Target Corp slashed its annual profit forecast for the second time in two months Wednesday as the value retail giant’s Q2 earnings fell sharply …
Target Corp slashed its annual profit forecast for the second time in two months Wednesday as the value retail giant’s Q2 earnings fell sharply on discounting on sluggish domestic sales, an overzealous Canadian expansion and that massive customer-data breach late last year. Target said Wednesday Q2 earnings dropped 61.7% to $234m/37 cents per share from $611m/95 cents a year earlier. Stripping out $148m expenses related to the data breach, earnings per share came in at 78 cents, a penny short of both Target’s reduced estimate issued earlier this month and analysts’ view.
Revenue rose 1.7% to $17.4bn, slightly above the $17.38bn analysts’ estimated. Same-store sales were unchanged from a year ago although comps moved into positive territory for six weeks in a row and were up 1% in July, a period that includes a bulk of the Back-to-School shopping season, noted Target.
Chief financial officer John Mulligan also said sales have been “better” in August, driven by demand for B-to-S items.
Although Target said most of its low- to middle-income shoppers have moved beyond the data breach, they remain cautious about spending in a tough environment. Customer traffic was down 1.3% in Q2, beating the 2.3% drop in Q1. Right after the breach was disclosed last December, traffic dropped 5%.
In his first earnings conference call as Target’s new leader, Cornell told investors his top priorities are turning around the US and Canadian businesses, as well as pushing Target to innovate more quickly in digital shopping.
Mulligan said during a call that Target plans to return to a more normal pace of discounting and focus on attracting shoppers by stocking more exciting products.
“A vast majority of guests have come back to us … Trust and confidence is returning to Target,” he said, adding that discounting was a contributing factor.
As for Canada, where the company is overhauling its business under new management, operating loss deepened to $204m from a loss of $169m a year ago. Total sales rose 63% on-year to $449m on new stores as comp sales sank 11.4%. The company opened 130 stores in the market over the last 18 months.
Target, meanwhile, reaffirmed that nearly half of the 70,000 items stocked in a typical Canadian store will be new by the Holiday season.
Overall, the company said it now expects full-year adjusted earnings to be in the range of $3.10-$3.30 per share, compared with prior guidance of $3.60-$3.90. Analysts had expected $3.50 per share.
Target’s shares rose 1%, or 67 cents, to $59.92 Wednesday. The shares, excluding Wednesday’s performance, have lost nearly 13% of their value over the past year.
A California judge has also called for Target Corp to stop work on a partly-built shopping centre in Hollywood, handing a major setback to a project championed by Los Angeles Mayor Eric Garcetti. Superior Court judge Richard L Fruin Jr sided with two community groups that said in separate lawsuits that the City Council should not have allowed Target to build a 74-ft-tall structure in a location where such projects cannot exceed 35 ft.