Target Offers Downbeat 2017 Outlook as Sales Fall
February 28 2017 - 7:47AM
Dow Jones News
By Joshua Jamerson
Target Corp. gave a gloomy forecast for earnings this year and
said it plans to invest in its stores and lower prices to address
"rapidly changing" consumer trends as the big-box chain said sales
and profit declined in the fourth quarter.
Shares skidded 12% to $58.81 in premarket trading.
"We will accelerate our investments in a smart network of
physical and digital assets," said Brian Cornell, Target's chief
executive and chairman, in prepared remarks. "In addition, we will
invest in lower gross margins to ensure we are clearly and
competitively priced every day. While the transition to this new
model will present headwinds to our sales and profit performance in
the short term, we are confident that these changes will best
position Target for continued success over the long term."
Mr. Cornell said the company would outline further details of
its plans during a meeting Tuesday morning with financial
analysts.
For 2017, Target said it expects adjusted earnings in a range of
$3.80 to $4.20 a share. Analysts, polled by Thomson Reuters,
expected $5.34 in per-share earnings. The company also forecast a
low-single-digit decline in comparable sales.
The report from Target comes after the company in January cut
its guidance for the quarter after reporting softer-than-expected
comparable sales during the holiday season, citing soft traffic in
its stores. It also comes after Macy's Inc. and rival big-box
retailer Wal-Mart Stores Inc. last week reported strong sales over
the holiday season, showing that some retailers are managing to
capitalize on a strengthening economy.
During the fourth quarter, Target's comparable sales fell 1.5%,
which was the low end of the company's guidance. Mr. Cornell said
the results "reflect the impact of rapidly changing consumer
behavior, which drove very strong digital growth but unexpected
softness in our stores." Digital channel sales increased 34%, but
store traffic edged up a mere 0.2%.
Over all, for the quarter ended Jan. 28, Target reported a
profit of $817 million, or $1.45 a share, down from $1.43 billion,
or $2.32 a share, in the year-ago period. Analysts expected $1.51 a
share in earnings.
Sales fell 4.3% to $20.69 billion; analysts projected $20.7
billion.
The company also gave an downbeat view for the first quarter,
expecting 80 cents to $1 a share in earnings, as analysts projected
$1.33.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
February 28, 2017 07:32 ET (12:32 GMT)
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