Shares of Target fell by more than 5% after reporting 3Q earnings

• Despite beating estimates, Target witnessed a significant drop in its stock price
• Net income jumped to $1.49 billion, or $3.04 per share, from $1.01 billion, or $2.01 per share

Despite topping third-quarter earnings estimates and raising its forecast for the holiday season, retail chain Target witnessed a significant drop in its stock price.

The stock was down more than 5% early Wednesday, despite beating earnings expectations for the fiscal third quarter.

Target CEO Brian Cornell said that the company was absorbing the higher costs rather than passing them on to customers.

“We are protecting prices. It’s as important to our guests this year as safety has been throughout the pandemic,” he said. This strategy could squeeze margins.

Net income jumped to $1.49 billion, or $3.04 per share, from $1.01 billion, or $2.01 per share, a year earlier. Total revenue rose 13% to $25.65 billion from the same period a year ago, slightly above analysts’ expectations of $24.78 billion. 

Comparable sales rose 12.7%, with growth driven entirely by a rise in customer traffic, easily surpassing expectations for a gain of 8.2%.

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Target announced that its inventory is up more than $2 billion compared with last year. Target was one of the major retailers that chartered its ships to bypass global supply chain bottlenecks.

For the fourth quarter, Target expects comp sales to grow high-single-digit to low-double digits compared with previous guidance for a high-single-digit increase.

On Tuesday the world’s largest retailer, Walmart raised its annual sales and profit forecast, expecting a rise in demand for toys and apparel during the holiday season. It expected full-year U.S. same-store sales to increase more than 6%, compared to its prior forecast of 5% to 6%.

READ MORE: Walmart raises forecast ahead of holiday season

(With inputs from CNBC)

Picture Credits: SuperMarket News