Analysts Expect Target’s Earnings to Fall in 3Q17

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Part 3
Analysts Expect Target’s Earnings to Fall in 3Q17 PART 3 OF 5

Will Target Report Improved Sales in 3Q17?

What do analysts expect?

Wall Street analysts expect Target’s (TGT) sales to improve marginally in fiscal 3Q17. Analysts expect Target to report sales of $16.6 billion in fiscal 3Q17—up 0.7% on a YoY (year-over-year) basis. An improvement in the store traffic, driven by value pricing and strong digital sales, is expected to drive the company’s sales in upcoming quarters. However, more competition from Walmart (WMT), Amazon (AMZN), and Costco (COST) will likely remain a drag.

Will Target Report Improved Sales in 3Q17?

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Target’s sales

Target’s top line improved in the first half of the current fiscal year due to the strong performance of its e-commerce business. Meanwhile, value pricing, store remodeling, and expansion of exclusive brand offerings support the company’s sales growth rate.

Going forward, Target’s top line is expected to be driven by its continued investment in price. It opened small-format stores, which are generating higher productivity (almost double compared to the traditional stores) and witnessing strong comps growth.

The addition of new and exclusive brands and customer-friendly initiatives like the expansion of the next-day delivery program to new markets and voice-based shopping through Google (GOOGL) Express are projected to drive the company’s sales. The acquisition of Grand Junction to lessen the delivery time and offer same-day delivery could augment its digital sales.

However, increased competitive activity in the food and beverage category from Walmart, Amazon, and other deep discounters will likely remain a drag.

In comparison, analysts expect Walmart to mark a 2.3% improvement in sales for its upcoming third quarter. Meanwhile, Costco continued to shine and reported growth of 15.7% YoY in its top line during the last reported quarter.


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