Target’s bottom line impacted by sale of pharmacy business

MINNEAPOLIS — Target’s sale of its pharmacy and clinic business to CVS Health, along with a 1.5% comparable store sales decrease led fourth-quarter sales to decline 4.3% year over year to $20.7 billion.

However, the pharmacy sale did provide a boost to its selling, general and administrative expense rate, which dropped to 17.5% in its 2016 fourth quarter, compared to 18.1% in the same time period in 2015.

Overall, Target reported Q4 adjusted earnings per share of $1.45 per share, down 4.6% versus 2015, falling short of Wall Street analyst estimates.

“Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” said Brian Cornell, chairman and CEO of Target on Tuesday. “At our meeting with the financial community this morning, we will provide detail on the meaningful investments we’re making in our business and financial model which will position Target for long-term, sustainable growth in this new era in retail. We will accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years. In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day. While the transition to this new model will present headwinds to our sales and profit performance in the short term, we are confident that these changes will best-position Target for continued success over the long term.”

For the first quarter of 2017, Target expects a low-to-mid single-digit decline in comparable sales, and a low-single-digit decline for its full-year 2017.