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Target’s Turnaround Plan Takes a Toll on Profit

The retailer is spending more on delivering online orders as part of its push to catch up in e-commerce.
Target store | Source: Shutterstock
By
  • Bloomberg

NEW YORK, United States — Target Corp.'s bid to overhaul the company and better compete with Amazon.com Inc. and a resurgent Walmart Inc. is taking a toll on profit.

The retailer posted fourth-quarter earnings that fell short of analysts’ estimates. Target also is spending more to deliver online orders — part of its push to catch up in e-commerce.

The results threatens to renew the debate over whether a $7 billion turnaround plan by Chief Executive Officer Brian Cornell is coming at too high a price. While new brands and store remodels have helped revive the retailer’s “Tar-zhay” cachet, the investments are squeezing earnings. And the company has been further constrained in recent months by a wage hike in October.

The shares fell as much as 4.7 percent to $71.60 in premarket trading after the earnings report was released.

The good news is Target’s sales are improving, helped by stronger traffic in stores and online. On a comparable basis, they grew 3.6 percent last quarter -- better than the 3.4 percent estimate. Profit came in at $1.37 a share during the period, excluding some items, a cent shy of Wall Street projections.

Target expects adjusted earnings of $5.15 to $5.45 a share this year, reiterating a forecast it delivered in January.

By Matthew Boyle; editors: Crayton Harrison and Nick Turner.

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