Target announced its third quarter 2023 financial results, noting that they reflected stronger-than-expected profit performance on sales consistent with expectations.
The company reported third-quarter GAAP and adjusted earnings per share of $2.10, up 36.3% from $1.54 in 2022.
"In the third quarter, our team continued to successfully navigate our business through a very challenging external environment," said Brian Cornell, chair and chief executive of Target. "While third quarter sales were consistent with our expectations, earnings per share came in far ahead of our forecast. This profit performance benefited from our team's commitment to efficiency and disciplined inventory management, and I'd like to thank them for their tireless efforts. Looking ahead, we're continuing to make investments throughout our business -- in our assortment, our team and the services we offer -- to provide the newness, affordability and convenience our guests want during the holiday season and beyond."
Target's comparable sales declined 4.9% in the third quarter, reflecting a comparable store sales decline of 4.6% and a comparable digital sales decline of 6%. Declines in discretionary categories were partially offset by continued growth in frequency categories, most notably in beauty.
The retailer's same-day services grew more than 8%, led by more than 12% growth in the drive-up service. Total revenue of $25.4 billion was 4.2% lower than last year, reflecting a total sales decline of 4.3% and a .6% decrease in other revenue. Third quarter operating income of $1.3 billion was 28.9% higher than last year, driven by a higher gross margin rate.
Target’s third-quarter operating income margin rate was 5.2% in 2023, compared with 3.9% in 2022. The third quarter gross margin rate was 27.4%, compared with 24.7% in 2022, reflecting lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs and favorable category mix. These benefits were partially offset by higher inventory shrink, Target said.
Through the first three quarters of this year, Target has generated more than $5.3 billion of operating cash flow, compared with approximately $550 million in 2022.
The retailer's inventory at the end of Q3 was 14% lower than last year, reflecting a 19% reduction in discretionary category inventory.
To deliver newness and value for guests this holiday season, Target said it will offer more than 10,000 new items for the holidays, with thousands of must-have gifts under $25, and thousands of exclusive-to-Target items across many categories.
For the fourth quarter, the company expects comparable sales in a wide range around a mid-single-digit decline, and GAAP and adjusted EPS of $1.90 to $2.60.