Target Corp. (TGT - Get Report) shares fell sharply Tuesday after it posted weaker-than-expected third quarter earnings but narrowly missed estimates for same-store sales amid a mixed set of numbers for the country's biggest retailers.
Target said adjusted earnings for the three months ending on November 3, its fiscal third quarter, came in at $1.09 per share, missing the Street consensus of $1.12 and rising 20.2% from the same period last year. Group sales, Target said, jumped 5.4% to $17.59 billion, matching analysts' forecasts, but noted that same store sales grew 5.1% compared to a 5.2% forecast. Target also said its third quarter gross margin, a key metric for profitability, fell 90 basis points to 28.7%, thanks in part to higher supply-chain costs as part of its drive towards digital sales and rising wage and training costs.
"We've made significant investments in our team heading into the holidays and they are ready to serve our guests with a comprehensive suite of convenient delivery and pickup options, a wide range of new products and unique gift ideas and a strong emphasis on low prices and great value," said CEO Brian Cornell. "We plan to leverage our current momentum into 2019, when we'll achieve greater scale across the full slate of our initiatives - creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target for profitable growth in the years ahead."
Target shares were marked 11% lower at the opening bell and changing hand at $68.60 each, a move that wipes out more than three quarters of the stock's year-to-date gain and value the Minneapolis, Minnesota-based retailer at around $35 billion.
Earlier Tuesday, Lowe's Companies Inc. (LOW - Get Report) posted weaker-than-expected same stores sales growth for its fiscal third quarter, and said it would sell some of its non-core businesses and its operations in Mexico, as the number-two home improvement retailer attempts to challenge Home Depot's (HD - Get Report) domestic dominance.
Lowe's said adjusted earnings for the three months ending on November 2 came in at $1.04 per share, firmly ahead of the 98 cent consensus estimate and down just under 1% from the same period last year. Group revenues, Lowe's said, rose 3.85% to $17.415 billion, a figure that fell largely in-line with Street forecasts, but noted that same store sales rose only 1.5%, well shy of the nearly 3% gain analysts had anticipated. Lowe's said it would look to exit its operations in Mexico, as well as other "non-core" businesses such as Alacrity Renovation Services and Iris Smart Home, and said it sees full-year earnings on a non-GAAP basis of between $5.08 and $5.13 per share amid an overall revenue decline of around 4% compared to 2017.
Last week, Home Depot said earnings for the three months ending in September came in at $2.51 per share, topping the $2.26 estimate and rising 36.4% from the same period last year, as group revenues rose 7.2% to $26.3 billion.
Comparable U.S. sales, Home Depot said, were up 5.4% while rising 4.8% across all markets. Home Depot said it now sees full-year earnings rising to as high as $9.75 per share on a diluted basis, up from a prior estimate of $9.42 and a Street consensus of $9.55, while same-store sales for the whole of 2018 should rise by 5.5%.