Target lowers earnings expectations after disappointing December

By Martin Moylan

Target lowered its earnings expectations Thursday after disclosing disappointing December sales.

Sales at stores open at least a year rose just 1 percent, falling short of the company’s expectations. Revenue at stores open at least a year is a key measure of a retailer’s financial health because it excludes stores that open or close during the year.

Sales of consumer electronics, music, movies and books were soft. But Target said grocery and health and beauty sales were strong.

Morningstar retail analyst Michael Keara says Target’s performance reflects intense price competition.

“Wal-Mart definitely undercut them on price,” Keara said. “Wal-Mart was very aggressive on pricing during the holiday season. In fact, all retailers were. That bodes well for consumers, obviously. But in terms of the perspective from companies, it’s clear that whoever wants to get sales is going to have to give up some margin.”

In October, Wal-Mart announced plans to cut prices by a cumulative $2 billion over two years.

“I don’t know if they reacted quickly enough in terms of cutting prices. We’ll see that later when they report fourth quarter earnings,” Keara said.

Target is seeing pressure on its profit margin. For the three months ending this month, Target expects earnings could be as much as 9 percent under Wall Street’s expectations. Target’s shares are down about 4 percent today.

  • Rich

    I’m sort of surprised to see that Target’s profits are going to be lower than expected. Personally, after how Wal-Mart badly handled Black Thursday and the joke of their price match guarantee, I spent way less than Wal-Mart at normal and took most of my business to Target and Shopko.

  • Tammy

    I really do not care about Walmart, the store is truly useless to me and my family. As for Target, I am really surprised that they are having any problems that are any different from any other store. I am also a little surprised that stores, any store, is surprised by a low profit margin. It happens.