We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Target (TGT) Q3 Earnings Miss Estimates and Decline Y/Y
Read MoreHide Full Article
Target Corporation (TGT - Free Report) came up with third-quarter fiscal 2022 results, wherein the top line beat the Zacks Consensus Estimate and grew year over year. Comparable sales increased for the 22nd successive quarter, primarily gaining from growth in store channels.
However, higher markdown rates and increased freight costs continued to weigh on margins. The bottom line missed the consensus mark and fell sharply from the year-ago period. This was the third straight earnings miss.
Management informed that sales and profit trends softened in the latter part of the quarter. Soaring inflation, rising interest rates and ongoing geopolitical tensions have brought a drastic change in consumer behavior. As a result, the profit performance came below the company’s expectations.
This Minneapolis, MN-based company cautioned that softening sales and profit trends have continued in November. It now foresees a low-single-digit decline in comparable sales and an operating margin rate of around 3% in the key holiday quarter. Earlier, Target had forecast low-to-mid-single-digit revenue growth for fiscal 2022 and an operating margin to be around 6% for the back half of the year.
To simplify and improve efficiencies across the business, Target announced an enterprise-wide cost-containment effort. Through the initiative, the company plans to save between $2 billion and $3 billion over the next three years.
Target Corporation Price, Consensus and EPS Surprise
Target reported adjusted earnings of $1.54 per share, which fell short of the Zacks Consensus Estimate of $2.15 and our estimate of $2.07. Also, the bottom line declined significantly from the $3.03 reported in the year-ago period.
However, the big-box retailer generated total revenues of $26,518 million, which increased 3.4% year over year and came ahead of the Zacks Consensus Estimate of $26,355 million and our estimate of $26,300.6 million. We note that sales jumped 3.3% to $26,122 million, while other revenues rose 9.5% to $396 million. Target witnessed unit share gains across all five core merchandising categories.
Meanwhile, comparable sales for the quarter under discussion increased 2.7%, surpassing our estimate of 2.3%. The comparable sales growth reflected a 1.4% increase in traffic and a 1.3% increase in the average transaction amount. Comparable store sales grew 3.2%, while comparable digital sales increased 0.3%. Frequency categories, such as beauty, food and beverage and household essentials, drove comparable sales growth.
Target’s debit card penetration contracted 90 basis points to 10.8%, while credit card penetration decreased 10 basis points to 8.8%. The total REDcard penetration declined to 19.6% from the year-ago quarter’s 20.7%.
Margins
The gross margin decreased 330 basis points to 24.7%, reflecting higher markdown rates, inventory shrink, and merchandise and freight costs. Additionally, the increased compensation and headcount in distribution centers and the cost of managing the excess inventory also hurt the gross margin rate. Meanwhile, the operating margin shriveled to 3.9% from 7.8% in the year-ago period.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $954 million, long-term debt and other borrowings of $14,237 million and shareholders’ investment of $11,019 million. During the quarter, Target paid out dividends of $497 million.
We note that shares of Target have fallen 16.9% in the past six months against the industry’s rise of 6.1%.
3 Hot Stocks
Here we have highlighted three better-ranked stocks, namely Crocs (CROX - Free Report) , Chipotle Mexican Grill (CMG - Free Report) and Dollar General (DG - Free Report) .
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS suggests growth of 51.5% and 23.7%, respectively, from the year-ago period. CROX has a trailing four-quarter earnings surprise of 18.2%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.1% and 31%, respectively, from the year-ago reported figure. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.
Dollar General, a discount retailer, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 11.1%.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10.8% and 13.8%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.2%, on average.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Target (TGT) Q3 Earnings Miss Estimates and Decline Y/Y
Target Corporation (TGT - Free Report) came up with third-quarter fiscal 2022 results, wherein the top line beat the Zacks Consensus Estimate and grew year over year. Comparable sales increased for the 22nd successive quarter, primarily gaining from growth in store channels.
However, higher markdown rates and increased freight costs continued to weigh on margins. The bottom line missed the consensus mark and fell sharply from the year-ago period. This was the third straight earnings miss.
Management informed that sales and profit trends softened in the latter part of the quarter. Soaring inflation, rising interest rates and ongoing geopolitical tensions have brought a drastic change in consumer behavior. As a result, the profit performance came below the company’s expectations.
This Minneapolis, MN-based company cautioned that softening sales and profit trends have continued in November. It now foresees a low-single-digit decline in comparable sales and an operating margin rate of around 3% in the key holiday quarter. Earlier, Target had forecast low-to-mid-single-digit revenue growth for fiscal 2022 and an operating margin to be around 6% for the back half of the year.
To simplify and improve efficiencies across the business, Target announced an enterprise-wide cost-containment effort. Through the initiative, the company plans to save between $2 billion and $3 billion over the next three years.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Sales & Earnings Picture
Target reported adjusted earnings of $1.54 per share, which fell short of the Zacks Consensus Estimate of $2.15 and our estimate of $2.07. Also, the bottom line declined significantly from the $3.03 reported in the year-ago period.
However, the big-box retailer generated total revenues of $26,518 million, which increased 3.4% year over year and came ahead of the Zacks Consensus Estimate of $26,355 million and our estimate of $26,300.6 million. We note that sales jumped 3.3% to $26,122 million, while other revenues rose 9.5% to $396 million. Target witnessed unit share gains across all five core merchandising categories.
Meanwhile, comparable sales for the quarter under discussion increased 2.7%, surpassing our estimate of 2.3%. The comparable sales growth reflected a 1.4% increase in traffic and a 1.3% increase in the average transaction amount. Comparable store sales grew 3.2%, while comparable digital sales increased 0.3%. Frequency categories, such as beauty, food and beverage and household essentials, drove comparable sales growth.
Target’s debit card penetration contracted 90 basis points to 10.8%, while credit card penetration decreased 10 basis points to 8.8%. The total REDcard penetration declined to 19.6% from the year-ago quarter’s 20.7%.
Margins
The gross margin decreased 330 basis points to 24.7%, reflecting higher markdown rates, inventory shrink, and merchandise and freight costs. Additionally, the increased compensation and headcount in distribution centers and the cost of managing the excess inventory also hurt the gross margin rate. Meanwhile, the operating margin shriveled to 3.9% from 7.8% in the year-ago period.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $954 million, long-term debt and other borrowings of $14,237 million and shareholders’ investment of $11,019 million. During the quarter, Target paid out dividends of $497 million.
We note that shares of Target have fallen 16.9% in the past six months against the industry’s rise of 6.1%.
3 Hot Stocks
Here we have highlighted three better-ranked stocks, namely Crocs (CROX - Free Report) , Chipotle Mexican Grill (CMG - Free Report) and Dollar General (DG - Free Report) .
Crocs, a leader in innovative casual footwear for women, men and children, carries a Zacks Rank #2 (Buy). CROX has an expected EPS growth rate of 15% for three to five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and EPS suggests growth of 51.5% and 23.7%, respectively, from the year-ago period. CROX has a trailing four-quarter earnings surprise of 18.2%, on average.
Chipotle Mexican Grill, an operator of fast-casual restaurants, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 23.4%.
The Zacks Consensus Estimate for Chipotle Mexican Grill’s current financial-year revenues and EPS suggests growth of 15.1% and 31%, respectively, from the year-ago reported figure. CMG has a trailing four-quarter earnings surprise of 4.1%, on average.
Dollar General, a discount retailer, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 11.1%.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10.8% and 13.8%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.2%, on average.