Target Disappoints In Q1, Signals Trouble Ahead
Shares of Target plummeted about 8 percent on Wednesday morning as the Minneapolis-based retailer tried to put the best face on a first quarter report that included declining sales and the warning that the second quarter might be worse.
Sales dropped 5.4 percent in the quarter ending April 30. The company cited the effects of selling of its pharmacy and clinic business to CVS, issues with a health-focused grocery rollout and bad weather to the lackluster results.
It’s the company’s slowest growth since 2014, when the company was recovering from a massive data breach.
“It’s been a very wet and cold start to the year in the Northeast … and a more cautious consumer,” CEO Brian Cornell said. “And it’s been reflected in our sales.”
Target tempered any expectation of growth during the May to July quarter, saying that sales would be flat or down as much as 2 percent.
It wasn’t all bad news for the company. Earnings per share of $1.29 (up about 17 percent year-over-year) handily beat analysts’ expectations of $1.20, comparable store sales rose 1.2 percent and spinning off the pharmacy and clinic business reduced administrative costs.
“We are pleased with our first quarter financial results,” Cornell said in a statement. “We plan to successfully implement our long-term strategy, even in the face of a challenging short-term consumer landscape.
The company’s focus on “signature categories” where the company has an edge—such as fashion, kids/baby and wellness—seem to be paying off with three times the growth of the company overall. And digital sales climbed 23 percent – an important area as the retailer continues to combat the likes of Amazon.
Target’s report comes amid a particularly bad time for retail, with major department stores like Macy’s, Nordstrom and Kohl’s reporting their worst results since the depths of the Great Recession. The company is also facing a boycott and protests after Cornell affirmed its bathroom policy that allows customers and employees to use the bathroom that conforms to their gender identity.
Shares of the company were trading at $68.35 by midday.