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Target (TGT) Stock Down on Soft Holiday Sales, View Cut
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Departmental store retailer, Target Corporation (TGT - Free Report) released soft sales results for the period Nov–Dec 2016, which mainly comprises the holiday season. Notably, the company’s holiday period comparable store (comps) and sales dropped 1.3% and 4.9%, respectively. The dismal results also caused management to lower the fourth quarter and fiscal 2016 outlook.
Consequent to these factors, Target’s shares declined 5.8% on the index. In fact, the company has been bearish for quite some time. Evidently, Target’s shares dropped 3.4% over the past one year, underperforming the Zacks categorized Retail – Discount Stores industry’s growth of 10.8%.
Coming to the holiday sales, the company stated that the slump in its total sales was largely attributable to the divestment of its pharmacy and clinic businesses, which was concluded in Dec 2015. Apart from this, comps for the holiday period were hurt by sluggish traffic and soft trends witnessed in the beginning of the season.
This was somewhat compensated by solid Black Friday sales, solid digital sales recorded in December and strength across Target’s signature categories.
Notably, comps at Target’s stores dropped by over 3%, somewhat offset by digital sales that grew by over 30%. Further, transactions remained flat year over year, owing to the same factors. Category-wise, comps at Target’s signature categories like Toys rose about 3 percentage points faster than the company average, while Electronics and Entertainment comps slipped in the high single-digit range. Also, comps at both Food and Essentials dipped in the low single-digit range.
While management remains impressed with its spectacular digital performance that also outdid the overall industry, the company incurred heavy costs related to speedy mix shift from stores to digital network. Moreover, intense promotional activities and stiff competition remained obstacles, which weighed on Target’s margins and bottom line for the fourth quarter of fiscal 2016.
Given these factors, management slashed its outlook for the fourth quarter and fiscal 2016. For the fourth quarter, the company now envisions comps growth in a range of negative 1.5% to negative 1%, compared with the previous guidance of negative 1% to 1% increase. Further, Target now anticipates GAAP and adjusted earnings from continuing operations to lie in the band of $1.45–$1.55, against $1.55–$1.75 projected earlier.
For fiscal 2016, the company now expects GAAP earnings to range of $4.57–$4.67 per share, down from $4.67–$4.87 forecasted earlier. Finally, adjusted earnings for the fiscal is now anticipated to lie in the range of $5.00–$5.10 per share, compared with the old projection of $5.10–$5.30.
While the company lowered its guidance, the expected adjusted earnings range for fiscal 2016 marks an all-time high for Target. Further, the company is on track to boost Target’s sales by enhancing services, across stores as well as online. In this regard, the company is making attempts to improve customers’ experiences, by undertaking relevant supply-chain initiatives, making technological advancements and developing new store formats.
Though these factors position Target well for long-term success, the company’s soft performance amid a tough retail environment currently justifies the company’s Zacks Rank #4 (Sell).
Apart from Target, many other companies bore the brunt of the challenging holiday season, as they continued to feel the pinch of declining customer traffic at stores and malls, as online stores hogged the limelight.
Retailers like Kohl's Corporation (KSS - Free Report) and Macy’s, Inc. (M - Free Report) fell prey to these industry hurdles, owing to which their holiday comps declined 2.1% each. This also compelled these bellwethers to slash their earnings outlook for fiscal 2016. Conversely, The Gap, Inc.’s holiday comps rose 2%, fuelled by solid consumer response witnessed at its namesake and Old Navy brands.
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Target (TGT) Stock Down on Soft Holiday Sales, View Cut
Departmental store retailer, Target Corporation (TGT - Free Report) released soft sales results for the period Nov–Dec 2016, which mainly comprises the holiday season. Notably, the company’s holiday period comparable store (comps) and sales dropped 1.3% and 4.9%, respectively. The dismal results also caused management to lower the fourth quarter and fiscal 2016 outlook.
Consequent to these factors, Target’s shares declined 5.8% on the index. In fact, the company has been bearish for quite some time. Evidently, Target’s shares dropped 3.4% over the past one year, underperforming the Zacks categorized Retail – Discount Stores industry’s growth of 10.8%.
Coming to the holiday sales, the company stated that the slump in its total sales was largely attributable to the divestment of its pharmacy and clinic businesses, which was concluded in Dec 2015. Apart from this, comps for the holiday period were hurt by sluggish traffic and soft trends witnessed in the beginning of the season.
This was somewhat compensated by solid Black Friday sales, solid digital sales recorded in December and strength across Target’s signature categories.
Notably, comps at Target’s stores dropped by over 3%, somewhat offset by digital sales that grew by over 30%. Further, transactions remained flat year over year, owing to the same factors. Category-wise, comps at Target’s signature categories like Toys rose about 3 percentage points faster than the company average, while Electronics and Entertainment comps slipped in the high single-digit range. Also, comps at both Food and Essentials dipped in the low single-digit range.
While management remains impressed with its spectacular digital performance that also outdid the overall industry, the company incurred heavy costs related to speedy mix shift from stores to digital network. Moreover, intense promotional activities and stiff competition remained obstacles, which weighed on Target’s margins and bottom line for the fourth quarter of fiscal 2016.
Given these factors, management slashed its outlook for the fourth quarter and fiscal 2016. For the fourth quarter, the company now envisions comps growth in a range of negative 1.5% to negative 1%, compared with the previous guidance of negative 1% to 1% increase. Further, Target now anticipates GAAP and adjusted earnings from continuing operations to lie in the band of $1.45–$1.55, against $1.55–$1.75 projected earlier.
For fiscal 2016, the company now expects GAAP earnings to range of $4.57–$4.67 per share, down from $4.67–$4.87 forecasted earlier. Finally, adjusted earnings for the fiscal is now anticipated to lie in the range of $5.00–$5.10 per share, compared with the old projection of $5.10–$5.30.
While the company lowered its guidance, the expected adjusted earnings range for fiscal 2016 marks an all-time high for Target. Further, the company is on track to boost Target’s sales by enhancing services, across stores as well as online. In this regard, the company is making attempts to improve customers’ experiences, by undertaking relevant supply-chain initiatives, making technological advancements and developing new store formats.
Though these factors position Target well for long-term success, the company’s soft performance amid a tough retail environment currently justifies the company’s Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apart from Target, many other companies bore the brunt of the challenging holiday season, as they continued to feel the pinch of declining customer traffic at stores and malls, as online stores hogged the limelight.
Retailers like Kohl's Corporation (KSS - Free Report) and Macy’s, Inc. (M - Free Report) fell prey to these industry hurdles, owing to which their holiday comps declined 2.1% each. This also compelled these bellwethers to slash their earnings outlook for fiscal 2016. Conversely, The Gap, Inc.’s holiday comps rose 2%, fuelled by solid consumer response witnessed at its namesake and Old Navy brands.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>