It was a rough fourth quarter for retailer Target , which reported earnings of $1.45 a share, missing estimates of $1.51.
Target warned Tuesday that its fourth-quarter store sales were weaker than expected and projected a 2017 slump, sending its stock plunging.
The retailer said it is accelerating its transition to digital sales as it, along with Walmart, does battle with online giant Amazon.The company’s stock opened down more than 12% and it didn’t recover into midday. It was trading at $58.56, down $8.36, at midday.
The big-box chain pledged new investments, new brands and improved digital offerings after what CEO Brian Cornell described as “unexpected softness in our stores” during the fourth quarter. He said next year will be a “year of investment” and a return to growth isn’t expected until 2019.
The company predicted a “low-to-mid single digit decline” in first-quarter comparable sales, as well as a “low-single digit decline” for the full year. Target’s “comparable sales” figure includes sales at stores open at least a year and digital offerings. Cornell said Target is going to try to get away from promotional discounts and move back to everyday low prices.
Taken together, the results concerned investors a week after archrival Walmart reported an encouraging financial performance.
Target is “not where we want to be” on financial results, said Chief Financial Officer Cathy Smith. She said the “strong digital growth that has not fully offset by sales in our stores.” She said the magnitude of change is unexpected when it comes to the “seismic shift we’re seeing in the retail landscape.”.
For the period ended Jan. 28, “comparable sales” sales fell 1.5%, hitting the bottom of Target’s projected range. That included a 3.3% decline at physical stores open at least a year.
The fourth quarter includes the crucial holiday shopping season.
Target revenue fell 4.3% to $20.7 billion for the quarter, which included the phasing out of the company’s pharmacy sales after it sold that business to CVS. That figure matched S&P Global Market Intelligence estimates.
Net earnings fell 42.7% to $817 million, reflecting earnings-per-share of $1.46. Those figures trailed expectations of $854 million and $1.51.
“Our fourth quarter results reflect the impact of rapidly changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” Cornell said in a statement.
He said the company would “accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment,” including 12 new brands covering $10 billion of the company’s annual sales over the next two years.
“While the transition to this new model will present headwinds to our sales and profit performance in the short term, we are confident that these changes will best position Target for continued success over the long term,” Cornell said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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