Target, Staples Post In-Line Earnings Results

Target and Staples released their latest earnings reports before opening bell this morning, with both posting results that were about as expected. Target posted adjusted earnings of 86 cents per share, which matched the consensus estimate. Revenue was $17.6 billion, which again was in line with consensus. In last year’s third quarter, Target reported adjusted earnings of 79 cents per share and $17.3 billion in revenue.

Staples posted adjusted earnings of 35 cents per share, which was in line with the consensus estimate, on $5.6 billion in revenue, which came out just slightly lower than the expectation of $5.67 billion. In last year’s third quarter, the office supply retailer reported adjusted earnings of 37 cents per share and revenue of $5.96 billion.

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Target performs at the top of expectations

Target’s GAAP earnings were 87 cents per share, which was significantly ahead of last year’s 55 cents per share. This year’s net earnings included a benefit of 11 cents per share in connection to investment losses in Canada, while last year’s result included a negative impact of 27 cents per share due to those losses.

The big box retailer said comparable store sales grew 1.9% year over year, which was toward the high end of management’s expectations. Traffic grew 1.4% and was the main driver of the increase in comparable sales. Target’s signature categories of Style, Baby, Kids and Wellness increased by more than 2.5 times the company average. Digital channel sales rose 20% year over year and contributed 0.4 percentage points to overall comparable sales.

Target management said they now expect adjusted earnings to be between $4.65 and $4.75 per share. The previous guidance was a range of $4.60 to $4.75 per share. For the fourth quarter, they expect between $1.48 and $1.58 per share in adjusted earnings, compared to last year’s $1.49 per share.

Shares of Target edged upward by as much as 2.89% in premarket trades following the earnings report.

Staples posts smaller profit

Staples reported net earnings of 31 cents per share, compared to last year’s 34 cents. The GAAP result includes $40 million in charges related to the Office Depot acquisition and $28 million for restructuring. North American same store sales declined 2% year over year, while North American stores and online sales declined 7.8%. Sales in the North American Commercial business increased 1% in U.S. dollars and 2% in local currencies. International sales plunged 16.8% year over year.

Staples management expects fourth quarter sales to decline compared to last year’s fourth quarter. They expect quarterly adjusted earnings to be between 26 cents and 30 cents per share, compared to the consensus estimate of 28 cents.

Shares of Staples tumbled by 5.3% to $11.79 per share in premarket trading following this morning’s earnings report.