Target Corporation (NYSE:TGT), one of the top online shopping sites in America, saw a significant rise in its quarterly same-store sales according to the company’s earnings report released last Wednesday. However, shares of the big-box store dropped by more than 4% before the morning session opened and tanked even harder after it commenced, and though shares have rebounded somewhat over the past few days, they’re still about 5% below their pre-earnings announcement level.
Based on the Minneapolis-based company’s fiscal third-quarter earnings report, its revenue in the period was $16.67 billion, higher than analysts’ forecast of $16.61 billion. Same-store sales growth was strong, rising by 0.9%, compared with an estimate of 0.4%. Earnings per share reached $0.91, also higher than Wall Street’s anticipated figure of $0.86.
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So why did the market react so negatively to the report? While the increase in sales was a positive sign for the retailer’s turnaround plan, its holiday forecasts threw some shade on them. Chief Executive Brian Cornell said in a statement that Target Corporation estimates sales during the holiday season will be somewhere between flat year-over-year, or increase by just 2%. Its expected fourth-quarter earnings of between $1.05 and $1.25 also disappointed, with analysts having predicted $1.24, at the top end of Target’s range.
While the company expressed confidence in its holiday plans, it appears that it may have previously overestimated the traffic it was expecting, as it planned to hire an additional 30,000 seasonal workers compared to last year despite the company now predicting similar results.
The retailer is in the process of overhauling its business as consumers are increasingly turning to Amazon.com, Inc. (Nasdaq:AMZN) for their shopping needs. Target Corporation is also focusing on increasing its online sales in response. The retailer has 1,800 stores that provide online services, allowing people to choose and buy products from their smartphones or computer, then go to a store nearby to pick them up. Target Corporation saw its online sales increase by 24% during the earnings report’s three-month period.