Target Takes a Hit: Retail Giant’s Q3 Earnings Fall Short

Retail giant Target released lower-than-expected earnings for the third quarter. For the poor numbers, company executives blamed unexpected expenses in its supply chain along with lower consumer spending in discretionary departments.

Target’s revenue in the third quarter reached $25.7 billion, slightly lower than expectations of $25.9 billion. Net income came in at $854 million, a 12% decline compared to the same period last year.

Comparable sales, a measure of same-store sales and website purchases, grew 0.3%. Analysts were predicting a gain of around 1.5%. Fourth-quarter comparable sales are likely to remain flat, according to Target’s projections.

Website and store traffic rose 2.4% versus Q3 2023. Online purchase sales went up 10.8% as curbside pickup and same-day home deliveries also increased.

In May, Target lowered prices on many essential items like bread and milk. Another 2,000 items were reduced in October, with the company planning to lower prices on roughly 10,000 products by the end of the year. The reductions are aimed at attracting price-conscience customers looking to save money on everyday purchases, potentially leaving a little left in the budget for non-essentials.

Target Issues and Annual Outlook

Even after price reductions, Target noticed that consumers were still much more cautious about spending, often employing various resources and strategies to ascertain the right time to buy. They have seemingly postponed purchases just to see if the prices come down any further.

“They know deals are out there,” stated Chief Commercial Officer Rick Gomez, per CNBC. “They’re willing to search for them, and they’ll wait for the exact right moment to head into our stores or log on to our app.”

According to Target’s Chief Operating Officer Michael Fiddelke, extra costs along the supply chain were a headache in the previous quarter. Anticipating an East Coast port strike, Target ramped up product ordering and found ways to decrease shipping time, but the company ended up with too much inventory.

“That came at a cost,” said Fiddelke. “It meant we were fuller a little bit earlier in the quarter than we would like to be, and we’re never quite as efficient when our buildings are full.”

For the full year, Target expects adjusted earnings per share between $8.30 and $8.90, much lower than analysts’ projections of $9.55 a share. In August, the big-box store predicted per-share annual earnings would land in the $9 to $9.70 range.

In contrast to Target’s poor earnings, Walmart announced strong profits in the third quarter. Net income for the mammoth retailer reached $4.6 billion, crushing the $453 million reported in the same period last year.