By Senad Karaahmetovic
Shares of Target (NYSE:TGT) are down about 15% in pre-market Wednesday after the retailer reported weaker-than-expected results and slashed its forward-looking forecast.
Target posted a Q3 EPS of $1.54, a significant miss relative to the consensus of $2.16. Revenue increased by 3.3% to $26.5 billion, just above the consensus of $26.39B. Comparable sales grew by 2.7% while the gross margin was reported at 24.7%, again lower than the 25.6% consensus.
EBITDA fell by 36% year-over-year to $1.71B as the company cleared through unwanted inventory. Target also said that the average transaction amount rose by 1.3%.
"In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests' shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty. This resulted in a third quarter profit performance well below our expectations," said Brian Cornell, chairman and chief executive officer of Target Corporation.
The company is projecting a drop in comparable sales for the current holiday period, which would be the first decline in five years. Target "predicts operating profit will shrink to about 3% of revenue -- roughly half the previous forecast."
"Based on softening sales and profit trends that emerged late in 3Q and persisted into Nov., the company believes it is prudent to plan for a wide range of sales outcomes in 4Q, centered around a low-single digit decline in comparable sales," Target said in a statement.
As a result, Target cut its top-line and bottom-line forecasts for Q4. While it didn't announce massive job cuts, Target did say that it plans to save "a total of $2 to $3 billion over the next three years through" business optimization.