Target Corp reported a not so jolly forecast for profits for this holiday season as the company maintains price cuts to increase purchasing in stores and online. Shares were down 4 percent in premarket trading.
The retailer forecast adjusted earnings of $1.05 to $1.25 per share for the quarter ending January 2018, below the average analyst prediction of $1.24. Target said it anticipates same-store sales during the holiday quarter to either remain flat or show a small increase up to 2 percent.
This year, Target has cut prices on thousands of items to get back consumers that have converted progressively to other retailers such as Wal-Mart Stores Inc and online retailers such as Amazon.com Inc. In October, the company stated that a majority of its holiday gift collection was priced at under $15. Target also mentioned that it would capitalize in free shipping starting at the beginning of November to commence the most significant shopping season of the year.
Target reported a third-quarter gross margin rate of 29.7 percent which was a tad better than expected, but moving away from 29.8 percent as cost cuts alleviated loss from the promotional pricing. Same-store sales quarter three rose 0.9 percent since the price cuts brought a 24 percent increase in online sales.
“24 percent online growth continues to place Target in the upper echelon of brick-and-mortar retailers from a percentage growth perspective,” said Charlie O‘Shea retail analyst, adding, “All-in-all, we believe Target is executing its strategic plan effectively”.
Target’s third quarter net income dropped to $480 million, or 88 cents per share from $608 million, or $1.06 per share, a year earlier. The company earned profits of 91 cents per share and sales increased by 1.4 percent to $16.67 billion.
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Chief Executive Brian Cornell asserted to double the number of small-format stores, invest immensely in e-commerce, aggressively market products and keep grocery prices low to compete with rivals this year.