Target misses on profit, shares slide
Minneapolis – Target’s ramped up investments online and in stores are bringing in shoppers, but they’re also bruising the bottom line.
Company shares fell sharply before the opening bell Tuesday after Target missed profit expectations for the third quarter, the last look at the retailer’s performance as it heads into the holiday shopping season.
At the same time, revenue at stores opened at least a year rose 5.3 percent, its sixth consecutive quarter in that direction. And online sales soared 49 percent. In the previous quarter, Target racked up the strongest same-store sales growth in 13 years.
The battle for customers has become rooted in convenience and to that end, Target leapt in front of rival Walmart with free, two-day delivery for any delivery. Amazon followed by dropping its $25 minimum for free delivery.
Target has begun an aggressive three-year plan to invest $7 billion in its stores and online operations. A large part of those investments are going toward transforming its stores into shipping hubs to cut shipping costs and speed deliveries. It’s expanded a variety of services that allow people to pick up goods curbside or get next-day delivery for some purchases.
“We’ve made significant investments in our team heading into the holidays and they are ready to serve our guests with a comprehensive suite of convenient delivery and pickup options, a wide range of new products and unique gift ideas and a strong emphasis on low prices and great value,” said CEO Brian Cornell.
The company on Tuesday posted net income of $622 million, or $1.17 per share. Per-share earnings without one-time benefits and pretax gains were $1.09, 2 cents short of expectations, according to a survey by Zacks Investment Research.
Revenue for the Minneapolis retailer was $17.82 billion, just edging out Wall Street expectations.
Target expects full-year earnings in the range of $5.30 to $5.50 per share.
Shares of Target Corp. slumped 9 percent.