NEW YORK (AP) — Sales and profits slipped for Target during the crucial holiday quarter as customers held back on spending, and the company said there will be “meaningful pressure” on its profits to start the year because of tariffs and other costs.
The retailer beat most estimates, however, but shares fell 6% in morning trading as the overall market sell-off continued. Target also said that sales declined in February in part because of brutal weather that hurt apparel sales and declining consumer confidence. It also anticipates that sales could be unchanged for the year amid increasing economic uncertainty.
The company's fiscal fourth-quarter results came on the same day that the discounter is holding its annual investor meeting in New York where it is updating analysts on its store expansion and merchandising plans. Target said it plans to invest anywhere from $4 billion to $5 billion this year in new store expansions, speeding up its online delivery and shortening its production cycle. The company said it plans to add 20 new stores this year, and it expects to add $15 billion in sales by 2030.
But tariffs and economic uncertainty loomed over the results.
President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect Tuesday, pushing markets in Asia, Europe, and the U.S. lower, and setting up costly retaliations by the United States’ North American allies, not to mention China.
China said Tuesday that it will impose additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy and beef, and also expanded controls on doing business with key U.S.
Americans have been pulling back on spending and retailers face a lot of uncertainty in the year ahead.
Target said that back in 2017, 60% of its products were sourced from China. It's now at 30%. The company is on its way to reduce that number to 20%, Rick Gomez, Target's chief commercial officer told investors on Tuesday. That's four years ahead of schedule. The company is shifting to sourcing in Guatemala and Honduras and is looking to sourcing in the U.S., he said.
Consumers have already been pulling back on discretionary spending because the costs of groceries have risen so sharply. That is an area where Target can be vulnerable because so much of its sales come from discretionary items like clothing, electronics purchases.
Target reported net income of $1.1 billion, or $2.41 per share, far better than the $2.26 that Wall Street was expecting, according to a survey by FactSet. That is down from the $1.38 billion profit the company reported in the same period last year, though the most recent quarter had one fewer week of sales.
Revenue fell to $30.91 billion, from $31.9 billion, but that also beat expectations.
Target said Tuesday its earnings per share for the current year will be between $8.80 to $9.80. Wall Street had been projecting per-share earnings of $9.29 for the year. The company expects net sales to be up 1% and comparable sales to be flat this year.
During the most recent quarter, comparable sales — those from stores and digital channels operating for at least 12 months — rose 1.5%. That was higher than the 0.3% gain during the third quarter. Target posted a 2% gain in the second quarter and a 3.7% drop in the first quarter.
Speaking about the current quarter, Chief Financial Officer Jim Lee said sales should pick up.
“We will continue to monitor these trends and will remain appropriately cautious with our expectations for the year ahead,” Lee said.
Anne D'innocenzio, The Associated Press
