The company's inventory is up more than $2 billion compared with last year.
Target had double-digit growth in its food and beverage categories during the third quarter, and the retailer says it is in an excellent position to capitalize on sales opportunities going into the holidays despite supply chain pressures.
For the third quarter ended Oct. 30, same-store sales grew 12.7% at Target, on top of 20.7% growth last year. That sales growth was driven entirely by traffic, the company said.
Physical store comps increased 9.7%, on top of 9.9% growth last year. Digital comps grew 29%, following growth of 155% last year.
“The consistently strong growth we’re seeing in our business, quarter after quarter, is a testament to the passion and commitment our team brings to serving our guests, and the trust we’ve built with them as a result,” said Brian Cornell, chairman and chief executive officer of Target Corp.
In an earnings call, Cornell also said the retailer has "made a big investment in both inventory and in staffing to make sure we are going to be there to provide the items the guest is looking for and great service.” The company's inventory is up more than $2 billion compared with last year as it has made investments to sail past supply chain bottlenecks.
Same-day services (Order Pickup, Drive Up and Shipt) grew nearly 60% this year, on top of more than 200% last year. More than 95% of Target’s third quarter sales were fulfilled by its stores. All five core merchandise categories delivered double-digit comparable sales growth, on top of strong sales performance last year.
Total revenue of $25.7 billion grew 13.3% compared with last year, driven by total sales growth of 13.2% and a 22.3% increase in other revenue. Operating income was $2 billion in the third quarter 2021, up 3.9% from $1.9 billion in 2020.
Third quarter operating income margin rate was 7.8% in 2021 compared with 8.5% in 2020. Third quarter gross margin rate was 28%, compared with 30.6% in 2020. This year's gross margin rate reflected pressure from higher merchandise and freight costs, increased inventory shrink, and increased supply chain costs from increased compensation and headcount in the company's distribution centers.
"With a strong inventory position heading into the peak of the holiday season, our team and our business are ready to serve our guests and poised to deliver continued, strong growth, through the holiday season and beyond,” Cornell said.
These pressures were partially offset by a slight benefit from favorable category mix. Third quarter SG&A expense rate was 18.9% in 2021, compared with 20.5% in 2020, driven by leverage on strong revenue growth.
Third quarter GAAP EPS of $3.04 was 51.6% higher than last year, and Adjusted EPS of $3.03 was 8.7% higher than last year. Third quarter GAAP and Adjusted EPS have both more than doubled since Q3 2019.
For the fourth quarter, the company expects high-single digit to low-double digit growth in comps, compared with the previous guidance for a high-single digit increase. The company continues to expect its full-year operating income margin rate will be 8% or higher.
The company paid dividends of $440 million in the third quarter, compared with $340 million last year, reflecting a 32.4% increase in the dividend per share, partially offset by a decline in average share count.
The company repurchased $2.2 billion worth of its shares in the third quarter, retiring 8.8 million shares of common stock at an average price of $246.80. As of the end of the third quarter, the company had approximately $14.6 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August.