Staff and news service reports
Target Corp. said it will aggressively cut prices to give consumers bargains during the holiday season, after weak sales of its apparel and home offerings led third-quarter earnings to fall 24 percent.
The discount retailer, which has six stores in southeastern Minnesota, including two in Rochester, also said sales in established stores have been weak so far in November, and if that persists it expects fourth-quarter earnings below analyst expectations.
"The increasing financial challenges and economic uncertainties facing American households continued to pressure our performance during the third quarter," Chief Executive Gregg Steinhafel said during a conference call with analysts on Monday.
Trading on Target stock was up, registering at $31.98 per share this morning.
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Steinhafel also cited higher write-offs in the company’s credit-card business, where profit fell 83 percent. Target added $104 million during the quarter to a reserve fund to cover future write-offs as customers have trouble paying their bills.
The company has fared worse than its rival, Wal-Mart Stores Inc., which has two stores in Rochester, as consumers cut back on discretionary spending and shop mainly for necessities, since more than 40 percent of Target’s revenue comes from nonessentials such as trendy fashions and housewares.
Last week, Wal-Mart said its third-quarter profit rose 10 percent, ahead of analyst expectations, as sales increased 7 percent.
During the holidays, Target will remain "keenly focused" on offering low prices on national brands and its own products and will match Wal-Mart prices on identical items in local markets, said Kathryn Tesija, Target’s executive vice president of merchandise.
The company will also offer half a dozen "value items" online every day at special prices.
"We have taken a very aggressive point of view this year in terms of our promotional pricing, so we expect to be price leaders on selected items in our circular," Steinhafel said. "This is not unlike what we’ve done in the past. But given the current environment and recognizing how challenging it is, we will be even sharper than we have in prior years."
