Target underperformed in the third quarter. The group was penalized by weak demand for consumer staples. In addition, a strike by dockworkers on the country's east coast paralyzed the supply chain. Although it lasted only 3 days, it forced Target to significantly increase its inventories, resulting in high costs which penalized profitability.
In terms of figures, revenues grew slightly, but profits fell by 12.1% to $854 million. Earnings per share (EPS) were $0.45 below the $2.30 projected by analysts.
Yesterday, Walmart gained 3% after the publication of its solid results and raised its annual expectations: sales rose by 5.5%, adjusted EPS by 13.7% and operating profit by 8.2%. The retailer did well thanks to low prices, investments in delivery and online sales. Where Walmart reports generalized strength across all segments, Target noted that its customers are very patient, on the lookout for promotions, looking for good value on essential items. Target is more exposed than Walmart to discretionary categories and runs a smaller grocery business.
Third-quarter performance, which includes the important back-to-school and Halloween periods, is not sufficient to meet annual targets. Target now expects NBI of between $8.3 and $8.9, compared with a previous range of between $9 and $9.7.