Target’s net profits for the third quarter ended Nov. 2 declined 46 percent to $341 million from $637 million in last year’s quarter, falling below the company’s expectations. Earnings per share of 54 cents fell 46 percent from 97 cents in the third quarter of 2012, a result of the higher-than-expected dilution of 29 cents related to the Canadian segment.
Comp-store sales increased 0.9 percent in the quarter, which is near the low end of the retailer’s prior guidance.
Sales in the third quarter rose 4 percent to $17.26 billion, from $16.6 billion in the prior year’s third quarter. But Target cut its outlook for the year to EPS of $4.59 to $4.69 from its earlier projection of EPS of $4.70 to $4.90, pointing again to costs associated with the Canadian operations.
“Profits and sales in Canada have not met our expectations, but we remain confident in their potential,” said Gregg Steinhafel, chairman, president and chief executive officer of Target. “Our Canadian segment will contribute meaningfully to Target sales over time. The shortfall will moderate next year, leading to significant improvement in Canadian profit.”
Segment earnings before interest expenses and income taxes were $977 million, a decline of 11.4 percent from $1.1 billion in 2012.Earnings before interest, taxes, depreciation and amortization were 8.7 percent in the third quarter. The gross margin rate decreased to 30 percent from 30.3 percent last year.
“The gross domestic product continues to grow at a painfully slow pace while household income remains constrained,” said Steinhafel. “Household incomes have seen additional pressure from this year’s payroll tax increase. The recovery took a dramatic step backward during the government shutdown. The competition has become increasingly focused on promotions to gain the attention of value-conscious consumers and clear discretionary categories.”
Target borrowed a phrase from Wal-Mart: everyday low prices. “Low everyday prices and our price-matching policies offer unbeatable value in the marketplace,” said Steinhafel.
Home and apparel saw small declines in comp sales, while apparel, hardlines and beauty experienced strong growth online in the third quarter. “We’re pleased with [3.1] Phillip Lim for Target,” said Kathryn Tesija, executive vice president, merchandising and supply chain. “It’s our best designer launch ever, both in stores and online, with very clean sell-throughs. The launch of holiday is off to a good start. We’re very pleased with apparel overall. The softest part of apparel has been in kids.”
Target will open at 8 p.m. on Thanksgiving, an hour earlier than last year.
The retailer returned $271 million to shareholders in the third quarter, but didn’t repurchase any shares. “We will resume repurchasing shares when conditions are appropriate,” said John Mulligan, executive vice president and chief financial officer. The company expects fourth-quarter EPS of around $1.26 and is planning flat comp store sales in the U.S., given the six fewer shopping days between Thanksgiving and Christmas, the state of mind of the consumer and the competitive environment.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye