Target sales miss estimates, stock plunges

May 18, 2016, 3:25 PM EDT
(Source: Mike Mozart/flickr)
(Source: Mike Mozart/flickr)

Target's sales missed estimates, leading its stock to plunge.

Reuters reports:

Target Corp (TGT.N) gave a cautious outlook on Wednesday after reporting a lower-than-expected increase in quarterly sales at established stores because of unseasonable weather and weaker demand for electronics and groceries. Shares of the company fell as much as 11 percent, their biggest intraday decline since December 2008, as investors shrugged off higher-than-expected earnings. The stock was down 7.1 percent at $68.27 in the early afternoon. The news also dragged down shares of rivals like Wal-Mart Stores Inc (WMT.N), which is scheduled to report quarterly results on Thursday. Target is the latest traditional brick-and-mortar chain to report disappointing sales, which show how these retailers, including Macy's Inc (M.N) and JC Penney (JCP.N), are suffering as consumers spend more on big-ticket purchases like cars and home improvements and at online merchants like Inc.

The Wall Street Journal writes:

Target joins a growing list of retailers reporting a disappointing start to the year. Last week, soft results from department stores like Macy’s Inc. and Nordstrom Inc. illustrated shoppers’ shift away from brick-and-mortar stores and sparked declines across the retail sector. That pressure was renewed Wednesday as shares in Wal-Mart Stores Inc. fell 2.2%. Wal-Mart is slated to report quarterly results Thursday morning. Off-price chain TJX Cos. and home-improvement stores like Home Depot Inc. reported healthy traffic and spending at their locations, suggesting that consumers are willing to spend but are being more selective about where. Recent data from the U.S. Commerce Department showed that consumer spending in April rose to the best level in more than a year. In the past year, Internet and catalog sales have grown more than three times as fast as overall sales, up 10.2%, while department-store sales sank 1.7% over the past 12 months.

Bloomberg notes:

A key challenge ahead for Target will be revamping its grocery department and improving the quality of its fresh foods and supply chain, said Scott Mushkin, an analyst for Wolfe Research. It will also have to battle increasing competition from Inc., which recently announced it would start offering a monthly Prime membership and is continuing to expand its same-day delivery. “The overall retail climate remains generally underwhelming,” Mushkin said. “The climate appears to have deteriorated to a certain degree across retail from late March and into April.”