Sale of pharmacy business impacts Target sales

MINNEAPOLIS — Target’s sale of its pharmacy and clinic business in December 2015 to CVS Health impacted sales, with the company announcing Wednesday that November/December 2016 sales decreased 4.9% year over year.

On a comparable basis, total sales declined by 1.3% year over year.

"While we were pleased with Black Friday sales, December digital sales growth of more than 40% and continued strength in our Signature Categories, these results were offset by early season sales softness and disappointing traffic and sales trends in our stores," said Brian Cornell, chairman and CEO of Target. 

Looking beyond the already sold pharmacy/clinic business, on a segment basis,  comparable sales declined by high single-digit percentage range in electronics and entertainment, Target announced. Food and essentials also saw a drop in sales to the tune of a low single-digit percentage range.

On the bright side, comparable sales in what the company refers to as Signature Categories — including toys — grew by nearly 3 percentage points faster than the company average during the two-month period.

"While we significantly outpaced the industry's digital performance, the costs associated with the accelerated mix shift between our stores and digital channels and a highly promotional competitive environment had a negative impact on our fourth quarter margins and earnings per share,” Cornell said. “Despite these challenges, we are positioned to deliver full-year Adjusted EPS1 of $5 or more in 2016, which would mark an all-time high for Target. And, importantly, our team has made substantial progress in positioning Target for long-term success by improving the shopping experience both in stores and on Target.com, transforming our supply chain and technology to support every way our guests want to shop, and developing new store formats that allow us to reach new guests in dense urban and suburban markets.” 

Target now expects fourth quarter comparable sales in the range of negative 1.5% to negative 1 percent, compared with prior guidance of negative 1% to 1%. In the fourth quarter of 2016, Target expects both GAAP EPS from continuing operations and adjusted EPS of $1.45 to $1.55 per share, compared with prior guidance of $1.55 to $1.75 per share.

Target will announce 2016 fiscal fourth-quarter results on Feb. 28.

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