Target forecasts strong profit in the 4th quarter, with lower costs and inventory control By Reuters

2023-11-15 15:00:19

© Reuters.

By Siddharth Cavale and Ananya Mariam Rajesh

(Reuters) – Target on Wednesday forecast profit well above Wall Street’s expectations for the fourth quarter, as the big retailer benefits from reduced supply chain costs and its efforts to control inventory begin. to give results.

The forecast sent the company’s shares soaring 14% in pre-market trading.

Target, like other North American retailers, has struggled with slowing sales as consumers become more cautious in the face of steep inflation.

The company expects adjusted earnings of between $1.90 and $2.60 per share in the fourth quarter. The midpoint of that range beat analyst expectations of $2.22 per share, according to LSEG data.

The Minneapolis-based retailer said the forecast follows a third quarter in which margins improved, helped by fewer discounts, a 14% reduction in inventories and related costs, and lower shipping, supply chain and delivery expenses. Seasonal merchandise for events like back-to-school and Halloween has outperformed other parts of its business, she added.

Gross margins in the fiscal third quarter, ended Oct. 28, rose to 27.4% from 24.7% a year earlier. The company also reported a smaller-than-expected 4.9% drop in comparable sales for the quarter, compared to estimates of a 5.25% decline, helped by demand for beauty products, which generates about 30% of sales.

Target shares have lost 25.7% of their value this year, in contrast to rival Walmart’s (NYSE:) 18.2% rise on the site. Walmart, which is the country’s largest supermarket chain by sales, releases third-quarter results on Thursday.