Shoppers returned to Target Corp. stores for back-to-school bargains and the retailer pointed to improving traffic trends for the key holiday season, after struggling to lure customers during the summer.
The big-box retailer posted a small decline in sales at stores open at least a year, but the third-quarter slide wasn't as severe as executives had warned. They also said same-store sales could return to growth in the fourth quarter.
"While we have much more work to do, this quarter we saw meaningful progress in our effort of to improve our traffic and sales," said Chief Executive Brian Cornell on Wednesday.
Shares of the Minneapolis-based company jumped 8% to $ 77.21 in early trading Wednesday.
Same-store sales edged 0.2% lower in the period ended Oct. 29, the second consecutive decline, but the company had warned they could fall as much as 2%. During the previous quarter, sales at established stores fell for the first time since Mr. Cornell took over his CEO job in 2014.
Store traffic was helped by efforts to highlight lower prices, such as emphasizing deals on the ends of aisles. "Earlier this year we began to fall short in communicating value to support the 'pay less' side, both in our stores and in our marketing," said Mr. Cornell.
Digital sales rose 26% from a year ago, after two consecutive quarters of decelerating growth. Target has been struggling to find an e-commerce strategy to compete rivals like Wal-Mart Stores Inc. and Amazon.com Inc. In September, Mr. Cornell eliminated the role of chief digital officer just four months after appointing Target.com President Jason Goldberger for the newly created position.
Mr. Cornell said the company is stress-testing its web systems before the holiday season, after technical failures bogged down its site last year. "This year we have devoted both capital and expense to improve the digital experience, increase reliability, and create additional capacity," he said.
Grocery sales fell for another quarter, despite efforts to ramp up marketing in recent months. The decline reflects "near term challenges presented by deflation and the intensely competitive environment," said Mr. Cornell.
The company has taken several steps to fix its grocery business, such as adding organic items and investing in store design. Earlier this month, Target announced the departure of Anne Dament, senior vice president of grocery.
Executives also highlighted continued softness in the sale of mobile phones, offset by "meaningful improvement" in the sale of Apple Inc. products, which was driven by newer merchandise. Last quarter, Mr. Cornell said sales of iPhones, iPads and other gadgets fell more than 20%.
Target has made investments to improve its in-store pickup area ahead of the holiday season. The service allows the company to save money from delivery costs. This year, Target expects volume to grow 50% from a year ago, according to Chief Operating Officer John Mulligan.
For the year, Target now expects adjusted per-share earnings in a range of $ 5.10 to $ 5.30, compared with a prior target of $ 4.80 to $ 5.20. However, the guidance is still below Target's original full-year earnings forecast of $ 5.20 to $ 5.40 a share.
Over all for the third quarter, Target earned $ 608 million, or $ 1.06 a share, up from $ 549 million, or 87 cents a share, a year earlier.
Sales fell 6.7% to $ 16.44 billion, reflecting the sale of its pharmacy business to CVS Health Corp. last year. Analysts expected $ 16.3 billion in the latest period.
For the fourth quarter the company forecast same-store sales could fall as much as 1% or rise as much as 1%, compared with its prior guidance for down 2% to flat sales.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Joshua Jamerson at joshua.jamerson@wsj.com
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