Target profits up despite shipping, labor woes

NEW YORK — Target delivered another strong quarter, overcoming a slew of challenges, from inflationary pressures to congested ports.

Third-quarter profits rose nearly 47%, while sales increased 13.2%, both exceeding expectations, and the Minneapolis company raised projections for fourth-quarter comparable store sales.

Target joins Walmart in heading into the holiday shopping season with momentum. The biggest U.S. retailers are rerouting goods to less-congested ports, even chartering their own vessels. Target also said it unloaded about 60% of its containers at off-peak times. Target and Walmart are using their scale to keep prices comparatively low and, perhaps most importantly, keeping shelves full when so much is in short supply.

On Wednesday, Target said that inventory levels rose nearly 20% compared with the same period last year.

Yet the company has not been unscathed by soaring costs. Its quarterly operating income margin rate during the quarter was 7.8%, up from 8.5% last year. Its gross margin rate was 28%, also up from last year’s 30.6%. The company cited higher merchandise and freight costs, on top of rising supply chain costs.

Some of those cost increases will be permanent, company executives said Wednesday. Supply chain bottlenecks should ease over time, but Target is seeing rising prices from suppliers who are also wrestling with higher costs. Labor also remains tight, and part of Target’s own cost increases come from staffing up to handle online orders.

Target’s shares fell more than 5%, or $13.54, to $252.89 at the opening bell.

Sales at stores open for at least a year rose 9.7% in the three-month period that ended Oct. 30. That was on top of a 9.9% growth in the same 2020 span.