Target’s Profit Drops 52% in Q3
Target Corp. on Wednesday morning reported a 52% drop in quarterly net income and warned investors of a slower holiday sales season.
The Minneapolis-based retailer logged $712 million in net income in its third quarter, down from $1.488 billion in the same quarter last year. Target’s quarterly revenue did increase marginally – up 3.4 percent to $26.5 billion – but that was apparently offset by higher expenses. In an earnings summary, Target officials pointed to higher compensation and headcount at distribution centers, which they said took a bite out of the company’s gross profit margin.
“In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates, and economic uncertainty,” said Target CEO and chairman Brian Cornell in the summary. “This resulted in a third quarter profit performance well below our expectations.”
In the statement, Target execs said the company now plans to pull off up to $3 billion worth of cost-cutting measures over the next three years, though they provided few details. As of now, the plan doesn’t include mass layoffs or hiring freezes.
Target execs also highlighted an uptick in theft during the quarter. In a call with reporters, CFO Michael Fiddelke said that shoplifting has cut the company’s gross profit margin by $400 million so far in 2022.
“We know we’re not alone across retail in seeing a trend that I think has gotten increasingly worse over the last 12 to 18 months,” Fiddelke said.
Target has taken some steps to stop theft in the Twin Cities, at least. At stores in downtown Minneapolis and near the U of M campus, the retailer has put more and more products in locked plastic cases.
Target’s financial performance seems to fly in the face of some analyst projections. MarketWatch reported that Target’s quarterly revenue fell short of Wall Street estimates.
And last month, consulting firm Deloitte also reported that nearly three quarters of Twin Cities consumers expect to spend the same or more on holiday shopping this year as they did in 2021. The firm’s projections are, of course, limited to Twin Cities shoppers, and the predictions were based on a survey of 452 consumers in the region.