Business

Target forecasts weak 2020 profit as online growth slows

Total revenue rose but retailer is dealing with falling demand for toys and electronics

Shoppers browse board games at a Target store in Chicago, Illinois. Photograph: Daniel Acker / Bloomberg

Tue Mar 3 2020 - 16:14

Target Corp on Tuesday forecast full-year earnings below analysts' estimates and missed lowered expectations for holiday-quarter revenue, as the retailer wrestled with falling demand for toys and electronics as well as slowing online growth.

Target's sales figures and tepid forecast underscore the pressure brick-and-mortar retailers are facing in building their e-commerce operations to attract more shoppers amid fierce competition from Amazon. com.

Walmart posted its slowest increase in quarterly online sales in nearly two years last month and forecast growth to slow further this year. In contrast, Amazon logged record sales for the holiday season.

Target’s comparable digital sales rose 20 per cent in the fourth quarter, compared with 31 per cent growth reported in the third quarter as well as in the year-earlier period.

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“Clearly, it was not the quarter the company was hoping for,” said Ken Perkins, founder of research firm Retail Metrics.

The slowdown in growth comes even as Target, one of the bellwethers in the retail industry, spends billions of dollars on rolling out same-day delivery and in-store pickup services, while remodelling stores that are also used as hubs to serve online orders.

Perkins said previous high online growth rates at Target and Walmart would be difficult to achieve again as the businesses grow larger in scale and as Amazon eats into their pie, especially during the crucial holiday quarter.

Total revenue at Target rose 1.8 per cent to $23.4 billion in the quarter ended February 1st, missing expectations of $23.5 billion.

Analysts had lowered their estimates from $23.9 billion after the company reported disappointing sales for the crucial November-December shopping season in January.

The company forecast adjusted earnings of $6.70 to $7 per share for fiscal 2020, the mid-point of which was below analysts’ estimates of $6.87 per share, according to IBES data from Refinitiv.

Its comparable sales, which include online and store sales, rose 1.5 per cent, matching analysts’ lowered estimates.

Net earnings rose 4.4 per cent to $834 million. Excluding certain items, Target earned $1.69 per share, beating estimates of $1.66 per share.

The company’s shares were little changed in premarket trading. – Reuters

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