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MINNEAPOLIS — Target Corp. posted better-than-expected earnings for its fiscal third quarter despite another decline in comparable-store sales.
Shoppers remain cautious, the company said, but did spend for necessities like food, school supplies and beauty aids.
Comparable sales were down 4.9% in the three months to October 28. In-store comps declined 4.6% while digital comps were down 6%. Revenue from same-day services increased more than 8% in the quarter, led by a 12% increase in curbside pickup.
Target said it added more than 1 million members to its loyalty program. Target Circle members took about five more trips than nonmembers during the quarter and spent about $300 more overall.
Chief executive officer Brian Cornell cited pressures like higher interest rates, increased credit card debt and reduced savings rates, which have left shoppers with less discretionary income.
“For example, this year we’ve seen more and more consumers delaying their spending until the last moment. Guests who previously bought sweatshirts or denim in August or September are deciding to wait until the weather turns cold before making a purchase,” Cornell said on an earnings call. “Dollar sales are being driven by higher prices, with consumers buying fewer units per trip. In fact, overall unit demand across the industry has been down 2% to 4% in recent quarters. And the industry has experienced seven consecutive quarters of declines in discretionary dollars and units.
“And while we’re happy to see inflation rates moderating, if you compare industry pricing in key categories back to 2020, food-at-home pricing for families has increased 25% overall, and in some areas up to 30%.”
Target managed to exceed its earnings forecast thanks to a companywide commitment to efficiency and disciplined inventory management, Cornell said. Target’s operating income margin rate of 5.2% topped last year’s rate of 3.6%. Inventory was 14% leaner than it was a year ago. Net income of $971 million was up 36%.
Target said it has adjusted prices heading into the holidays, with two-thirds of its holiday toys under $25 and most decorations priced below $20.
