Retailer Daily

Target Sales Decline in Q4

Discount general merchandiser Target Corporation’s sales declined 1.6% in Q4 2008, to $19 billion from $19.3 billion. According to the retailer’s Q4 earnings release, this reduction in sales was caused by a 5.9 percent decline in comparable store sales, partially offset by a contribution from 91 new stores opened during fiscal 2008. Target reported net earnings of $609 million in Q4 2008 (ending Jan. 31, 2009), compared to $1.028 billion in Q4 2007. In addition, the Q4 gross margin rate decreased by 1.4 percentage points, driven by increases in markdowns combined with the mix impact of faster sales growth in non-discretionary, lower margin-rate categories. Q4 retail segment EBIT (earnings before interest expense and income taxes) were $1.251 billion, down 22% from $1.622 billion in Q4 2007. For fiscal 2008, sales increased 2.3% to $62.9 billion from $61.5 billion in fiscal 2007, due to the contribution from the 91 new stores. A 2.9% decline in comparable store sales partially offset the sales increase. Full-year retail segment EBIT dropped 6% to $4.1 billion from $4.3 billion in fiscal 2007. Gross margin rate for fiscal 2008 decreased 0.4 percentage points, with rate improvements within categories offsetting the sales mix impact. Last month, Target announced it would close a distribution center in Little Rock, AR, later this year, eliminating 500 jobs. The company also announced a 9 percent reduction in its corporate headquarters staff, eliminating approximately 600 existing positions and 400 open positions. Also in October 2008, Target announced it would scale its planned 2009 new store openings back to 70, and make further unspecified reductions in its 2010 new store openings. Target’s main rival, Wal-Mart, reported stronger Q4 2008 results. Although Wal-Mart’s profit fell 7.4% due to higher expenses and a stronger dollar, overall sales rose 1.7% from $106.2 billion to $108 billion. US sales rose 6%, to $71.5 billion. Target operates 1,682 stores in 48 states, 34 distribution centers and employs approximately 350,000 people worldwide.