Amid Transition, Target's 1Q Profit Falls Short
NEW YORK (AP) -- Target, which is pushing through a costly period of transition, posted weaker-than-expected profits for the first quarter.
While traffic growth in stores reached levels not seen in a decade and comparable-store sales jumped a solid 3 percent, those bright spots were overshadowed by the profit numbers.
Shares tumbled 7 percent before the opening bell Wednesday.
Like other retailers, Target is reinventing itself, attempting to become more nimble in the age of Amazon. The Minneapolis discounter is re-investing more than $7 billion into the company through 2020, updating stores and opening smaller locations in urban markets.
With last year's acquisition of same-day delivery service Shipt for $550 million, Target has rolled out same-day delivery to more than 700 stores. And Target announced earlier this month that it was expanding its next-day delivery service for household essentials nationwide and cutting the fee to $2.99, from $4.99 per order. It's free for its loyalty card members.
Target increased the minimum hourly pay to $12 starting this spring, the second hike in a matter of months.
But the massive overhaul has squeezed profits.
The retailer reported a profit of $718 million, or $1.33 per share. Earnings, adjusted for pretax gains and to account for discontinued operations, were $1.32 per share, far short of the $1.38 expected on Wall Street, according to a poll by Zacks Investment Research.
Quarterly earnings are up from last year's $678 million, or $1.22 per share.
Revenue jumped to $16.78 billion, edging out analyst projections for $16.53 billion.
CEO Brian Cornell said in a company release Wednesday that strong sales growth in its home, essentials and food and beverage categories offset the impact of delayed sales in weather sensitive categories, whose business rapidly accelerated in recent weeks as the weather improved.
The company said that customer traffic was up 3.7 percent in the quarter. And online sales rose 28 percent, slightly below the 29 percent pace in the fourth quarter.
For the current quarter, Target expects per-share earnings of between $1.30 and $1.50, about in line with expectations.
The company expects full-year earnings in the range of $5.15 to $5.45 per share, compared with the $5.29 analysts expect.
Shares of Target Corp. fell $5.87, to $75.47 in premarket trading.
Shares have been up more than 40 percent in the past 52 weeks.
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