Target transformation a work in progress

It took a heightened level of promotional activity to drive marginally better than expected third quarter same store sales growth at Target’s U.S. stores while losses in Canada were less severe than the prior year.

Target had forecast comps to be flat to up 1% so the 1.2% gain at U.S. stores was noteworthy, but to drive the better than expected performance Target said it increased promotional activity which caused gross margins to contract to 29.5% from 30%. As a result, operating profits declined to $927 million from $977 million in the third quarter the prior year.

Total sales at the company’s 1,801 U.S. stores increased 1.9% to $17.3 billion with the better than expected comp performance aided by 30% growth in online sales and an increase in higher average selling prices and transaction size offset by an overall decline in transaction volume. Total company profits increased 3.1% to $352 million while earnings per share increased 2.7% to 55 cents.

“We’re pleased with our third quarter financial results, which were driven by better-than-expected performance in our U.S. Segment,” said Brian Cornell, Target’s chairman and CEO. “We’re encouraged by the improving trend we’ve seen in our U.S. business throughout the year, and our fourth quarter plans are designed to sustain this momentum. In Canada, we’ve made improvements to our operations, pricing and assortment in time for the holiday season, and we’re eager to measure how our guests respond.”

Target said sales at its 133 stores in Canada increased 43.8% to $479 million due to the addition of new units and a 1.6% comp increase at the 82 Target Canada stores which have been open long enough to be included in the same store sales base. The Canadian division reported an operating loss of $211 million, but that was better than a prior year loss of $238 million. Target’s gross margins in Canada improved to 19.5% compared to 14.8% the prior year when inventory clearance efforts were more extreme.

Looking ahead, Cornell said, “The entire company is energized as we approach the peak of the holiday shopping season, and we are looking forward to delivering an outstanding store and digital experience to our guests.”

Source: Retailing Today