Target Quarterly Earnings Plunge On Higher Markdowns

Scott Peters
17 Aug, 2022
New York City

Target Corporation declined 3.3% to $174,14 after the retailer reported a sharp decline in earnings after the company marked down items to clear excess inventories. 

Second quarter revenues increased 3.5% to $26.0 billion from $25.2 billion a year ago. 

Comparable sales grew 2.6% in the second quarter, reflecting comparable store sales growth of 1.3% and comparable digital sales growth of 9.0%. 

Higher gasoline prices drove many customers to shop online. 

Second quarter gross margin plunged to 21.5%, compared with 30.4% a year ago. 

"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," the company's earnings release noted. 

Net income in the quarter plunged to $183 million from $1.82 billion a year ago. Diluted earnings per share dropped to 39 cents from $3.65 a year ago. 

Target reiterated 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 second-half of the year.

In the second quarter, Target paid dividends of $417 million compared to $336 million a year ago, a 32.4% increase in the dividend per share, partially offset by a decline in average share count.

Target repurchased $2.6 billion worth of its shares through the accelerated share repurchase program which ended in June, reflecting the retirement of 12.5 million shares of common stock at an average price of $211.58.

The retailer still have $9.7 billion available in its stock repurchase program authorized in August 2021 by the company's board of directors.