Target Corporation (NYSE:TGT) stock fell 0.33% (As on Nov 18, 11:04:23 AM UTC-4, Source: Google Finance) after the company posted better than expected results in the third quarter of FY 21. The comparable sales for the quarter increased 12.7%, backed by a 12.9% rise in the number of transactions. However, average transaction amount dropped a marginal 0.2%. The digital comparable sales grew 29%, while comparable stores sales rose 9.7% during the quarter. All five core merchandise categories delivered double-digit comparable sales growth, on top of strong sales performance last year. During the quarter, gross margin decreased 260 bps to 28% owing to higher merchandise and freight costs, increased inventory shrink, and rise in supply-chain costs from increased compensation and headcount in the distribution centers. Meanwhile, operating margin shriveled 70 bps to 7.8%. Same-day services (Order Pickup, Drive Up and Shipt) grew nearly 60 percent this year, on top of 200 percent last year. More than 95 percent of Target’s third quarter sales were fulfilled by its stores.
TGT in the third quarter of FY 21 has reported the adjusted earnings per share of $3.03, beating the analysts’ estimates for the adjusted earnings per share of $2.87, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 13.3 percent to $25.65 billion in the third quarter of FY 21, beating the analysts’ estimates for revenue of $24.91 billion. Operating income was $2.0 billion in third quarter 2021, up 3.9 percent from $1.9 billion in 2020. Third quarter gross margin rate was 28.0 percent, compared with 30.6 percent in 2020. This year’s gross margin rate reflected pressure from higher merchandise and freight costs, increased inventory shrink, and increased supply chain costs from increased compensation and headcount in the Company’s distribution centers.
Additionally, during the third quarter, Target paid dividends of $440 million. This reflected an increase of 32.4% in the dividend per share. The company repurchased shares worth $2.2 billion, thereby retiring 8.8 million shares at an average price of $246.80. At the end of the quarter, the company had about $14.6 billion remaining under its share-buyback program approved in August 2021.
The company expects high-single-digit to low-double-digit growth in fourth-quarter comparable sales, compared with the prior view of a high-single-digit increase. It currently expects full-year operating margin rate to be 8% or higher.