Facing unexpectedly high costs driven by a number of factors, Target reported Q1 GAAP earnings per share were $2.16, down 48.2% from $4.17 in 2021. First quarter adjusted EPS of $2.19 decreased 40.7% compared with $3.69 in 2021.
Target's comparable sales grew 3.3% in the first quarter, reflecting comparable store sales growth of 3.4% and comparable digital sales growth of 3.2%.
Total revenue of $25.2 billion grew 4% compared with last year, reflecting total sales growth of 4% and a 6.7% increase in other revenue. Operating income was $1.3 billion in first quarter 2022, down 43.3% from $2.4 billion in 2021. The decrease was primarily due to a decline in the company's gross margin rate, Target said.
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The retailer’s first quarter operating income margin rate was 5.3% in 2022, compared with 9.8% in 2021. First quarter gross margin rate was 25.7%, compared with 30% in 2021. This year's gross margin rate reflected higher markdown rates, driven largely by inventory impairments and actions taken to address lower-than-expected sales in discretionary categories, as well as costs related to freight, supply chain disruptions, and increased compensation and headcount in its distribution centers, the company said.
"Our first-quarter results mark Target's 20th-consecutive quarter of sales growth, with comp sales growing more than 3% on top of a 23% increase one year ago," said Brian Cornell, chairman and CEO of Target. "Guests continue to depend on Target for our broad and affordable product assortment, as reflected in Q1 guest traffic growth of nearly 4%. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations and well below where we expect to operate over time. Despite these near-term challenges, our team remains passionately dedicated to our guests and serving their needs, giving us continued confidence in our long-term financial algorithm, which anticipates mid-single digit revenue growth and an operating margin rate of 8% or higher over time."
Target also reported that same-day services — Order Pickup, Drive Up and Shipt — grew 8% this year, led by Drive Up, which grew in the mid-teens on top of more than 120% last year. More than 95% of Target's first-quarter sales were fulfilled by its stores. Sales growth was led by frequently-purchased categories, including food and beverage, beauty, and household essentials.
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Target said it expects its Q2 operating income margin rate will be in a wide range centered around first quarter's operating margin rate of 5.3%.
For full-year 2022, Target said it continues to expect low- to mid-single digit revenue growth. The company also said it now expects its full year operating income margin rate will be in a range centered around 6%.