2018 has been a good year for Target shareholders so far. After being less in demand on the stock market for years, the American retailer has been swimming since January on a wave of success. However, the current quarterly figures are causing a slump.
Walmart remains at the top. The US dealer is optimistic about the Christmas business after a strong third quarter. In the three months to the end of September, sales in the important US market increased by 3.4 percent. The retail giant exceeded expectations. Overall, revenue increased by 1.4 percent to $124.9 billion. The bottom line was $1.7 billion, about two percent less than last year.
The past year was forgotten for Target. The decline in sales of six and the decline in profit of 19 percent compared to 2016 showed how difficult the situation of the company was. Reason for the weak development was the increasingly dominant online shopping – especially through the success story of Amazon.
The Seattle-based group already outperformed Target in 2013. Since then, revenues from Amazon have almost doubled, while those of Target even declined slightly. The share price also temporarily lost more than one third of its value in 2017.
However, Target benefited from a very successful holiday season and was surprisingly strong in the fourth quarter. The announcement initiated the turnaround on the stock market. Since the beginning of the year, it has been almost continuously upwards.
Target even defied the giant Amazon. Especially the increase in customer numbers apparently impressed the investors. Especially the results of the second quarter contained promising news, as the number of customers grew by 6.4 percent: the best result in over a decade. Other major retailers have grown, but not at such a high level. Walmart’s customer growth was 2.2 percent in the second quarter and Costco’s comparable figure was 5.0 percent.
But there were also some setbacks. The retailer’s profits came under considerable pressure due to a more aggressive pricing strategy coupled with the costly measures to expand e-commerce sales. As a result, gross margin declined in the last two quarters and operating income dropped from $2.25 billion (6.9 percent) to $2.17 billion (6.4 percent).
