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Target's Q3 earnings beat estimates, while revenues and comparable sales declined.
Sales softness stemmed from weaker discretionary demand and lower store traffic.
Digital sales rose 2.4% with strong same-day delivery and higher non-merch revenues.
Target Corporation (TGT - Free Report) reported third-quarter fiscal 2025 results, with revenues and earnings declining from the prior-year period. While the top line missed the Zacks Consensus Estimate, the bottom line beat the same. Also, the company witnessed a decline in comparable sales, reflecting ongoing pressure in consumer discretionary categories. Despite the challenging environment, Target continued to show resilience in digital growth and non-merchandise revenue streams, aided by strength in membership, marketplace and Roundel advertising.
The company reaffirmed confidence in its holiday readiness. Strong execution of fulfillment options, expanded exclusive assortments and continued efficiency gains remain core to Target’s multiyear transformation plan. Management reiterated its focus on strengthening merchandising authority, elevating the guest experience and accelerating technology-driven operational enhancements.
Target reported adjusted earnings of $1.78 per share, which beat the Zacks Consensus Estimate of $1.76 but declined from $1.85 reported in the year-ago period.
The big-box retailer generated total revenues of $25,270 million, which fell short of the Zacks Consensus Estimate of $25,360 million. The metric fell 1.5% on a year-over-year basis. We note that merchandise sales declined 1.9% to $24,752 million, while non-merchandise sales grew 17.7%, fueled by strong growth in Roundel advertising, Target Circle 360 memberships and marketplace contributions.
Meanwhile, comparable sales decreased 2.7%, following a 1.9% decline in the preceding quarter. The metric fared worse than our estimate of a 1.4% decline. Comparable sales reflected a drop of 3.8% in comparable store sales but an increase of 2.4% in comparable digital sales. Digital momentum was led by more than 35% growth in same-day delivery via Target Circle 360.
Food & Beverage and Hardlines delivered positive comparable sales growth, while discretionary categories remained pressured as consumers continued to prioritize value and necessity. Traffic, or the number of transactions, dipped 2.2%, while the average transaction amount slid 0.5%. We had expected the average transaction amount to decline 0.4% for the quarter under review.
Gross margin came in at 28.2%, down slightly from 28.3% reported last year, as increased markdowns and mix pressure were mostly offset by lower inventory shrink, higher advertising revenues, and operational efficiencies in supply chain and digital fulfillment. The adjusted operating margin rate was 4.4%, down 20 basis points from the year-ago quarter, and came in line with our estimate.
Target Corporation Price, Consensus and EPS Surprise
Target ended the quarter with cash and cash equivalents of $3,822 million, long-term debt and other borrowings of $15,366 million, and shareholders’ investment of $15,501 million. During the quarter, Target paid out dividends of $518 million.
The company repurchased $152 million worth of shares, retiring 1.7 million shares at an average price of $91.59. Target still has approximately $8.3 billion remaining under its August 2021 share repurchase authorization.
A Sneak Peek Into TGT’s FY25 Outlook
This Zacks Rank #3 (Hold) company reaffirmed its fourth-quarter sales outlook. It continues to expect a low-single-digit decline in sales. Adjusted earnings are projected in the band of $7.00-$8.00 per share (versus the prior estimate of $7.00-$9.00), while GAAP earnings per share are anticipated in the range of $7.70-$8.70.
Target’s efforts to improve speed, relevance and value for guests, through thousands of new exclusive items, expanded next-day shipping reach, aggressive price investments on essentials, and strong gift-oriented assortments, are expected to support traffic recovery as macro pressures gradually ease.
Shares of Target have fallen 10.3% in the past three months against the industry’s decline of 5.4%.
Don’t Miss These Solid Bets
The Chefs' Warehouse, Inc. (CHEF - Free Report) , a premier distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales and EPS calls for growth of 8.1% and 29.3%, respectively, from the year-ago reported numbers.
Boot Barn Holdings, Inc. (BOOT - Free Report) , the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). BOOT has a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS implies growth of 16.2% and 20.5%, respectively, from the year-ago reported numbers.
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , a leading off-price retailer of brand-name household products, currently carries a Zacks Rank #2. OLLI has a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and EPS suggests growth of 16.4% and 16.5%, respectively, from the year-ago reported numbers.
