What To Expect From Target’s Q3 2016 Earnings?
Target (NYSE: TGT) is scheduled to announce its third quarter results on Wednesday, November 16. The company reported better than expected results in the second quarter, as its revenues were in line with its guidance and EPS came in ahead of expectations. However, the company’s revenue declined 7% year-over-year (y-o-y) to $16.2 billion, primarily driven by the sale of its pharmacy business to CVS, investments in promotions and increased digital shipping expenses. Moreover, Target also saw a disappointing comparable sales decline of 1.1% y-o-y in the second quarter due to 2.2% y-o-y decline in its store foot traffic.
The retailer witnessed softer comparable sales in its grocery, electronics and pharmaceutical business in the second quarter. On the other hand, comparable sales in signature categories – particularly kids, women’s apparel, home and toys – continued to drive the company’s results in Q2. We expect this trend to continue, which will pressure the company’s top line. The grocery segment is likely to be negatively impacted by food deflation in the third quarter. The food-at-home (grocery store or supermarket food items) consumer price index (CPI) was flat from August to September and also 2.2% lower than last September. ((Summary Findings Food Price Outlook, usda.gov.in, Sept 2016)) In addition, Target’s store foot traffic could continue to decline on the back of the transition of its in-store pharmacies to CVS in the third quarter.
For long term growth, Target needs to focus on its high performing signature categories to differentiate itself from other retailers and shift its focus to promoting its digital channel.
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Q3 Guidance
In the third quarter, Target expects its comparable sales to be flat to down 2%. The company also expects adjusted earnings of $0.75 to $0.95 per share in the third quarter, and trimmed its full-year 2016 earnings guidance to $4.80 to $5.20, compared to prior guidance of $5.20 to $5.40. Reuters’ compiled analyst estimates forecast revenues of $16.3 billion and earnings of $0.83 per share for Q3 2016, implying growth of about (-7.5)% and (-3.5)%, respectively.
See our complete analysis for Target
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