Target's modest rise in digital sales stands in sharp contrast to its 28.9% growth in Q3 2021.

Target Corp. said net earnings fell more than 50% in its fiscal third quarter ended Oct. 30. The retailer also lowered its forecast for the holiday season and promised a massive cut in spending.

Comparable sales grew 2.7% in the third quarter, reflecting 3.2% comparable store sales growth and 0.3% comparable digital sales growth. That modest rise in digital sales stands in sharp contrast to Target’s 28.9% online sales growth in Q3 2021.

The mass merchant reported $26.52 billion in total revenue, a 3.4% rise compared with a year earlier and higher than the $26.38 billion analysts expected. Operating income, $1.02 billion in third quarter 2022, decreased 49.2% from $2.01 billion in 2021, driven primarily by a decline in the retailer’s gross margin rate.

“In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests’ shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty,” Target CEO Brian Cornell said in written statement. “This resulted in a third quarter profit performance well below our expectations.”


Third quarter operating income margin rate decreased to 3.9% in 2022, compared with 7.8% in 2021. Operating income margin rate is computed by dividing operating income by total revenue. A decline in the rate is generally seen as evidence of inventory discounting. Target announced in June that it would dramatically reduce inventory by slashing prices after supply-chain woes across the retail industry led to a surge in unsold goods.

Holiday woes and cutbacks at Target

Target said it expects a low-single-digit decline for comparable sales in its fiscal fourth quarter. Its less-than-optimistic outlook came just hours before the U.S. Department of Commerce announced U.S. retail sales rose 1.3% in October.

In a call with analysts, Cornell said the Minneapolis-based retailer had entered “a period of rapidly softening demand and elevated uncertainty.”


The difficulties will linger into 2023, chief financial officer Michael Fiddelke said, without offering financial details. The goal of Target’s long-term efficiency plan is to save $2 billion to $3 billion over the next three years, and the merchant is reexamining everything from how it acquires apparel to how it handles digital orders.

“We’re not planning layoffs,” Fiddelke told analysts.

Target inventory clearance

The retailer also made progress in clearing out bloated inventory, Fiddelke said. But it did so in part by marking down prices more than expected, dragging down profit.


“We think there’s risk of another round of heavy markdowns following the holiday season,” Bloomberg Intelligence analyst Jennifer Bartashus said in a report.

One highlight in the third quarter was Target’s beauty offerings, Christina Hennington, executive vice president and chief growth officer, said in a call with analysts.

“Our beauty offerings continue to drive strong performance, delivering sales growth in the mid-teens in skincare,” she said. “Haircare and cosmetics all performed very well, and our Ulta Beauty at Target offerings nearly tripled their total sales volume when compared to the period a year ago.

Same-day services (Order Pickup, Drive Up and Shipt) were essentially flat in the third quarter, with stores fulfilling 96.8% of such orders. A year earlier, stores fulfilled 96.7% of same-day service orders.


Target ranks No. 5 in the 2022 Digital Commerce 360 Top 1000 database.

Q3 2022 Target earnings

For the three months ending Oct. 29 31, 2022, Target reported:

  • Revenue from sales of $26.12 billion, a 3.3% rise from the $25.29 billion in sales a year earlier.
  • An 8.1% rise in the cost of sales to $19.68 billion from $18.21 billion in the comparable quarter of 2021.
  • Net earnings of $712 million, a 52.1% drop from the $1.48 billion reported in Q3 2021.

For the nine months ending Oct. 29, 2022, Target reported:

  • Revenue from sales of $76.60 billion, a rise of 3.5% from the $73.99 billion in the comparable nine months of 2021.
  • An 11.6% rise in the cost of sales to $58.28 billion from $52.20 billion in the year-earlier period.
  • Net earnings of $1.90 billion, a 64.7% drop from $5.40 billion in the first nine months of 2021.

Percentage changes may not align exactly with dollar figures due to rounding.

Bloomberg News contributed to this report.

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