Target upbeat on promising third quarter earnings
Nov 16, 2012 (Menafn - Pioneer Press - McClatchy-Tribune Information Services via COMTEX) --Target Corp. reported strong results on the brink of the holiday season, sending its stock up 1.7 percent. But Wal-Mart and Sears both came under pressure after announcing their results.
For Target, the growing popularity of its 5 percent-off Redcard Rewards, along with continued strength in its expanding grocery business, gave the Minneapolis discounter a 15 percent earnings lift that beat analysts' estimates.
On the company's earnings call Thursday, Nov. 15, CEO Gregg Steinhafel said he was optimistic that Target's strength would continue through the holidays. He cited its upcoming partnership with 50 fashion designers and high-end retailer Neiman-Marcus.
"It will be our biggest event, our biggest partnership event that we've ever conducted, at a great time of the year as well," Steinhafel said.
Meanwhile, rival Wal-Mart's shares fell 3.6 percent Thursday after the world's largest retailer reported revenue below analysts' estimates. Net earnings in the quarter rose 9 percent.
"Macroeconomic conditions continue to pressure our customers," Charles Holley, Wal-Mart's chief financial officer, told analysts.
Sears had even greater struggles, reporting that same-store sales fell 3.1 percent, with especially steep declines at its Kmart stores, which more directly compete with Target. Sears lost 498 million in the quarter, which sent its stock down 6 percent in after-hours trading.
Target is hoping its strong pre-holiday results set the stage for a
robust season. Last Christmas was a mixed picture for Target, with higher sales but troubles with its website.
After heavy investment and focus on upgrading its digital abilities, Target officials are confident of a better season online, which it thinks will boost store sales, too.
"The health of our site certainly affects the health of our stores," said Kathee Tesija, Target's executive vice president for merchandising.
Another increasingly bright spot appears to be Target's 5 percent-off-everything Redcard program. Two years ago, just 5.5 percent of Target's customers used the Redcard for their purchases. That has grown to 14 percent, and one early test market suggests that number will top 20 percent, officials said.
Target loves the program because once shoppers get a card, they spend on average 50 percent more at Target, Steinhafel said.
"This is a very powerful, immediate and simple program," Steinhafel said. "We have a lot of our guests that spend thousands of dollars, and that 5 percent savings, along with other bets, is a meaningful savings to them."
In its third quarter ending Oct. 27, Target reported net earnings of 637 million, or 97 cents a share. That easily beat the analysts' consensus of 78 cents a share. Sales were 16.6 billion, up 3.4 percent.
Shares rose 1.06, or 1.7 percent, to 62.44.
Tom Webb can be reached at 651-228-5428. Follow him at twitter.com/TomWebbMN.
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