Target sees highly competitive holiday on the way
Updated: 7:13 a.m. | Posted: 6:17 a.m.
A cautious outlook on the crucial holiday season overshadowed a strong quarter from Target, pulling shares down sharply before the opening bell and the shares of other retailers as well.
The company on Wednesday reported higher traffic and sales at established stores rose as a campaign to improve the experience in stores and online pay off.
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But it looks like it will have to spend a lot of money to get people into stores.
"While we expect the fourth-quarter environment to be highly competitive, we are very confident in our holiday season plans," said Brian Cornell, CEO of Target in a company release.
Like all traditional retailers, Target, based in Minneapolis, is in fierce competition with Amazon.com and needs to cater to more and more people who transition seamlessly between store aisles and mobile phones when they shop.
Target announced in February that it was spending more than $7 billion to revamp its stores and online businesses over the next few years. As part of that strategy, the discounter is offering new store brands, eight of which will be available for the first time this holiday season. That includes the much-anticipated Hearth & Hand with Magnolia, a lifestyle brand from Chip and Joanna Gaines of HGTV's "Fixer Upper." Target now also has dedicated sales associates in such areas as clothing, beauty and electronics. And Target has also been expanding its online services including now shipping online orders from 1,400 of its 1,800 stores for faster delivery.
Starting last month, it increased the minimum hourly pay to $11 this holiday season, effective for the 100,000 temporary hourly workers this season. It's committing to a $15 hourly wage by the end of 2020.
Target reported a third-quarter profit of $480 million, or 88 cents per share, for the period ended Oct. 28. That compares with $608 million, or $1.06 per share, in the year-ago period.
Earnings, adjusted for one-time gains and costs, came to 91 cents per share, or a nickel better than Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue was $16.67 billion, also topping forecasts $16.61 billion, and better than last year's third-quarter revenue of $16.4 billion.
Revenue at stores opened at least a year rose 0.9 percent, better than the 0.4 percent that analysts had predicted. It was also the second consecutive quarter of same-store gains. Customer traffic rose 1.4 percent.
For the current quarter ending in January, Target expects its per-share earnings to range from $1.05 to $1.25, which is shy of Wall Street projections for $1.27.
The company expects full-year earnings in the range of $4.40 to $4.60 per share.
Shares of Target Corp. were down more than 5 percent, or $3.19 to $56.90 in pre-market trading.