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Target Q3 Earnings Beat Estimates, Sales Decline Amid Soft Traffic
Key Takeaways
Target Corporation (TGT - Free Report) reported third-quarter fiscal 2025 results, with revenues and earnings declining from the prior-year period. While the top line missed the Zacks Consensus Estimate, the bottom line beat the same. Also, the company witnessed a decline in comparable sales, reflecting ongoing pressure in consumer discretionary categories. Despite the challenging environment, Target continued to show resilience in digital growth and non-merchandise revenue streams, aided by strength in membership, marketplace and Roundel advertising.
The company reaffirmed confidence in its holiday readiness. Strong execution of fulfillment options, expanded exclusive assortments and continued efficiency gains remain core to Target’s multiyear transformation plan. Management reiterated its focus on strengthening merchandising authority, elevating the guest experience and accelerating technology-driven operational enhancements.
Target’s Quarterly Performance: Key Metrics & Insights
Target reported adjusted earnings of $1.78 per share, which beat the Zacks Consensus Estimate of $1.76 but declined from $1.85 reported in the year-ago period.
The big-box retailer generated total revenues of $25,270 million, which fell short of the Zacks Consensus Estimate of $25,360 million. The metric fell 1.5% on a year-over-year basis. We note that merchandise sales declined 1.9% to $24,752 million, while non-merchandise sales grew 17.7%, fueled by strong growth in Roundel advertising, Target Circle 360 memberships and marketplace contributions.
Meanwhile, comparable sales decreased 2.7%, following a 1.9% decline in the preceding quarter. The metric fared worse than our estimate of a 1.4% decline. Comparable sales reflected a drop of 3.8% in comparable store sales but an increase of 2.4% in comparable digital sales. Digital momentum was led by more than 35% growth in same-day delivery via Target Circle 360.
Food & Beverage and Hardlines delivered positive comparable sales growth, while discretionary categories remained pressured as consumers continued to prioritize value and necessity. Traffic, or the number of transactions, dipped 2.2%, while the average transaction amount slid 0.5%. We had expected the average transaction amount to decline 0.4% for the quarter under review.
Gross margin came in at 28.2%, down slightly from 28.3% reported last year, as increased markdowns and mix pressure were mostly offset by lower inventory shrink, higher advertising revenues, and operational efficiencies in supply chain and digital fulfillment. The adjusted operating margin rate was 4.4%, down 20 basis points from the year-ago quarter, and came in line with our estimate.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Target’s Financial Health Snapshot
Target ended the quarter with cash and cash equivalents of $3,822 million, long-term debt and other borrowings of $15,366 million, and shareholders’ investment of $15,501 million. During the quarter, Target paid out dividends of $518 million.
The company repurchased $152 million worth of shares, retiring 1.7 million shares at an average price of $91.59. Target still has approximately $8.3 billion remaining under its August 2021 share repurchase authorization.
A Sneak Peek Into TGT’s FY25 Outlook
This Zacks Rank #3 (Hold) company reaffirmed its fourth-quarter sales outlook. It continues to expect a low-single-digit decline in sales. Adjusted earnings are projected in the band of $7.00-$8.00 per share (versus the prior estimate of $7.00-$9.00), while GAAP earnings per share are anticipated in the range of $7.70-$8.70.
Target’s efforts to improve speed, relevance and value for guests, through thousands of new exclusive items, expanded next-day shipping reach, aggressive price investments on essentials, and strong gift-oriented assortments, are expected to support traffic recovery as macro pressures gradually ease.
Shares of Target have fallen 10.3% in the past three months against the industry’s decline of 5.4%.
Don’t Miss These Solid Bets
The Chefs' Warehouse, Inc. (CHEF - Free Report) , a premier distributor of specialty food products in the United States, currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CHEF’s current financial-year sales and EPS calls for growth of 8.1% and 29.3%, respectively, from the year-ago reported numbers.
Boot Barn Holdings, Inc. (BOOT - Free Report) , the nation’s leading lifestyle retailer of western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). BOOT has a trailing four-quarter earnings surprise of 5.4%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS implies growth of 16.2% and 20.5%, respectively, from the year-ago reported numbers.
Ollie's Bargain Outlet Holdings, Inc. (OLLI - Free Report) , a leading off-price retailer of brand-name household products, currently carries a Zacks Rank #2. OLLI has a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and EPS suggests growth of 16.4% and 16.5%, respectively, from the year-ago reported numbers.