Targets Posts Lower Profit, Forecasts Moderate Holiday Sales Growth

Target Corp. posted higher quarterly sales but profits fell and the retailer gave a disappointing earnings outlook for the holiday period, as the big-box chain spends heavily to revamp stores, lower prices and raise wages.

The company said sales at stores open at least a year increased 0.9% in the quarter ended Oct. 28, compared with a 0.2% decline in the same period last year. It forecast earnings for the holiday quarter of $1.05 to $1.25 a share, though the range is lower than what Wall Street was expecting.

Shares of the retailer fell more than 3% in premarket trading following the report. The stock is down 16% on the year as investors worry about competition from Wal-Mart Stores Inc. and Amazon.com Inc., which are pushing down prices.

"While we expect the fourth-quarter environment to be highly competitive, we are very confident in our holiday season plans," CEO Brian Cornell said in a news release.

Despite higher third-quarter sales, both in stores and online, Target's profits fell 21% to $480 million, or 88 cents a share, in the three months ended Oct. 28. The company's profit margins declined and expenses rose as it remodeled stores and invested in lower prices.

Target expects comparable sales growth in the holiday period of flat to 2%, translating into growth of flat to 1% for the full year.

The company also expects higher compensation costs driven by investments in store employee hours and wage increases. Earlier this year, Target said it was increasing its hourly minimum wage to $11 this year and it planned to hire 100,000 temporary workers over the holiday period -- a 40% increase from last year.

Target said it remodeled 37 stores in the third quarter and 110 stores in the year. Sales have increased 2% to 4% in those recently renovated stores. The company plans to finish remodeling 1,000 stores out of its 1,800 fleet by 2020.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com

(END) Dow Jones Newswires

November 15, 2017 08:40 ET (13:40 GMT)