(BFM Bourse) – The retailer suffered from weak demand for discretionary items in the third quarter. The group has revised downwards its earnings per share target for its entire financial year.
While waiting for Nvidia’s publication this Wednesday evening, Wall Street is analyzing other results, notably those of mass distribution groups. After Walmart on Tuesday, Target, in turn, delivered its copy.
And to say that the reception by the market is frosty is an understatement. Target plunged 20.8% at the start of the session on Wall Street, to $122.72.
In the third quarter, which ended November 2 for Target, the company struggled to turn around its sales. Turnover only increased by 0.9% to $25.7 billion and by 0.3% on a like-for-like basis.
Its physical sales even fell by 1.9% at a number of comparable stores over the quarter, while they had increased by 0.7% in the previous quarter, notes Bank of America.
Operating profit fell 11.2% to $1.17 billion, while earnings per share fell 12% to $1.85. According to an LSEG consensus cited by CNBC, analysts expected revenue of $25.9 and earnings per share of $2.3.
The comparison with Walmart hurts
During a conference call with American journalists, CEO Brian Cornell, quoted by CNBC, explained that these disappointing results were due to “continued weakness in discretionary categories”, i.e. clothing , electronic devices or home products.
“We are seeing that consumers are becoming more resourceful and strategic in the way they shop,” said Rick Gomez, Target’s chief commercial officer, according to comments reported by Reuters.
Additionally, Target was forced to stockpile more inventory in anticipation of the US dock workers’ strike in October. Which hampered its profitability.
“It’s certainly a disappointing quarter, much worse than expected,” Karen Short of Melius Research said on CNBC.
“Walmart had warned (Tuesday, Editor’s note) that discretionary spending was complicated with consumers who exercise a lot of discernment. This message comes from a company less oriented towards fashion and clothing than Target, which needs this spending discretionary funds work because it represents 50% of their activity,” she added.
Target doesn’t expect much better momentum in the short term. The group said it expected “stable” sales in the fourth quarter, while Bank of America expected an increase of 2%. The company also lowered its full-year earnings per share forecast, now forecasting a figure between $8.3 and $8.9, compared to a previous range of $9 to $9.70.
This publication obviously contrasts with Walmart which, on Tuesday, on the contrary raised its forecasts, after having beaten expectations in the third quarter, thanks to market share gains among the most affluent households.
Julien Marion – ©2024 BFM Bourse
