Inside the Numbers
In Q3, Target reported $3.03 in adjusted earnings per share, beating expectations of $2.38 per share. This was a 50% increase from last year's $2 per share earnings. Revenue also beat at $25.65 billion vs expectations of $24.8 billion. This was a 13% improvement from last year.
The company also increased its forecast for Q4 due to early indications of strong holiday shopping. Comparable sales, which includes online and physical, in the third quarter grew 12.7%, topping expectations of 8.2%. Online sales grew 29%. Curbside pickup and home delivery service, Shipt, saw growth of 60%.
The company continues to invest in its supply chain and logistics to deal with increased volumes. So far, its strategy of using stores as distribution centers has been working as 95% of sales were fulfilled in stores. Still, the company is adding storage capacity at select locations to support seasonal peaks and increasing the number of curbside pickup spots. Overall, inventory has increased by $2 billion, a 20% increase.
It has continued to innovate by opening up Disney
It has also already started promoting holiday deals and pledged price matches for certain items. It's also looking to hire 100,000 season employees, add 30,000 new people in supply chain roles, and increase the total hours worked by 5 million.
Stock Price Outlook
Target has strong earnings and significant momentum. The drop in share prices is most likely due to some profit-taking after a big run and an overall weak tape.
It continues to outperform the market with a 42% YTD gain. And, it's cheaper than the broader market with a forward P/E of 19 vs 21 for the S&P 500