Target Q1 Profit Misses Estimates, Comps. Up 3.3%

(RTTNews) - Target Corp. (TGT) reported that its first quarter comparable sales grew 3.3 percent, reflecting comparable store sales growth of 3.4 percent and comparable digital sales growth of 3.2 percent. The company noted that throughout the first quarter it faced unexpectedly high costs, resulting in profitability that came in well below its expectations. Operating margin rate was 5.3 percent, well below expectations, driven primarily by gross margin pressure.

Gross margin rate was 25.7 percent, compared with 30.0 percent, last year. The company said this year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in distribution centers.

For second quarter 2022, the company projects operating income margin rate will be in a wide range centered around first quarter's operating margin rate of 5.3 percent.

For full-year 2022, the company continues to anticipate low- to mid- single digit revenue growth. The company now expects its full-year operating income margin rate will be in a range centered around 6 percent.

Brian Cornell, CEO of Target Corp., said: "Guests continue to depend on Target for our broad and affordable product assortment, as reflected in first quarter guest traffic growth of nearly 4 percent."

First quarter adjusted EPS was $2.19, down 40.7 percent from $3.69, prior year. On average, 24 analysts polled by Thomson Reuters expected the company to report profit per share of $3.06, for the quarter. Analysts' estimates typically exclude special items.

Net earnings declined to $1.01 billion from $2.10 billion, previous year. Earnings per share was $2.16 compared to $4.17.

Total revenue was $25.2 billion, up 4.0 percent from last year, reflecting total sales growth of 4.0 percent and a 6.7 percent increase in other revenue. Analysts on average had estimated $24.49 billion in revenue. More than 95 percent of the company's first quarter sales were fulfilled by its stores.

Shares of Target Corp. were down 22% in pre-market trade on Wednesday.