Canada costs weigh on Target results
MINNEAPOLIS (AP) — Target’s third-quarter net income dropped 47 percent, stung by costs related to its expansion into Canada. The discount store operator’s adjusted profit beat analysts’ estimates, but revenue fell short.
Target lowered its full-year adjusted earnings forecast on Thursday. The results come as the key holiday season, which can account for up to 40 percent of a retailer’s annual revenue, revs up.
The stock declined almost 4 percent in premarket trading Thursday.
Target, which sells affordable, trendy clothes and home decor under the same roof as toothpaste and cereal, has experienced choppy business heading into the holiday season.
In the U.S., while jobs are easier to get and the housing market is gaining momentum, these improvements have not been enough to get most Americans to spend. Many shoppers are grappling with stagnant wage growth. On top of that, Americans continue to struggle with a 2 percentage-point increase in the Social Security payroll tax since Jan. 1.
CEO Gregg Steinhafel said the company’s U.S. segment executed well despite the fact that “consumer spending remains strained.”
For the three months ended Nov. 2, Target earned $341 million, or 54 cents per share. That’s down from $637 million, or 96 cents per share, a year earlier.
Removing Canada-related expansion costs and other items, earnings were 84 cents per share.
Analysts expected earnings of 64 cents per share for the Minneapolis company.
Revenue rose 2 percent to $17.26 billion from $16.93 billion. Wall Street expected $17.38 billion in revenue.
Sales at U.S. stores open at least a year rose 0.9 percent, near the low end of Target’s expectations.
Target’s results come after its chief rival Wal-Mart Stores Inc. posted results that reflect that its low-income shoppers are still struggling. It announced last week that a key revenue measure — revenue at stores open at least a year — fell for the third straight quarter in a row. It also cut its annual outlook for the second time in three months and gave fourth-quarter guidance that’s below Wall Street’s expectations.
Shares fell 3.7 percent, or $2.49, to $64 in premarket trading about 70 minutes ahead of the market open. The stock is up 12 percent for the year.