Target shares plunge on earnings miss, weak guidance

Investing.com — Target Corporation (NYSE:) shares tumbled more than 21% premarket Wednesday after the retailer reported third-quarter earnings that fell well short of analyst expectations and provided disappointing guidance for the full year.

Target posted adjusted earnings per share of $1.85 for the third quarter, missing the analyst consensus of $2.30 by a wide margin. Revenue came in at $25.67 billion, slightly below estimates of $25.87 billion. Comparable sales inched up just 0.3% YoY, driven by a 2.4% increase in traffic but offset by lower average transaction amounts.

The company’s full-year earnings guidance also disappointed investors. Target now expects fiscal 2025 EPS of $8.30-$8.90, well below the $9.52 consensus estimate.

“We saw several strengths across the business, including a 2.4% increase in traffic, nearly 11% growth in the digital channel, and continued growth in beauty and frequency categories,” said Brian Cornell, CEO of Target. “At the same time, we encountered some unique challenges and cost pressures that impacted our bottom-line performance.”

Cornell described the operating environment in the third quarter as volatile.

The retailer’s gross margin rate declined 0.2 percentage points YoY to 27.2%, while its operating margin fell to 4.6% from 5.2% last year. Target cited higher digital fulfillment and supply chain costs due to managing higher inventory levels and new facilities coming online.

For the fourth quarter, Target projects approximately flat comparable sales and adjusted EPS of $1.85-$2.45.

Despite the weak results, Cornell expressed confidence in the company’s holiday season preparations and long-term prospects, stating, “We remain confident in the underlying strength and fundamentals of our business, and our ability to deliver on our longer-term financial goals.”