MINNEAPOLIS -- Target Corp.'s fiscal third-quarter profit increased 56 percent and placed the company on the winners' side of the retail sector, but executives said Wednesday that digital sales grew only half as fast as they wanted.
Target's online sales grew 20 percent in the August-to-October quarter, well below the company's stated goal of 40 percent. And that marked a slowdown from 30 percent growth in the May-July period.
The pace at which traditional retailers such as Target can make digital sales -- those through the Web and mobile devices -- a bigger part of their revenue mix is considered a sign of long-term competitiveness with online specialists such as Amazon.com Inc.
Cathy Smith, Target's new chief financial officer, attributed the slower digital growth to being up against aggressive electronics promotions in the same quarter last year and the warmer fall this year, which weakened apparel sales.
The Minneapolis-based retailer reported adjusted earnings per share of 86 cents, in line with analysts' expectations and up from 79 cents a year ago.
Net profit grew 56 percent to $549 million, chiefly reflecting the elimination of losses from its now-closed Canadian stores.
Revenue grew 2.1 percent to $17.6 billion, and same-store sales were up 1.9 percent.
"Our momentum is encouraging, especially in the face of stiffer prior-year comparisons," Target CEO Brian Cornell said in a statement.
In comments to reporters, Smith said Target hasn't set a closing date for the sale of its pharmacies to CVS, a $1.9 billion deal announced in June. She said the company is working with regulators and CVS to ensure a smooth process.
Target does appear to be behind in issuing chip-based cards. While it began using chip-based readers at the checkout lane this fall, Smith said only about half of Target's Redcards have been replaced with chips thus far. She said the retailer was taking "a pause" during the Christmas season and will issue the rest of them after the season.
Target also raised the lower end of its profit outlook for the full fiscal year, saying it now expects earnings per share in a range of $4.65 to $4.75. Previously, it began the range at $4.60 per share.
Target shares fell $3.13, or 4.3 percent, to close Wednesday at $69.78.
Matt Nemer, an analyst with Wells Fargo, said, "The company is perhaps one of only a handful of retailers to escape the slowdown reported by many so far this earnings season." The title of his report said that Target is "one of the few winners in retail."
Sean Naughton, an analyst with Piper Jaffray, said in a report: "Overall, this was a solid sales quarter for Target in what has been a difficult retail environment."
Last week, Macy's and Nordstrom reported big drops in third-quarter sales. On Tuesday, Wal-Mart reported a 1.5 percent increase in same-store U.S. sales, its fifth-straight quarter of growth, and Home Depot said its sales at existing stores rose 5.1 percent in the quarter.
Business on 11/19/2015