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Investing.com - Target has lowered the upper end of its full-year earnings guidance and reiterated that it expects sales to drop in the current quarter, in a potentially dour outlook for the all-important holiday shopping season.
Like its peers, the big-box retail chain has been grappling with an uncertain operating backdrop driven in part by sweeping U.S. tariffs and a record-long federal government shutdown. Concerns have swirled around whether many shoppers, wary of making big-ticket purchases on nonessential items in this environment, will dial back spending.
Minneapolis-based Target has also been bleeding market share to Walmart, as its bigger rival focuses on building out its delivery service and providing essential products. Understaffing and inventory missteps have plagued Target as well, overshadowing growth in its e-commerce business.
In the third quarter, total comparable sales, which fold in purchases both online and in stores that have been open for at least 13 months, dropped by 2.7%, versus Bloomberg consensus expectations for a decrease of 2.06%.
Digital sales, meanwhile, increased by 2.4%, although the expansion was short of Wall Street estimates of 3.45%.
However, strong returns at Target’s Roundel advertising unit helped lift quarterly per-share income to $1.78, above estimates of $1.73.
Still, the company said it now expects to post annual adjusted earnings per share of about $7 to $8, compared to a previous forecast of roughly $7 to $9. The guidance excludes gains from legal settlements in the first quarter as well as severance and asset-related charges in the third quarter, Target said.
A low-single digit decline in sales is also anticipated for the fourth quarter. Shares of Target, which have shed more than a third of their value this year, were lower by more than 2% in premarket U.S. trading on Wednesday.
The projections come as new CEO Michael Fiddelke aims to overhaul Target’s performance by making changes to the firm’s variety of merchandise and leaning into new artificial intelligence-enhanced technologies.
To entice buyers ahead of the holidays, Target has slashed prices on 3,000 everyday offerings such as food and household staples and rolled out a cheaper slate of Thanksgiving meal items.