Why the target stock has fallen today – The Fool Motley

What happened

Retailer actions Target (NYSE: TGT) It broke down Tuesday as a result of a third quarter report slightly below expectations. While Target posted strong growth in online sales and comparable sales, analysts' estimates were disappointed by the bottom line and higher. The stock was down about 9.9% at 12:30 pm EST.

So what

Target's third quarter revenue was $ 17.82 billion, up 5.6% year-on-year, but $ 110 million lower than the average analyst estimate. Comparable sales increased 5.1%, driven by a 5.3% increase in in-store traffic and 49% in online sales. Target claimed to have gained market share in its top five merchandising categories during the quarter.

Source of the image: target.

Non-GAAP earnings per share were $ 1.09 compared to $ 0.90 last year but $ 0.02 higher than analysts' expectations. Earnings growth was driven by a reduction in interest expense and a lower tax rate. The company's gross margin was 28.7%, down from 29.6% last year. Operating margin was 4.6%, down from 5% in the third quarter of 2017.

Investments in hours of work, training and salaries are one of the reasons for the decline in the margin, but Target CEO Brian Cornell expects a positive result over the holiday season: "We have made significant investments in our guests with a full range of convenient delivery and pickup options, a wide range of new products and unique gift ideas, as well as the emphasis on price low and the best value for money. "

Now what

Although the analyst's estimates were not estimated by the target, his results were satisfactory on an absolute basis. Comparable sales and traffic continue to grow and e – commerce is accelerating. Target's 49% online growth was slightly faster than the 41% growth posted in the second quarter. The two-day free delivery probably played a role in this acceleration.

Target's earnings growth will likely slow significantly and may even reverse once the company has reaped the benefits of a lower tax rate and a reduction in interest expense. This could be one of the reasons why the stock is selling today. But with the growth of in-store and online sales, Target proves that it can go hand in hand with both Walmart and Amazon.

John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Timothy Green has no position in the mentioned actions. The Motley Fool owns shares and recommends Amazon. Motley Fool has a disclosure policy.