Although revenues slipped from a year earlier, Target posted a significant gain in third-quarter profits and will tackle sales going forward, including efforts to drive holiday gains with sharp prices on gifts and promoting them conspicuously.
Net earnings for the quarter were $971 million, or $2.10 per diluted share, versus $712 million, or $1.54 per diluted share, in the year-prior period. Adjustments for one-time events did not affect the diluted share price in the quarter.
An analyst consensus estimate from Yahoo Finances called for earnings of $1.48 per diluted share and revenues of $25.24 billion.
Comparable sales slid 4.9% in the quarter, with declines in discretionary categories partially offset by continued growth in frequency categories, most notably in beauty, according to Target. Same-day services advanced more than 8%, led by more than 12% growth in drive-up.
Revenues were $25.4 billion and sales were $25 billion, versus $26.52 billion and $26.12 billion in the year-previous period, respectively, the company reported. Operating income was $1.32 billion versus $1.02 billion.
Target indicated inventory at quarter was 14% lower than at the same point in 2022, reflecting a 19% reduction in discretionary category inventory.
To deliver newness and value for consumers in the holiday season, Target reported the company is offering more than 10,000 new items for the holidays, with thousands of gifts under $25 and thousands of Target-exclusive items across multiple categories.
In a conference call, Brian Cornell, Target chair and CEO, emphasized the company’s earnings gains.
“We’ve seen a meaningful improvement in profitability compared with last year,” Cornell said. “Even beyond this year’s rapid progress, we believe we have a significant opportunity to grow both the top and bottom line in the years ahead. So, even as we remain cautious in our near-term outlook, we’re not standing still. We’re playing the long game, investing in our stores, our supply chain, our team, our digital capabilities and our assortment to provide the newness, value and convenience our guests want for the holiday season and beyond.”
Cornell said economic headwinds continue to hit target, and the decline in comps resulted from softer sales in discretionary categories, partially offset by gains in everyday needs. Store comp trends were a bit stronger than digital comps in the third quarter, Cornell added. Bottom-line growth was stronger than Target anticipated because of factors including better freight costs, favorable product mix, inventory management and work to improve efficiencies.
Target will focus on improving traffic and sales growth to provide more satisfactory overall performance, he said. However, consumers are waiting until the last minute to make purchases and buying fewer units across the industry, Cornell maintained. As such, Target is emphasizing sharp price points on end caps and marketing during the holiday season, as well as innovation and newness. He commended vendors for providing both. For its part, Target is revisiting employee training to ensure shopper satisfaction as the year ends and into the future.