Target: Weak Holiday Sales Plummet Shares

Shares of the second-largest discount store retailer in the United States, Target Corp. (NYSE: TGT) fell nearly 6 percent after the company announced it will cut its fourth quarter earnings guidance due to disappointing sales during the crucial holiday season.

According to the report, total sales decreased 4.9 percent during the months of November to December, reflecting the impact of 2015 sales 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.

“While we were pleased with Black Friday sales, December digital sales growth of more than 40 percent 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 Chairman & Chief Executive Officer of Target, Brian Cornell.

“While we significantly outpaced the industry’s digital performance, the costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth quarter margins and earnings per share,” Cornell continued. “Despite these challenges, we are positioned to deliver full-year Adjusted EPS1 of $5.00 or more in 2016, which would mark an all-time high for Target. And, importantly, our team has made substantial progress in positioning Target for long-term success by improving the shopping experience both in stores and on, transforming our supply chain and technology to support every way our guests want to shop, and developing new store formats that allow us to reach new guests in dense urban and suburban markets.”

Fourth Quarter and Fiscal 2016 Guidance

Target anticipates fourth quarter comparable sales in the range of 1.5 percent to 1 percent, compared with prior guidance of 1 percent to 1.0 percent. 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. The 43-cent difference between these ranges reflects $0.44 of early debt-retirement losses and a $0.01 benefit from the resolution of income tax matters.

Fourth quarter and full-year 2016 GAAP EPS from continuing operations may include the impact of unforeseen discrete items which may be excluded in calculating Adjusted EPS. The Company is not currently aware of any such discrete items beyond those already reported in the first, second and third quarters of 2016.

The Company plans to release its fourth quarter financial results on Feb. 28, 2017.

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