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7 months ago
Target cuts earnings forecast due to weak holiday sales
January 18, 2017 / 12:17 PM / 7 months ago

Target cuts earnings forecast due to weak holiday sales

A newly constructed Target store is shown in San Diego, California May 17, 2016.Mike Blake/File Photo

(Reuters) - Target Corp (TGT.N) became the latest U.S. brick-and-mortar chain to report disappointing results for the holiday season, cutting its quarterly earnings forecast after sales for the crucial November-December period came in lower than expected.

The news on Wednesday sent Target shares down nearly 6 percent.

A sharp rise in holiday digital sales failed to offset declines at Target stores. For many retailers, rapid growth in their online sales is taking business away from their stores, which still generate more than 90 percent of their revenues.

Target Chief Executive Officer Brian Cornell said deep discounts in a competitive environment hurt margins and earnings during the holiday season.

While the company was pleased with its performance on Black Friday in late November and a 40 percent jump in digital sales in December, "these results were offset by early-season sales softness and disappointing traffic and sales trends in our stores," Cornell said.

Target said a drop in sales of electronics, entertainment, food and "essential" products in the holiday season overshadowed growth in its signature categories, including toys.

Chain stores have suffered from reduced demand for small discretionary purchases and as shoppers spend more at online merchants like Amazon.com Inc (AMZN.O).

Earlier this month, Target rivals Macy's Inc (M.N) and Kohl's Corp (KSS.N) cut their profit forecasts after reporting disappointing holiday sales.

Despite poor results from some retailers, overall U.S. holiday sales at stores and online came in higher than expected. The National Retail Federation reported a forecast-beating 4 percent increase to $658.3 billion, helped by an improving economy and increased discounting.

"Target's holiday performance ... is a reflection of what we viewed as a highly promotional season on multiple fronts," said Moody's retail analyst Charlie O'Shea.

O'Shea said Target's holiday e-commerce sales, which rose 30 percent from a year earlier, were a bright spot for the company.

Target's digital performance has had a mixed year. Those sales rose 26 percent, more than expected, in the third quarter after disappointing growth of 16 percent in the second quarter and a strong 23 percent in the first.

Sales at Target stores open at least a year declined 1.3 percent in the November-December period.

Target said it expected comparable sales to fall 1.0 percent to 1.5 percent in the fourth quarter ending on Jan. 31. It had previously forecast a decline of 1 percent to an increase of 1 percent.

The company expects to earn $1.45 to $1.55 per share in the quarter, lower than its prior forecast of $1.55 to $1.75.

Target's shares were down 5.7 percent at $66.93 in midday trading.

Reporting by Nandita Bose in Chicago and Aravind K in Bengaluru; Editing by Lisa Von Ahn

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