earned an adjusted 39 cents a share in the second quarter, well below analysts’ estimates.
The stock was falling 3.2% in premarket trading Wednesday.
The retailer said “profit pressure driven primarily by the company’s inventory reduction efforts.”
“While these inventory actions put significant pressure on our near-term profitability, we’re confident this was the right long-term decision in support of our guests, our team and our business,” said Brian Cornell, chairman and chief executive.
(ticker: TGT) posted second-quarter sales of $26.04 billion, slightly higher than forecasts. Same-store sales rose 2.6% vs. Wall Street expectations of an increase of 2.8%.
Gross margin in the period fell to 21.5% in the second quarter from 30.4%. “This year’s gross margin rate reflected higher markdown rates, driven primarily by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as higher merchandise, inventory shrink, and freight costs,” Target said.
Target said current trends support its “prior guidance for full-year revenue growth in the low- to mid-single digit range, and an operating margin rate in a range around 6% in the back half of the year.”
Target’s earnings follow those from
(WMT), which weren’t as bad as feared.
Analysts expected Target to earn 79 cents a share on revenue of $26 billion. That compares with earnings of $3.64 and revenue of $25.16 billion in the year-ago period.
Both Target and Walmart have seen their top lines bolstered by inflation, even as profits have come under pressure from increased discounting to move merchandise.
Walmart’s earnings and sales were above expectations—even though these were swiftly adjusted after the company’s late-July update. While Walmart’s outlook still calls for earnings to decline 9% to 11% in fiscal 2023, that’s still better than just last month, when it called for a drop of 11% to 13%. That’s largely down to the second-quarter beat, but still was enough to boost hopes that the worst was behind the company.
Write to Teresa Rivas at firstname.lastname@example.org
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