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Jan 18, 2017
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Target cuts fourth-quarter forecast as holiday sales slump

By
Reuters
Published
Jan 18, 2017

Target Corp became the latest brick-and-mortar chain to report disappointing results for the holiday season, cutting its quarterly earnings forecast after sales for the crucial November-December period came in lower than expected.

A sharp rise in holiday digital sales failed to offset declines at Target stores, the company said on Wednesday, citing intense competition. Its shares fell nearly 5 percent.



"The costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth-quarter margins and earnings per share," Chief Executive Officer Brian Cornell said in a statement.

Chain stores have suffered from reduced demand for small discretionary purchases like clothes and accessories and as shoppers spend more at online merchants like Amazon.com Inc.

Target said a drop in sales of electronics, entertainment, food and "essential" products in the holiday season offset growth in its signature categories, including toys.

Earlier this month, rivals Macy's Inc and Kohl's Corp cut their profit forecasts after reporting disappointing holiday sales.

Despite poor results from some retailers, overall U.S. holiday sales at stores and online came in higher than expected. The National Retail Federation reported a forecast-beating 4 percent increase to $658.3 billion, helped by an improving economy and increased discounting.

"Target's holiday performance ... is a reflection of what we viewed as a highly promotional season on multiple fronts," said Moody's retail analyst Charlie O'Shea.

O'Shea said Target's holiday e-commerce sales, which rose 30 percent from a year earlier, were a bright spot for the company.

Target's digital performance has had a mixed year. Those sales rose 26 percent, more than expected, in the third quarter after disappointing growth of 16 percent in the second quarter and a strong 23 percent in the first.

Sales at Target stores open at least a year declined 1.3 percent in the November-December period.

Target said it expected comparable sales to fall 1.0 percent to 1.5 percent in the fourth quarter ending on Jan. 31. It had previously forecast a decline of 1 percent to an increase of 1 percent.

The company expects to earn $1.45 to $1.55 per share in the quarter, lower than its prior forecast of $1.55 to $1.75.

Target's shares were down 4.7 percent at $67.59 in morning trading.

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