Target's Profit Formula Shows Mixed Results in Q3: Stock Slips Despite Beating Expectations

Market Takes Stock Price Down Despite Beat

Target Corp. (TGT) faced investor skepticism despite posting better-than-expected results, with shares dropping 3.02% to $85.86 in pre-market trading on the New York Stock Exchange. The retail giant’s updated guidance for the full year appears to have spooked the market, signaling a more cautious outlook ahead.

Earnings Breakdown: Where Target’s Profit Formula Shows Cracks

The company’s Q3 bottom line deteriorated year-over-year, coming in at $689 million compared to $854 million in the same quarter last year. On a per-share basis, earnings slipped to $1.51 from $1.85, representing a roughly 18% decline.

However, when examining Target’s profit formula through an adjusted lens, the picture brightens slightly. Excluding special items, the company delivered $1.78 in adjusted earnings per share—surpassing analyst expectations of $1.71. This beat demonstrates that operational performance outpaced Wall Street’s baseline assumptions.

Revenue Headwinds Persist

The top-line tells a concerning story. Revenue fell 1.6% to $25.270 billion from $25.668 billion in the prior-year period. This revenue contraction, combined with margin pressure, explains the more pronounced decline in net income compared to sales decreases—a critical component of understanding Target’s underlying profit formula.

Full-Year Guidance Pulls Back

Management substantially revised its annual outlook, narrowing expectations for both reported and adjusted earnings. The company now projects net income of $7.70 to $8.70 per share, down from the prior guidance range of $8 to $10. On an adjusted basis, Target expects $7 to $8 per share versus the earlier $7 to $9 range.

The new guidance lands below analyst consensus forecasts of $7.27 per share for the full year, suggesting Target sees persistent headwinds through year-end. This conservative recalibration reflects management’s concern about sustained consumer spending pressure and operational challenges affecting their profit formula going forward.