FILE PHOTO: A Target logo is seen outside one of its stores in Burnaby, British Columbia January 15, 2015. TREUTERS/Ben Nelms
(Reuters) – Target Corp (TGT.N) reported third-quarter earnings and comparable sales below estimates on Tuesday at a time when a strong economy has boosted consumer spending at rival retailers, sending its shares down 7 percent in premarket trade.
Sales at stores open at least a year rose 5.1 percent, short of analysts’ estimates of a 5.21 percent increase, according to IBES data from Refinitiv.
Profit missed expectations as price cuts, higher wages and investments in its online business ate into margins. Excluding items, Target earned $1.09 per share in the quarter, below the average estimate of $1.12 per share.
The retailer remained confident it could reach its earlier full-year earnings outlook, hoping its investments help it compete against online behemoth Amazon.com Inc (AMZN.O) and brick-and-mortar rivals like Walmart Inc (WMT.N) during the key holiday season.
Target will offer free two-day shipping on hundreds of thousands of items through Dec. 22 with no minimum order or membership required.
Sales rose to $17.59 billion, below the average estimate of $17.8 billion.
Its third-quarter performance comes after it reported its best comparable-sales growth in 13 years during the second quarter.
Target’s shares dropped 7.1 percent at $72.25 in premarket trading.
Reporting by Nandita Bose in New York