Target Corporation (NYSE:TGT) stock fell 1.20% (As on August 18, 11:55:06 AM UTC-4, Source: Google Finance) after the company posted lower than expected results for the second quarter of FY 22 and reported a bigger-than-expected 90% drop in the earnings. The comparable sales for the quarter increased 2.6% but fell short of the estimate of 3.7%. The comparable sales growth reflected a 2.7% increase in traffic. The comparable store sales grew 1.3%, while comparable digital sales increased 9%. Stores fulfilled more than 95% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) grew approximately 11%, led by Drive Up, which grew in the mid-teens. Target registered a sturdy performance in the Food & Beverage, Beauty and Household Essentials categories. During the quarter, the company opened five new stores. Target’s debit card penetration contracted 40 basis points to 11.2%, while credit card penetration increased 20 basis points to 8.9%. The total REDcard penetration declined to 20.1% from the year-ago quarter’s 20.3%.

TGT in the second quarter of FY 22 has reported the adjusted earnings per share of 39 cents, missing the analysts’ estimates for the adjusted earnings per share of 71 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 3.5 percent to $26.01 billion in the second quarter of FY 22, missing the analysts’ estimates for revenue of $26.2 billion. The gross margin decreased 890 basis points to 21.5%, reflecting higher markdown rates due to inventory impairments and measures undertaken to address softer-than-anticipated sales in discretionary categories as well as higher merchandise, inventory shrink and freight costs.

Additionally, the increased compensation and headcount in distribution centers, the cost of managing the excess inventory and higher per-unit last-mile shipping costs also hurt the gross margin rate. Meanwhile, the operating margin shriveled to 1.2% from 9.8% in the year-ago period. The Company paid dividends of $417 million in the second quarter, compared with $336 million last year, reflecting a 32.4 percent increase in the dividend per share, partially offset by a decline in average share count. As of the end of the second quarter, the Company had approximately $9.7 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.

The company expects full-year revenue growth to be in the low- to mid-single digit range, and an operating margin rate to be in a range around 6% in the back half of the year.