Target Corp. Q3 Profit Tops Estimates; Comps. Up 12.7%

Target Corporation (TGT) reported an increase in profit for the third quarter that also topped Wall Street estimates. However, operating income margin rate reduced to 7.8 percent from 8.5 percent, a year ago. Gross margin rate declined to 28.0 percent from 30.6 percent, reflecting pressure from higher merchandise and freight costs, increased inventory shrink, and increased supply chain costs from increased compensation and headcount in the distribution centers. The company said it continues to expect full-year operating income margin rate will be 8 percent or higher.

Third quarter comparable sales grew 12.7 percent, reflecting comparable store sales growth of 9.7 percent and comparable digital sales growth of 29 percent. Comparable sales growth was driven entirely by traffic. More than 95 percent of the company's third quarter sales were fulfilled by its stores.

Third quarter adjusted earnings per share was $3.03, grew 8.7 percent from $2.79, a year ago. On average, 24 analysts polled by Thomson Reuters expected the company to report profit per share of $2.83, for the quarter. Analysts' estimates typically exclude special items. Net earnings increased to $1.49 billion or $3.04 per share from $1.01 billion or $2.01 per share, prior year.

Total revenue was $25.7 billion, up 13.3 percent from last year, driven by total sales growth of 13.2 percent and a 22.3 percent increase in other revenue. Analysts on average had estimated $24.78 billion in revenue.

For the fourth quarter, the company expects high-single digit to low-double digit growth in comparable sales, compared with the previous guidance for a high-single digit increase.

Shares of Target Corp. were down 3% in pre-market trade on Wednesday.

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