Target Q3 Earnings Falter

Minneapolis – Seasonal markdowns and higher expenses led to a 46 percent decline in Target’s third-quarter profits, to $341 million.
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Minneapolis  Seasonal markdowns and higher expenses led to a 46 percent decline in Target’s third-quarter profits, to $341 billion.

Total revenues edged up 1.9 percent to $17.3 billion for the three months, ended Nov. 2.

In the U.S., sales rose 2 percent to $16.6 billion, aided by the opening of nine new stores, while comp sales increased 0.9 percent on higher average basket size but fewer average transactions.

Domestic gross margin slipped from 30.3 to 30 percent due to seasonal markdowns and the impact of “integrated growth strategies,” while the selling, general and administrative expenses (SG&A) expense rate increased from 20.5 percent to 21.2 percent as the discounter continued to invest in technology and supply chain to support its multichannel initiatives.

In a statement, chairman/president/CEO Gregg Steinhafel said, “Target’s third-quarter financial results reflect continued strong execution in our U.S. segment in an environment where consumer spending remains constrained. As our focus shifts to the fourth quarter, we are intently focused on delivering outstanding merchandise, an easy, fun shopping experience and an unbeatable combination of everyday low prices, weekly ad discounts, 5 percent Redcard Rewards and price-match policies throughout the U.S. and Canada.”

But Target, like Best Buy earlier this week, also warned of lower fourth-quarter earnings on what Janney, Montgomery, Scott analyst David Strasser described as weak trends for low- and midtier consumers and Walmart’s planned “promotional onslaught” this holiday season.

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