Target Corp. and The TJX Cos. Inc.’s value positioning helped them boost third-quarter profits and beat analysts’ estimates, but both companies said the holiday season might not live up to Wall Street’s expectations.
This story first appeared in the November 18, 2009 issue of WWD. Subscribe Today.
Meanwhile, Target, which has been beefing up its accessories offerings, said it will launch a limited edition hat collection designed by Eugenia Kim. The collection is the first hat launch in the retailer’s series of limited-time-only accessories designer partnerships and will be available at select Target stores nationwide and online at target.com April 18 to June 20.
Target also is partnering with Cynthia Vincent to launch a limited edition footwear collection, Cynthia Vincent for Target. The fifth footwear launch in Target’s limited-time-only accessories series, Cynthia Vincent for Target will be offered at Target stores nationwide and online at target.com April 18 to July 1. Certain styles will only be available at target.com.
Target in July launched a long-running collection, Jaye Hersh’s Hollywood Intuition, which will be sold through the spring. Last year, Dean Harris created the first jewelry line to use precious metals such as sterling silver. Target also tested its highest-priced accessory item with his $249.99 necklace.
An improvement in the retailer’s apparel business helped push the discounter’s net income up 18.4 percent to $436 million, or 58 cents a share, in the third quarter even though comparable-store sales fell 1.6 percent. TJX’s earnings shot up 47.5 percent to $347.8 million, or 81 cents a diluted share, on a 7 percent comp rise.
However, caution about the fourth quarter drove down Target’s stock 3 percent to $48.77 as TJX dropped 1.5 percent to $38.91. (For more on stocks, see page 14.)
Gregg Steinhafel, Target’s chairman, president and chief executive officer, told analysts on a conference call that shoppers are feeling better, but zeroing in on bargains.
“While they are back to their typical shopping patterns in terms of frequency of visits, they are more disciplined in their spending habits,” Steinhafel said. “They’re coming in with lists and circulars. They are focused on items that are on sale.”
The company has made strides in its apparel business, which had third-quarter comp sales that were roughly in line with the store average after a year and a half of underperformance. Target also changed how its jewelry is presented, freeing the assortment, which had been locked in glass cases, and moving prices below $50.
But caution is still the byword for the fourth quarter, when analysts had Target pegged for earnings of $1.12 a share.
“This figure lies within the range of potential outcomes,” said Douglas Scovanner, chief financial officer. “Yet I also believe that many things would have to fall in place to meet or exceed this figure. Sell-side analysts are somewhat more optimistic across most of our industry than we believe is warranted in light of the harsh realities of the current environment.”
Target’s earnings per share for the quarter came in 8 cents ahead of the 50 cents analysts predicted. Year-ago profits tallied $369 million, or 49 cents a share. Revenues for the quarter inched up 1.1 percent to $15.28 billion from $15.11 billion.
Off-pricer TJX, which owns TJ Maxx and Marshalls, was more bullish and had stronger gains, but the company still might fall short of projections.
“We achieved record third-quarter results, driven by significant increases in comparable-store sales and customer traffic that have continued to accelerate,” said Carol Meyrowitz, president and ceo.
TJX’s EPS for the quarter came in a penny ahead of the 80 cents Wall Street projected. Year-ago earnings totaled $235.8 million, or 54 cents a diluted share. Sales advanced 10.2 percent to $5.24 billion from $4.76 billion.
The firm said fourth-quarter profits from continuing operations would range from 65 cents to 71 cents — allowing for some downside from the 71 cents Wall Street currently expects.