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.
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Target (TGT) Q3 Earnings Top Estimates, Comps Decline 4.9% Y/Y
Target Corporation (TGT - Free Report) came up with third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. However, total revenues declined year over year due to the cautious consumer environment. Target witnessed continued demand in frequency categories but a pullback in discretionary categories. Nonetheless, disciplined cost and inventory management helped the retailer to post meaningful improvement in earnings from the year-ago period.
Sales & Earnings Picture
Target reported adjusted earnings of $2.10 per share, which surpassed the Zacks Consensus Estimate of $1.48. Markedly, the bottom line meaningfully increased from the earnings of $1.54 reported in the year-ago period.
Consumers are grappling with a triple challenge, marked by a high interest rate environment, persistent inflation in food prices and the resumption of student loan payments.
The big-box retailer generated total revenues of $25,398 million, which decreased 4.2% year over year. However, the metric marginally came ahead of the Zacks Consensus Estimate of $25,242 million. We note that sales fell 4.3% to $25,004 million, while other revenues declined 0.6% to $394 million.
Meanwhile, comparable sales decreased 4.9% in the quarter. The metric reflected a comparable store sales decline of 4.6% and a comparable digital sales decline of 6%. We had expected a comparable sales drop of 5.3% and a comparable store sales decline of 3.6% for the quarter under discussion.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Margins
The gross margin expanded 270 basis points to 27.4%, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs and a favorable category mix. These were partly offset by higher inventory shrink. We had expected year-over-year improvements of 200 basis points in the gross margin for the quarter under review. Meanwhile, the operating margin increased to 5.2% from 3.9% in the year-ago period.
Other Financial Details
This Zacks Rank #4 (Sell) company ended the quarter with cash and cash equivalents of $1,910 million, long-term debt and other borrowings of $14,883 million and shareholders’ investment of $12,514 million. During the quarter, Target paid out dividends of $507 million.
Target did not buy back any shares during the quarter under review. At the end of the quarter, the company had about $9.7 billion remaining under the repurchase program approved in August 2021.
Outlook
Target foresees a mid-single-digit decline in comparable sales in the final quarter of fiscal 2023. It expects both GAAP and adjusted earnings per share between $1.90 and $2.60 compared with $1.89 reported in the year-ago period.
We note that shares of Target have fallen 25.7% year to date against the industry’s rise of 4.6%.
Stocks Hogging in the Limelight
Here, we have highlighted three better-ranked stocks, namely Ollie's Bargain (OLLI - Free Report) , Ross Stores (ROST - Free Report) and Walmart (WMT - Free Report) .
Ollie's Bargain, which operates as a retailer of brand-name merchandise, currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings suggests growth of 14.2% and 67.9%, respectively, from the year-ago reported numbers. Ollie's Bargain has a trailing four-quarter earnings surprise of 1.3%, on average.
Ross Stores, which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7.1% and 19.6%, respectively, from the year-ago reported numbers. ROST has a trailing four-quarter earnings surprise of 11.4%, on average.
Walmart, which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings implies growth of 5.2% and 2.7%, respectively, from the year-ago reported numbers. WMT has a trailing four-quarter earnings surprise of 11.6%, on average.