Target misses holiday sales estimates, warns of more margin pain
US retail sales dropped by the most in 10 months in December after a start to Christmas shopping as early as October
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U.S. retailer Target Corp on Tuesday fell short of analysts' sales expectations for the crucial holiday quarter and signaled no immediate relief from the squeeze on margins by decades-high inflation and rising labor costs.
Gross margins fell to 25.7% in the November-January period, from 26.8% the year before, as retailers worldwide spent heavily to expedite shipments and hired thousands more people to navigate supply chain bottlenecks and keep shelves stocked.
Target expects first-quarter operating margins to be well below 2021 levels.
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U.S. retail sales dropped by the most in 10 months in December after a start to Christmas shopping as early as October.
Comparable sales at Target rose 8.9% in the quarter ended Jan. 29, below expectations of a 10.23% rise, according to IBES Refinitiv data.
Target's total revenue rose by a weaker-than-expected 9.4%, the first miss of analysts' estimates in nearly two years.
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Still, the Minneapolis-based company was optimistic about margins improving down the year.
It is banking on tie-ups with companies such as Starbucks on curbside pickup shopping options to drive sales, as well as speedy same-day delivery services.
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Rival Walmart Inc also predicted gross margins to improve this year, buoyed by higher prices and greater reliance on its alternative online businesses such as advertising.
For fiscal 2022, Target expects low- to mid-single digit revenue growth, compared with analysts' estimate of a 2.18% rise. It also forecast adjusted profit to rise in the high-single digit range, while analysts expect a marginal rise.
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On an adjusted basis, Target earned a profit of $3.19 per share in the fourth quarter.
(Reporting by Aishwarya Venugopal and Uday Sampath in Bengaluru; Editing by Sriraj Kalluvila)