Target Forecasts Drop in Same-Store Sales, Shares Sink

Target forecast a surprise drop in full-year sales at established stores on Tuesday and reported a steeper-than-expected fall in holiday-quarter sales due to "unexpected softness" at its stores.

Continue Reading Below

The retailer's shares tumbled nearly 12 percent in premarket trading.

Target's net sales have now declined for six quarters in a row as shoppers increasingly gravitate to online retailers such as Inc and spend more on big-ticket purchases such as cars and home renovations rather than on electronics, food and apparel.

The Minneapolis-based retailer said it expects sales at stores open for at least a year to decline in the low-single digit percentage range in fiscal 2017, after reporting a fall of 0.5 percent in 2016.

Analysts on average were expecting the company's same-store sales to increase 0.4 percent in 2017, according to analysts polled by research firm Consensus Metrix.

Target also forecast full-year earnings from continuing operations of $3.80-$4.20 per share, while analysts' on average were expecting its profit to top $5.00, according to Thomson Reuters I/B/E/S.

The retailer also reported a drop in gross margins as well as a bigger-than-expected decline in profit for the fourth quarter, reflecting pressure from discounting and clearance as well as costs from its shift from brick-and-mortar to digital channels.

"Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores," Target Chief Executive Brian Cornell said in a statement.

Target's results compare poorly against those of bigger rival Wal-Mart Stores Inc, which last week reported higher-than-expected U.S. sales for the holiday quarter as its low prices attracted more customers to its stores and online activity accelerated.

Wal-Mart and Kroger have been aggressively cutting prices to gain market share.

Target's net income slumped to $817 million, or $1.45 per share, in the three months ended Jan. 28, from $1.43 billion, or $2.32 per share, a year earlier.

Analysts on average were expecting a profit of $1.51 per share, according to Thomson Reuters I/B/E/S.

The big box retailer's same-store sales fell 1.5 percent, missing analysts' average estimate of a decline of 1.3 percent, according to research firm Consensus Metrix.

Net sales fell 4.3 percent to $20.69 billion. Analysts had expected $20.70 billion, according to Thomson Reuters I/B/E/S.

Target's gross margin rate declined to 26.9 percent from 27.9 percent.

Target's shares slumped 11.8 percent to $59 in premarket trading. Up to Monday's close, they has fallen about 6 percent since Target warned in January on its fourth-quarter results.

(Reporting by Richa Naidu in Bengaluru; Editing by Savio D'Souza)