Target Corporation (NYSE: TGT) on Wednesday announced quarterly profit that fell short of analysts’ estimates, sending its shares down more than 5 percent.
The retailer said total revenue rose 3.5 percent to $16.56 billion in the quarter ended May 5, beating analysts’ estimates of $16.58 billion, according to Thomson Reuters.
However, Target’s earnings missed expectation on the top and bottom lines as the company poured more money to keep competitive with other rivals. Excluding certain items, the company earned $1.32 per share in the first quarter, below analyst estimate of $1.39.
Target has been investing heavily in its delivery service. Last year, Target bought Shipt, a same-day delivery company, for $550 million. The company also lowered its next-day delivery fee for household essentials to $2.99 from $4.99. Target’s digital sales rose 28 percent in the in the first quarter.
Competition in the grocery industry is intensifying. Traditional trailers like Walmart Inc (NYSE: WMT) and Kroger are also spending more money to expend their online sales. While e-commerce giant Amazon rattles the market by acquiring Whole Foods.
“We're very pleased that our business continued to generate strong traffic and sales growth in the first quarter, as we made significant progress in support of our long-term strategic initiatives," said Brian Cornell, chairman and chief executive officer of Target Corporation. "Our first quarter performance reflects the benefit of our unique multi-category portfolio. Strong sales growth in our home, essentials and food & beverage categories offset the impact of delayed sales in temperature-sensitive categories, which accelerated rapidly in recent weeks as weather improved across the country. Additionally, our team is delivering excellent execution and guest service every day, and momentum in our traffic has accelerated in the second quarter. “
Target’s share fell over 5 percent to $71.33 in the early trading on Wednesday.