On Wednesday, Target posted a bigger than had been expected increase in its same-store sales for the quarter, which was a positive sign for the turnaround plan of the big-box retailer.
Target also increased its outlook for earnings for his full year, although its forecast for the fourth quarter, which includes the all-important holiday shopping season, is lower than expectations on Wall Street. That helped to send shares of Target tumbling over 4% prior to the opening of the market.
CEO Brian Cornell through a prepared statement said that while Target expects the environment for the fourth quarter to be very competitive, the company is very confident in its plans for the holiday season.
Target posted earnings per share of 91 cents, excluding certain items, in comparison to a Wall Street forecast of 86 cents.
Revenue for the quarter reached $16.67 billion, in comparison to Wall Street’s expectation of $16.61 billion.
Sales at same-stores were up 0.9% compared to an expectation for a 0.4% increase.
The retailer, based in Minneapolis, is going through a huge overhaul to the business, as it attempts to keep pace with its biggest rivals Amazon and Walmart.
Target’s turnaround plan of $7 billion, which it announced during February, includes the refurbishing of its existing locations, the opening of stores that are smaller, and making large online investments. Target also is growing its private labels and expanding its amount of groceries.
Some of the brands that already have already launched are in its home goods and apparel categories and included Hearth & Hand, A New Day and Joy Lab.
Meanwhile, Target is reevaluating its strategy for pricing, telling its customers during September it would slash it prices for thousands of its items and would focus on just the most compelling sales.
However those investments also can eat profit margins, warned analysts.
One Wall Street analyst said that results for the third quarter at Target reflected the impact of the company’s short-term investments for a benefit over the long term, with margins slightly softening due to the tactical price investments along with persistent battles for market share with Amazon and Walmart in several categories.
The amount of customer transactions increased during the recently completed third quarter, but the average amount of customer’s transactions fell.
The company said its goal was to lure people into stores more frequently while buying fewer items all at one time.
Net income was down ending the quarter at $480 million compared to $608 million for the same period last year.