Target Lowers Outlook As Profits Tumble 16%
Target announced Wednesday that its earnings for the first quarter dropped 16 percent as traffic to its stores fell for the sixth straight quarter.
The Minneapolis-based retailer’s financial performance for the quarter was essentially in line with analysts’ low expectations, as last year’s data breach and its disappointing Canada expansion continue to plague the company.
Interim President and CEO John Mulligan, who recently replaced ousted CEO Gregg Steinhafel, said in a conference call with analysts Wednesday that it’s too early to calculate the total cost of the data breach. That’s especially true as the company still faces more than 140 lawsuits filed by consumers, shareholders, and banks. However, the company said it recorded $61 million in pre-tax expenses related to the data breach in its fourth quarter.
Mulligan also said that Target is going to become more experimental in the future, both in its digital and in-store businesses.
“I think [that] probably the biggest investment and where you’ll see us accelerate is in speed and doing more testing and learning,” Mulligan said. “And that’s not just digital, but also in our store, just getting more activities out into the business that we’re testing, we’re modifying and adjusting and improving on and if it doesn’t work pull it back and retreat from that and learn from the testing.”
Target announced that net earnings for the first quarter, which ended May 3, totaled $418 million, or $0.66 per share, down 16 percent from $498 million, or $0.78 per share, during the same period in 2013. Earnings per share were $0.01 lower than what analysts polled by Thomson Reuters had expected.
Revenue, meanwhile, totaled $17.1 billion, up 2.1 percent from $16.7 billion in the first quarter of 2013. First-quarter revenue was just above analysts’ projections of $17 billion.
“First-quarter financial performance in both our U.S. and Canadian segments was in line with expectations, reflecting the benefit of continued recovery from the data breach and early signs of improvement in our Canada operations,” interim President and CEO John Mulligan, who recently replaced ousted CEO Gregg Steinhafel, said in a statement. “While we are pleased with this momentum, we need to move more quickly. As a result, we have made changes to our management team and are investing additional resources to drive U.S. traffic and sales, improve our Canadian operations, and advance our ongoing digital transformation.”
Target’s Canadian division struggled again in its first quarter, totaling $393 million in sales—under the expected $400 million to $450 million—and generating a loss of $144 million, or $211 when taking into account depreciation of its leased assets.
On Tuesday, Target ousted Tony Fisher—president of its Canadian operations—who was immediately replaced by Mark Schindele, formally the senior vice president of merchandising operations. That was just one change among significant executive turnover in recent months, including the planed retirement of its executive vice president of property development and replacing its chief information officer.
Target changed its forecast for its full-year earnings per share to between $3.60 and $3.90, down from its previous guidance last quarter of $3.85 to $4.15 per share.
Shares of Target’s stock were trading up about 0.4 percent at $56.85 per share during late Wednesday morning.