(Reuters) – Target said on Wednesday it is targeting profit well above Wall Street expectations for the holiday quarter, as the retailer benefits from lower supply chain costs and its efforts to control its stocks are starting to bear fruit.
Target, like other U.S. retailers, is facing a slowdown in sales as consumers become more cautious in the face of soaring inflation.
For the current quarter, Target expects adjusted earnings of between $1.90 and $2.60 per share, beating analysts’ expectations of $2.22 per share, according to data provided by LSEG.
The group’s stock rose 14% in pre-stock market trading.
According to Target, this guidance follows an improvement in its margin in the third quarter, driven by fewer discounts, a 14% reduction in inventory and associated costs, as well as lower freight costs, supply and delivery chain. Seasonal merchandise for events such as back-to-school and Halloween has outperformed other areas of its business.
Gross margin for the third quarter ended October 28 reached 27.4%, compared to 24.7% a year ago.
Like-for-like quarterly sales fell less than expected, by 4.9%, compared to an estimated decline of 5.25%, thanks to demand for beauty products, which generate around 30% of sales.
“(Target’s) results were better than expected in almost all areas, but that doesn’t change the fact that the consumer environment apparently deteriorated throughout the quarter,” RBC Capital Markets analysts said. in a note.
The company, which primarily sells non-essential items such as electronics and home decor, expects fourth-quarter comparable sales to decline between 4 and 6 percent (“mid single-digit”), compared with a expected drop of 3.97%.
In August, Target lowered its adjusted earnings per share forecast for 2023 to reflect the impact of slowing consumer demand.
Target’s stock has lost 25.7% of its value this year, while the action of its great rival Walmart has increased by 18.2%.
(Reporting by Siddharth Cavale in New York and Ananya Mariam Rajesh in Bangalore; Lina Golovnya, editing by Kate Entringer)
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