* Q3 shr 58 cents vs Wall St view 50 cents
* Sees Q4 shr of $1.12 possible, Street view was $1.14
* Says cautious about holiday quarter performance
* Shares slide 4 percent
(Adds details from conference call, updates stock)
By Nicole Maestri
SAN FRANCISCO, Nov 17 Target Corp (TGT.N)
forecast a holiday quarter profit that could fall short of Wall
Street estimates, saying early sales results for November
showed tepid consumer demand, and shares fell 4 percent.
Target's view for the holiday season overshadowed its
report of higher-than-expected quarterly profit on Tuesday. The
discount retailer is facing a budding holiday season price war
against much larger rival Wal-Mart Stores Inc (WMT.N) and
online retailer Amazon.com Inc (AMZN.O).
"Our early sales results for November provide additional
justification for being cautious," Target Chief Executive Gregg
Steinhafel said on a conference call. Steinhafel said store
traffic was moderately higher than a year ago, but transactions
were smaller than average, "creating pressure on our topline
The company said earnings of $1.12 per share for the fourth
quarter were possible, but many factors would need to fall into
place to meet or exceed that number. Analysts on average had
forecast earnings per share of $1.14, according to Thomson
Target said it is also planning for a modest decline in
fourth-quarter same-store sales.
Wal-Mart is slashing prices every week until Christmas,
prompting Target to match those discounts on everything from
toys to books and DVDs.
Target's aggressive price cuts may expand into other
categories as well. Websites claiming to have copies of
Target's advertising circular for "Black Friday," the day after
Thanksgiving, say the retailer will be selling a coffeemaker
and a slow cooker for $3 each.
A company spokesman said Target "is unable to confirm the
accuracy" of pricing information posted online by other sites.
Target's profit for the third quarter ended Oct. 31 rose to
$436 million, or 58 cents per share, from $369 million, or 49
cents per share, a year earlier.
Analysts, on average, were expecting earnings of 50 cents
per share, according to Thomson Reuters I/B/E/S.
With the results, Target broke a streak of eight
consecutive declines in quarterly profit.
Sales rose 1.4 percent to $14.79 billion, while sales at
stores open at least a year, a key retail gauge known as
same-store sales, fell 1.6 percent.
Ralph Cole, senior vice president of research at Ferguson
Wellman Capital Management, which owns Target shares, said it
made sense for Target to issue a conservative forecast.
"It important that they set the bar at a reasonable level
and then, like they did this quarter, try to beat that," he
But the worry is how much Target, which said it is
"well-positioned to capture profitable market share," could
pressure its own margins in trying to reach its goals.
"If you're going to go for market share, what does that
mean for profitability during the holiday season?" he said.
In its credit card segment, profit increased to $60 million
from $35 million, helped by improved portfolio performance.
Target's business faltered in the recession as shoppers
stopped splurging on its trendy wares and fell behind making
payments on their credit cards.
To get business back on track, Target has slashed
inventory, cut costs, set aside funds to cover bad credit card
accounts, and has rolled out its "P-fresh" concept -- adding an
expanded selection of grocery items in its general merchandise
stores -- to more than 100 stores.
It will add the "P-fresh" format to an additional 350
stores in 2010, it said, and will expand its "up & up" private
label line, which already includes diapers and tissues.
In its electronics department, the retailer is testing TV
delivery and installation service, and it is allowing consumers
to trade in their Apple iPods in return for a Target gift card
To win shoppers at the start of the holiday shopping rush,
the retailer will off a one-day only sale on Target.com on
Thanksgiving Day, and its stores will open one hour earlier
than usual on Black Friday, the day after Thanksgiving.
In afternoon trading, Target shares were off $2.08, or 4.14
percent, at $48.21.
(Reporting by Nicole Maestri, editing by Maureen Bavdek,
Gerald E. McCormick and Gunna Dickson)