Leading up to Target’s third quarter financial results, Wall Street slashed expectations and the Minneapolis-based retailer was able to beat the lower numbers Wednesday and snap a hard streak of missed quarterly projections.
The stock market responded well to the news, with Target stocks up 17% after the earnings call.
Still, the retailer’s net sales for the quarter were down 4.3% year-over-year at $25 billion vs. Wall Street’s estimates at $24.9 billion.
Comparable sales were 4.9% less than Q3 2022.
However, gross profit margin stood at 27.4%, which is a 2.3% improvement year-over-year and beat the adjusted estimate of 26.6%.
Many investors pointed to the third quarter earnings of Target and Walmart as performance indicators for the upcoming holiday shopping season. Nothing big was expected fromTarget, financially, and Walmart reports its earnings Thursday.
Market data, however, indicates that this year could be the worst shopping season in five years.
Target continues to put the blame of the soft results on external factors. On Wednesday’s earnings call, Target Chairman and CEO Brian Cornell talked about factors like student loan repayments, continued inflation, and increased credit card debt during the call.
“In our research, themes like uncertainty, caution, and management of budgets are top of mind,” said Cornell. “For example, we see more consumers delaying purchases until the last moment.”
Over the first three quarters of the fiscal year, Target generated more than $5.3 billion of operating cash flow compared with about $550 million in 2022.
In late September, the retailer announced it was closing nine locations across four states due to theft issues.
“We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all,” Target said in a statement.
Target’s ecommerce segment, Shipt, also said it was cutting 3% of its workforce during the third quarter.
As for the fourth quarter, Target is looking at a drop in comparable store sales in the mid single digits.