Target pre-holiday picture mixed
Earnings per share below projections, but revenue up 5.6 percent.
Target’s stock fell Tuesday after it reported a so-so third-quarter earnings report right as the holiday shopping season kicks off.
The company reported earnings per share of $1.09, below analyst predictions of $1.12. Revenue, however, was higher-than-expected, up 5.6 percent from last year at $17.82 billion.
The Minneapolis-based company has poured resources into becoming a holiday heavy-hitter, introducing free two-day-shipping (with no minimum purchase required) and same day delivery to compete with heavyweights such as Walmart and Amazon.
It’s bolstering its toy offerings and expanding customer service. But its new shipping services took a toll on profit margins, as Target blamed its gross margin rate — down from a year ago at 28.7 percent — on higher supply chain costs and struggles to fulfill digital orders, which were up 49 percent this quarter.
But Target assured investors it was ready to compete with other retail juggernauts in a hypercompetitive holiday season.
“We’ve made significant investments in our team heading into the holidays,” chief executive Brian Cornell said in a statement. “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.”
Expectations were high after the company said sales growth was at a 13-year high, thanks to demand for toys and home goods. There’s a lot at stake this holiday season, which is supposed to see record-breaking spending due to the strong economy, low unemployment and higher wages.
Target is also poised to capitalize on the collapse of storied retailers such as Toys R Us and Sears, and a spate of closings for chains like JCPenney and Kmart.
It’s tried to snag its competitors’ shoppers by rolling out widespread renovations — remodeling its makeup departments with beauty-store lighting and vastly expanding its toy section — which should hit more than 1,000 stores by 2020.
Target is poised to capitalize on the collapse of retailers such as Toys R Us and Sears, and chain closings like JCPenney and Kmart.