Soft Holiday Sales On The Cards? Target's Q4 Forecast Says So

Target Corporation TGT shares are lower after the retailer released its third quarter results. The negative sentiment toward the stock stemmed from its muted fourth quarter guidance.

The big-box retailer, however, reported better-than-expected sales, earnings and comps for the third quarter and also bumped up its full year earnings per share guidance.

The results are a proof that the company's $7 billion turnaround plan announced in February is bearing fruit, as it attempts to ward off competitive threat from peer Wal-Mart Stores Inc WMT and online retail behemoth Amazon.com, Inc. AMZN.

What Happened

The company reported third quarter adjusted earnings per share from continuing operations of 91 cents per share, down 13.1 percent year-over-year. However, sales rose 1.4 percent to $16.67 billion on the back of 0.9 percent comps growth.

Analysts, on average, expected earnings of 86 cents per share on revenues of $16.67 billion.

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Among other key metrics, comparable traffic climbed 1.4 percent, comparable digital sales jumped 24 percent, contributing 0.8 percentage to total comps growth.

What's Next

For the fourth quarter, the company expects flat to 2 percent growth in comps, rendering the full year comps at flat to 1 percent growth. The company guided fourth quarter adjusted earnings per share to $1.05 to $1.25.

Target lifted its full year adjusted earnings per share guidance from $4.34-$4.54 to $4.40-$4.60. The Street earnings per share forecasts are at $1.24 for the fourth quarter and $4.52 for the full year.

Walmart is scheduled to report its fiscal third quarter results before Thursday's market open. The company is expected to report flattish bottom-line results on 2.4 percent sales growth.

In pre-market trading, shares of Target were off 4.7 percent at $57.21, having lost 16 percent in the year-to-date period.

Image credit: Jay Reed (Flickr) [CC BY-SA 2.0], via Wikimedia Commons