Target Says Profit Trailed Forecast on Weaker SalesRenee Dudley
Target Corp., the retailer that chose a new chief executive officer last week, said second-quarter profit trailed its forecast as U.S. sales remained weak and its Canadian operations continued to struggle.
Profit per share in the quarter ended Aug. 2 was 78 cents, excluding some items, less than the company’s projection of 85 cents to $1, Minneapolis-based Target said today in a preliminary earnings statement.
Target has been struggling to boost U.S. traffic, rescue its botched expansion into Canada and regain shoppers’ trust after hackers stole millions of customers’ data last year. The retailer last week chose PepsiCo Inc. executive Brian Cornell to replace Gregg Steinhafel, who was ousted amid the turmoil this year. Cornell will have his work cut out for him: revenue at established U.S. stores was little changed in the quarter, and Canadian sales were less than expected, Target said.
Target has been “giving away stuff below margin or at a lower margin to drive traffic,” Poonam Goyal, a senior retail analyst for Bloomberg Intelligence, said in an interview. “It’s driven by promotions, which can’t last forever. They need to bring back traffic that will stay beyond promotions.”
The shares fell 4.4 percent to close at $58.03 in New York. Target has slid 8.3 percent this year.
The retailer plans to report full second-quarter results Aug. 20.
U.S. sales at stores open at least 13 months were “essentially flat,” and profit margin was narrower than expected because of price reductions to entice shoppers who “continue to spend cautiously,” Target said.
The Canadian division had “somewhat softer-than-expected” revenue and was hurt by investments to clear slow-selling merchandise.
The company also said today it had $148 million in breach-related expenses in the quarter, including money set aside to cover existing and potential claims related to the data theft. Those expenses were partly reduced by a $38 million insurance receivable.
Cornell will become the first outsider ever to lead Target. In the past three decades, he’s worked for at least six different companies, including PepsiCo, Wal-Mart Stores Inc., Michaels Stores Inc. and Safeway Inc.
He’ll become CEO effective Aug. 12 and also will be named chairman.
(An earlier version of this story corrected a reference to the reason profit trailed Target’s forecast.)