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(Bloomberg) -- Target Corp. raised its sales guidance following a better-than-expected holiday season, but the boost wasn’t big enough to ease investors’ concerns about profitability.
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The Minneapolis-based retailer now expects comparable sales to grow about 1.5% in the fourth quarter, which runs through January, up from an earlier view that sales would be flat. The company maintained its profit outlook.
Shares fell as much as 4.9% Thursday morning in New York. Target stock fell 5.1% last year, while the S&P 500 index gained 23%.
Scot Ciccarelli of Truist said Target’s sales were “largely in-line” with investor expectations but it’s likely that discounting and promotions may have hurt profitability. Ciccarelli also wrote that competition from Amazon.com Inc. and Walmart Inc. may still make it tough for Target to meet its profitability goals.
Target has been struggling to reignite sales for more than a year as consumers spend less on nonessential items such as home goods, which have historically been one of the company’s strongest categories.
Following a series of missteps on inventory and product assortment, the retailer lowered its profit guidance late last year, sparking a sharp plunge in the shares. At the same time, Walmart reported strong results, underscoring the companies’ diverging trajectories.
The latest results, however, suggest Target is making progress. A nearly 3% increase in online and in-store traffic helped to spark record sales during the Black Friday and Cyber Monday promotional periods. Comparable sales rose 2% in November and December.
Early holiday results from retailers point to a mixed bag for the industry. Lululemon Athletica Inc. and American Eagle Outfitters Inc. earlier this week raised their projections, citing better-than-expected results, while Macy’s Inc. issued a downbeat outlook.
Target said that sales of discretionary products, especially apparel and toys, improved from the previous quarter. In particular, the company has pointed to its $25 leggings — which are a more affordable version of the popular product from Lululemon — as a hit.
The company also announced some shuffling of its leadership ranks as it looks to revive sales.
Adrienne Costanzo, who currently serves as senior vice president of store operations, will become chief stores officer, replacing Mark Schindele, who is retiring. Sarah Travis, senior vice president overseeing social commerce and Target’s digital ad business, will be promoted to chief digital and revenue officer.