Target earnings blast forecasts, but same-store sales slide, theft increases; shares soar

Updated at 7:45 am EST

Target Corp. TGT posted much stronger-than-expected third quarter earnings Wednesday, thanks in part to tighter cost and inventory control, but hinted to another slowdown in same-store sales over the holiday period.

Target said adjusted earnings for the three months ending on October 28 were pegged at $2.10 a share, a 36.4% increase from the same period last year that smashed the Street consensus forecast of around $1.48 per share.

Group revenues, Target said, fell 4.2% to $25.4 billion, just ahead of analysts' estimates of a $25.24 billion tally. Same-store sales fell 4.9% from last year, as well, inside the Refinitiv forecast of a 5.25% decline. Digital sales were down 6%, extending their recent decline to a fourth consecutive quarter.

Profit margins were up 300 basis points, or 3 percentage points, from last year's quarter to 27.4%, Target said, while overall inventories were down 14% from last year's levels. 

Looking into the final months of the year, Target said is sees comp sales falling by mid-single digits, with a wide earnings range of between $1.90 and $2.60 per share.

"In the third quarter, our team continued to successfully navigate our business through a very challenging external environment," said CEO Brian Cornell. "While third quarter sales were consistent with our expectations, earnings per share came in far ahead of our forecast. This profit performance benefited from our team's commitment to efficiency and disciplined inventory management, and I'd like to thank them for their tireless efforts."

"Looking ahead, we're continuing to make investments throughout our business -- in our assortment, our team and the services we offer -- to provide the newness, affordability and convenience our guests want during the holiday season and beyond," he added. 

Target shares were marked 13.55% in pre-market trading immediately following the earnings release to indicate an opening bell price of $125.80 each, a move that would still leave the stock with a 20% decline over the past six months.

Last month, Target closed nine stores across four major U.S. cities, including New York and San Francisco, following losses due to organized crime and theft that could cost the retailer more than $500 million this year.

Cornell told investors in August that Target faced a 120% increase in theft, or threat of theft, over the first five months of the year, and warned the group continued to face an "unacceptable" levels of risk he linked to organized crime. Target said in May that theft from its U.S. stores would likely cost $500 million more than it did last year.

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