Target U.S. sales beat expectations, loss-making Canada unit faces review
Target Corp (TGT.N) on Wednesday reported its first increase in U.S. same-store sales in four quarters and a quarterly profit above expectations, but said it would review the future of its loss-making Canadian business after the holiday season.
Shares of the fourth-largest U.S. retailer rose 5.4 percent to $71.15 after the results.
Target said consumers responded well to its back-to-school and Halloween promotions. It also reported strong sales of health and beauty items, which helped counteract the trend of weaker apparel sales due to unusually warm early autumn weather that had marred results of some other retailers.
U.S. same-store sales rose 1.2 percent, double the rate expected by analysts polled by Consensus Metrix. Earnings per share were 55 cents, up one cent from a year ago and beating the consensus for 47 cents, according to Thomson Reuters I/B/E/S.
Target projected same-store sales to grow 2 percent in the fourth quarter, a reflection of improving consumer sentiment. Lower fuel prices should help by putting more income in the pockets of shoppers, Chief Financial Officer John Mulligan said on a conference call to discuss the results.
Last week Wal-Mart Stores Inc (WMT.N), the largest U.S. retailer, also cited cheaper gasoline in reporting its first rise in U.S. same-store sales in seven quarters.
Target narrowed the range of its full-year forecast, saying it now expects adjusted earnings of $3.15-$3.25 per share for the year ending January, compared with its previous forecast of $3.10-$3.30.
Mulligan said Target has been able to pull back on the promotions it put in place to win back customers unsettled by a damaging data breach, which resulted in the theft of at least 40 million card numbers, but that he expected the year-end to be highly competitive. Target, unlike Wal-Mart and other competitors, is offering free shipping for all online purchases during the holidays.
Target said sales in Canada rose 44 percent in the quarter to $479 million but that it suffered a loss there of $211 million before interest and taxes.
Mulligan said the company had made improvements to the Canadian business, including better assortment and stocking of items, but that there would be a review of the operations after the critical fourth quarter to determine the "best path to go forward." The company declined to elaborate.
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