Results miss expectations
Pressure on discretionary persists
In the third quarter, comparable sales inched up 0.3%, with comparable store sales down nearly 2% and digital sales up nearly 11%. Traffic grew 2.4% in the quarter but this growth was offset by a 2% decline in average ticket, driven by weakness in discretionary categories as customers remained cautious with their spending.
As mentioned on the conference call, the beauty category displayed strength during the quarter with a comp increase of over 6% while the food and beverage, and essentials categories both saw low-single-digit growth. The apparel category witnessed a slight sales decline due to softness in cold weather apparel. The retailer saw continued softness in the home and hardlines categories in Q3.
Target is focusing on offering value to its budget-conscious customers through price reductions and promotions. After lowering prices on 5,000 everyday items earlier in the year, the company has cut prices on an additional 2,000 items in order to drive traffic. TGT also plans to roll out promotions that will run throughout the holiday season.
Guidance cut
For the fourth quarter of 2024, Target anticipates comparable sales to remain flat due to continued softness in discretionary categories. GAAP and adjusted EPS are both expected to range between $1.85-2.45 in Q4.
The company lowered its earnings guidance for the full year of 2024 due to the headwinds it has been seeing in the second half of the year. It now expects GAAP and adjusted EPS to range between $8.30-8.90 versus the previous range of $9.00-9.70.