NEW YORK (AP) — Sales and profits slipped for Target during the crucial holiday quarter as customers held back on spending and the company said there will be “meaningful pressure” on its profits to start the year because of tariffs and other costs.
The retailer beat most estimates however, and shares rose 4% before the opening bell.
Target reported net income of $1.1 billion, or $2.41 per share, far better than the $2.26 that Wall Street was expecting, according to a survey by FactSet. That is down from the $1.38 billion profit the company reported in the same period last year, though the most recent quarter had one fewer week.
Sales fell to $30.91 billion from $31.9 billion, but that also beat expectations.
Americans have been pulling back on spending, however, and retailers face a lot of uncertainty in the year ahead.
President Donald Trump’s long-threatened tariffs against Canada and Mexico went into effect Tuesday, pushing markets in Asia, Europe, and the U.S. lower, and setting up costly retaliations by the United States’ North American allies, not to mention China.
China said Tuesday that it will impose additional tariffs of up to 15% on imports of key U.S. farm products, including chicken, pork, soy and beef, and also expanded controls on doing business with key U.S. companies.
Consumers have pulled back on discretionary spending because the costs of groceries have risen so sharply. That is an area where Target can be vulnerable because so much of its sales come from clothing and electronics purchases.
However, during the most recent quarter, comparable sales — those from stores and digital channels operating for at least 12 months — rose 1.5%. That was higher than the 0.3% gain during the third quarter. Target posted a 2% gain in the second quarter and a 3.7% drop in the first quarter.