Target Corporation (TGT.US), one of large US retailers, reported earnings for fiscal Q3 2023 today ahead of the Wall Street session open today. While the company managed to beat sales expectations, it missed significantly on profit expectations. Moreover, company gave a gloomy outlook for consumer trends in November-January holiday period, what sent shares over 10% lower in premarket. Let's take a quick look at earnings report from Target.
Headline results: Sales beat but profits miss
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Open account Try demo Download mobile app Download mobile appTarget reported 2.7% YoY increase in fiscal-Q3 comparable sales. While growth was much weaker than 12.7% reported a year ago, it was also better than 2.5% expected by the market. Revenue increased 3.3% YoY to $26.12 billion (exp. $25.97 billion). Company reported a 49% YoY drop in EBIT, to $1.03 billion), and a 36% YoY drop in EBITDA, to $1.71 billion. Operating income was 49% YoY lower at $1.02 billion and significantly below the $1.36 billion median estimate. Adjusted EPS came in at $1.54 (exp. $2.15) and almost halved from $3.03 reported a year ago.
On a positive note, company's reported a 1.3% YoY jump in average transaction amount, meaning that customers are spending more during each visit on average. Market expected average transaction amount to increase 0.2%. Moreover, the number of customer transactions increased 1.4% YoY. Total number of Target stores increased 0.9% YoY to 1,941 but fell short of market estimates (1,950).
Target warns about consumer spending
Target said that trends in consumer spending deteriorated in the final weeks of fiscal Q3 2023, causing company to report disappointing profits for the quarter and setting the stage for a poor final quarter of the fiscal 2023 (November 2022 - January 2023). Company said that those weakening sales and profit trends extended into 2022 and it now expects a low-single digit decline in comparable sales in fiscal Q4. It would be the first decline in comparable sales in 5 years. Target also expects operating profit margin to drop to 3%, down from 3.9% in fiscal-Q3 2023. Company does not plan to engage in mass lay-offs but said it plans to save up to $3 billion by simplifying operations and lowering costs.
Target trades over 11% lower in premarket following a worrying Q4 guidance. Stock tested $180 resistance zone yesterday but failed to break above and is now set to open below $158. A key support to watch can be found in the $150 area and marks the lower limit of a recent trading range. Source: xStation5
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