The stock of the Target Corporation has just taken a 9% dip after underwhelming third quarter earnings.
Target’s third quarter revenue was a bit higher than expected, coming in at an adjusted figure of $17.82 billion, whereas market analysts’ expectations were $17.80 million. Their earnings for the quarter, however, did not do as well. Adjusted earnings per share is at $1.09 which is 3 cents lower than expectations.
Despite the good news on the revenue end, the earnings have investors worried, and it has driven Target’s stock down. The brunt of the concern lies with the increase in Target’s supply chain costs, especially with the holidays right around the corner. In the second quarter, Target’s supply chain seemed to have been paying off, as Target saw a 40% increase in digital sales compared to last year. The overall boost to the system was a net positive for a while, but now it seems like Target may have been investing too much into the supply chain.
According to sources, Target has ordered a ton of stock in preparation for the holidays, well ahead of the beginning of the fourth quarter. Some investors are worried that Target is banking too much on the in-store holiday rush and that they may be overstocked. Not only that, but Target is also planning on hiring 120,000 seasonal employees to keep up with the projected holiday rush. This hiring figure is up 20% from last year. Target is banking on having a very successful holiday season, and if they fail to meet their expectations, then they’re in for a heap of trouble.
In addition to that, Target’s store renovations and stock changes have investors worried as well. Target is still in the number two spot when it comes to retailers in the U.S, and they are looking to do anything they can to finally claim number one from Wal-Mart. They have added more store-brand items and they are lowered the minimum spending requirement for free two/three day shipping order eligibility. These changes are definitely good for Target customers, but there’s no indication that this will be good for Target themselves, and that’s what the investors care about.