Target's reported earnings miss investor expectations

Target's stock is getting hammered today after the retailer reported earnings that didn't meet investor expectations. The stock fell more than 10 percent at one point.

For the quarter that ended earlier this month, Target earned $622 million on sales of $17.6 billion.

Store and online sales rose at a healthy clip, especially online sales. They jumped nearly 50 percent compared with the same quarter a year ago.

But the retailer has been spending billions of dollars on store upgrades and ramped-up digital commerce efforts. And Edward Jones retail analyst Brian Yarbrough says that eats into profits.

"Profit margins, they're getting squeezed," he said. "It's just a higher cost of doing business in retail. They thought expenses would improve but I think there's a lot of concerns they'll probably continue to be elevated."

Yarbrough says online sales are not as profitable as store sales.

"As online sales grow more rapidly, it lowers profit margins, due to the cost of shipping," he said. "Offering the free shipping, free two-day shipping is very expensive."

For the current quarter, which includes the holiday shopping season, Target expects a 5 percent sales increase online and at stores open at least a year.

So far this year, Target says stores account for 94 percent of its sales and online, 6 percent.