March 3, 2020 / 12:18 PM / 3 months ago

Target forecasts weak 2020 profit as online growth slows

(Reuters) - Target Corp (TGT.N) on Tuesday forecast full-year profit below analysts’ estimates and missed lowered expectations for holiday-quarter revenue, as the retailer wrestled with falling demand for toys and electronics as well as slowing online growth.

A shopper carries a Target paper bag in the Manhattan borough of New York City, New York, U.S., March 1, 2020. REUTERS/Jeenah Moon

Target’s sales figures and tepid forecast underscore the pressure brick-and-mortar retailers are facing in building their e-commerce operations to attract more shoppers amid fierce competition from Inc (AMZN.O).

Its comparable digital sales rose 20% in the fourth quarter, compared with 31% growth in the previous quarter as well as in the same period a year earlier.

Walmart Inc (WMT.N) last month posted its slowest increase in quarterly online sales in nearly two years and forecast growth to slow further this year. In contrast, Amazon logged record sales for the holiday season.

High online growth rates at Target and Walmart would be difficult as the businesses grow larger in scale and as Amazon eats into their pie, especially during the holiday quarter, Ken Perkins, founder of research firm Retail Metrics, said.

Kohl’s Corp (KSS.N), in contrast, beat tempered expectations for holiday-quarter sales as a partnership with Amazon brought in more shoppers to its stores.

The slowdown in growth for Target, one of the bellwethers in the retail industry, comes even as it spends billions of dollars to roll out same-day delivery and in-store pickup services, while remodeling stores to use as hubs for online orders.

Total revenue rose 1.8% to $23.40 billion, but missed expectations of $23.50 billion. Analysts had lowered their estimates from $23.90 billion after Target reported weak sales in January for the crucial shopping season.

However, its adjusted profit of $1.69 per share beat estimates of $1.66, as the company saved on delivery costs with more customers picking up their online orders from stores.

Target forecast adjusted earnings of $6.70 to $7 per share for fiscal 2020, the mid-point of which was below analysts’ estimates of $6.87, according to IBES data from Refinitiv.

The company said it had not seen any impact from the coronavirus outbreak, although it has made minor supply adjustment.

Shares of the company were down 1% in early trading.

Reporting by Uday Sampath in Bengaluru; Editing by Anil D'Silva and Arun Koyyur

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