Target (TGT) stock is up 7.85% in premarket trading on Wednesday following the release of the retailer’s Q3 2016 earnings. The retailer topped Wall Street estimates on sales and earnings. Four key points of interest in the report are:
1. Revenue Reached $16.44 Billion
Target’s revenue rose to $16.44 billion on the quarter, surpassing estimates of $16.3 billion. The company cited improved store traffic and sales trends as the leading factors for the revenue increase.
2. EPS of $1.04
Analysts pegged the company’s EPS at $0.83 on revenue of $16.3 billion. Target posted an adjusted EPS of $1.04 on the quarter. During the same period a year ago, the company posted an EPS of $0.84 on revenue of $17.61 billion.
The company points to efficient execution and an increase in baby, wellness, style and kids categories as the main reasons for higher profit margins.
The back-to-school season was unusually profitable for the company, as sales increased for back-to-school and back-to-college season.
3. Full-Year Guidance Revised to $5.10 – $5.30 EPS
The company adjusted its full-year guidance from $4.80 – $5.20 per share to $5.10 – $5.30 earnings per share. Same-store sales for the fourth quarter were revised to between -1% and 1%, up from -2% to flat sales.
Target’s EPS doesn’t account for income tax matters or debt-retirement losses.
4. Revenue Declined 6.7% Year-on-Year
Target’s revenue is down 6.7% year-on-year to $16.4 billion. The company’s top line has suffered from the sale of its pharmacy business to CVS (CVS). The sale closed last December.
Same-store sales fell 0.2% for two straight quarters. Analysts forecasted a 1% drop in same-store sales.
The company improved sales through weekly ads in its essentials and grocery business. The retailer plans to increase advertising by 20% in the fourth quarter to prepare for the holiday season.
Digital sales rose 26% on the quarter. Target is expected to offer free shipping to increase sales during the holiday period.
