Nov 16, 2016
Target Corp raises profit forecast; shares rise
Nov 16, 2016
Target Corp on Wednesday reported a higher-than-expected quarterly profit and raised its fiscal-year forecast after benefiting from a strong back-to-school shopping season and higher online sales.
The Minneapolis-based retailer's shares, which had been down nearly 2 percent year to date, rose 8.1 percent to $77.22 in morning trading.
Target's performance has improved from recent quarters, when competition from online rivals like Amazon.com Inc and slower sales of smaller items like electronics and food hurt earnings. Target was forced to shake up its top leadership with three high-profile exits in the past four months.
"Although Target's performance has improved, it would be wrong to say that it is now a company firing on all cylinders," said Neil Saunders, chief executive officer of research firm Conlumino. He said Target's sales still showed the company is losing market share overall.
The company said demand for Apple Inc merchandise, which was disappointing in the second quarter, improved because of new products like the iPhone 7. Ahead of the holidays, advance orders for the brand were three times higher than a year earlier.
Last week, department store rivals like Macy's Inc and Kohl's Corp struck an optimistic note going into the holiday season and said they expected consumer spending to accelerate this quarter.
Target CEO Brian Cornell said store visits increased and sales trends improved by a percentage point during the third quarter ended on Oct. 29.
Digital sales jumped 26 percent, an acceleration from previous quarters. Comparable sales in high-margin "signature" categories such as baby, health and wellness outpaced those overall by three percentage points.
"As we move into the biggest quarter of the year, we are pleased with our inventory position," Cornell said.
Target forecast fiscal-year earnings of $5.10 to $5.30 per share, excluding special items, up from a prior outlook of $4.80 to $5.20. It also raised the forecast for its sales performance at stores open at least a year by one percentage point to a range of down 1 percent to up 1 percent for this quarter.
Net income attributable to Target rose nearly 11 percent to $608 million in the third quarter from a year earlier.
Earnings of $1.04 per share before special items beat the analysts' average estimate of 83 cents, according to Thomson Reuters I/B/E/S.
Total sales fell 6.7 percent to $16.4 billion. Same-store sales dipped 0.2 percent, while analysts on average had expected a decline 1.1 percent, according to research firm Consensus Metrix.
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