• Target, the big box retailer saw shares fall this week despite reporting financial results which beat estimates on the top and bottom lines. The company suffered the same fate as sector peers, with regards to inflationary pressures, and chose to absorb some of the costs instead of passing them onto consumers.

  • Revenue for the fiscal third quarters rose 13% to $25.65 billion from the same period a year ago. Comparable sales were up 12.7%, as customers made more trips to stores and visits to its website. The strongest month of the quarter was August, as parents and students bought back-to-school supplies as learners prepared for a return to in-person learning.

  • Store comparable sales grew 9.7% in the period under review, whilst digital comparable sales continued to improve, growing 29%. Store comparable sales were up 9.9% and 155%, respectively, in the year-ago quarter.

  • Sales through its same-day services grew nearly 60% in the quarter. This on top of more the more than 200% growth in the year-ago period. Same-day services are comprised of curbside pickup, drive up, in-store order pickup, and home delivery service Shipt.

  • Operating income was $2.0 billion in third quarter 2021, up 3.9%. Margins were impacted by higher prices of groceries, fuels and other items. Net income jumped 48% to $1.49 billion, or $3.04 per share, from $1.01 billion, or $2.01 per share, a year earlier. Excluding once-off items, the retailer earned $3.03 per share. 

  • Target also raised its fourth-quarter guidance, forecasting comparable sales to rise between high single-digit and low double-digits. Previously, it estimated a high single-digit increase.

  • Target has deployed some innovative measures to help Santa get gifts to homes this holiday season in lieu of supply chain challenges. It has its own ships and unloaded about 60% of its containers at off-peak times, and sent more of its goods to less-trafficked ports in Georgia, Virginia or the Pacific Northwest. This helped increase inventory levels by nearly 20% y-o-y. Walmart has also loaded stores with Apple, Disney, Lego and Ulta (beauty) shops ahead of the holiday period to help drive sales. Although target is an impressive company, we own in the retail space in managed portfolios and the Cratos world wide flexible fund.