TGT Target Corp

By Joshua Jamerson 

Target Corp. slashed its profit targets for this year, saying it needed to invest in stores and lower prices to win back shoppers.

The big-box chain, which reported sales and profit declines for the holiday quarter, said 2017 profits would fall as much as 25% below what Wall Street had forecast.

Shares skidded 13% to $58.18 in recent premarket trading.

"We will accelerate our investments in a smart network of physical and digital assets," said Brian Cornell, Target's chief executive and chairman, in prepared remarks. "In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day."

Mr. Cornell said the company would outline further details of its plans during a meeting Tuesday morning with financial analysts.

Charlie O'Shea, the lead retail analyst for Moody's, said Target's move to take a hit to profit in 2017 to invest in its business reflects "sensible long-term strategic moves to enhance its competitive position" that "recognize the changing landscape of retail."

For 2017, Target said it expects adjusted earnings in a range of $3.80 to $4.20 a share. Analysts, polled by Thomson Reuters, expected $5.34 in per-share earnings. The company also forecast a low-single-digit decline in comparable sales.

The report from Target comes after the company in January cut its guidance for the quarter after reporting softer-than-expected comparable sales during the holiday season, citing soft traffic in its stores. It also comes after Macy's Inc. and rival big-box retailer Wal-Mart Stores Inc. last week reported strong sales over the holiday season, showing that some retailers are managing to capitalize on a strengthening economy.

During the fourth quarter, Target's comparable sales fell 1.5%, which was the low end of the company's guidance. Mr. Cornell said the results "reflect the impact of rapidly changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores." Digital channel sales increased 34%, but store traffic edged up a mere 0.2%.

Over all, for the quarter ended Jan. 28, Target reported a profit of $817 million, or $1.45 a share, down from $1.43 billion, or $2.32 a share, in the year-ago period. Analysts expected $1.51 a share in earnings.

Sales fell 4.3% to $20.69 billion; analysts projected $20.7 billion.

The company also gave an downbeat view for the first quarter, expecting 80 cents to $1 a share in earnings, as analysts projected $1.33.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

February 28, 2017 08:46 ET (13:46 GMT)

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