Weak store traffic prompts Target to cut Q4 forecast

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Weak store traffic prompts Target to cut Q4 forecast


Target has lowered its profit and sales guidance for the fourth quarter after disappointing store traffic led to softer-than-expected holiday sales.

The discounter announced that overall comparable sales during the November-December period decreased 1.3%. Comps in Target stores declined more than 3%, partially offset by digital sales growth of more than 30%.

"While we were pleased with Black Friday sales, December digital sales growth and continued strength in our Signature Categories, these results were offset by early season sales softness and disappointing traffic and sales trends in our stores," said Brian Cornell, chairman and CEO of Target.

The good news on Target’s online efforts seems to suggest that the 4% holiday sales growth reported by the National Retail Federation and other analysts mostly benefited the digital channel.

A new report out this week from Cisco suggests that the online shopper is responsible for the biggest boost in retail holiday sales since 2014. While overall retail sales increased over the holiday period, most of that growth did not come from the brick-and-mortar channel. In fact, Internet shoppers saved the holiday season by setting new records for online sales, and this has huge implications for retailers.

“A bright spot for Target continues to be its online business, with year-over-year growth for the season of over 30% likely to set the bar for brick-and-mortar retailers. Target also called out margin pressure resulting from costs involved in the shift online, which is a factor that will impact any retailer as it makes this shift,” said Moody’s Lead Retail Analyst Charlie O’Shea. 

Total sales at Target decreased 4.9% in the holiday period, reflecting the impact of the December 2015 sale of the company’s pharmacy and clinic businesses. As a result of this softer-than-expected sales performance, the company updated its fourth quarter and full-year 2016 guidance.

Target now expects fourth quarter comparable sales in the range of -1.5% to -1% percent, compared with prior guidance of -1% percent to 1%. In fourth quarter 2016, Target expects both GAAP EPS from continuing operations and Adjusted EPS of $1.45 to $1.55, compared with prior guidance of $1.55 to $1.75.

For full-year 2016, Target now expects GAAP EPS from continuing operations of $4.57 to $4.67, compared with prior guidance of $4.67 to $4.87. The company expects full-year 2016 Adjusted EPS of $5.00 to $5.10, compared with prior guidance of $5.10 to $5.30.