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Target Slashes Outlook After Earnings Drop 62%
[August 20, 2014]

Target Slashes Outlook After Earnings Drop 62%


(dpa-AFX International Compact Via Acquire Media NewsEdge) MINNEAPOLIS (dpa-AFX) - America's second biggest discount-store operator Target, Inc. (TGT) reported Wednesday a profit for the second quarter that declined 62 percent from last year, despite sales growth, hurt by costs related to last year's embarrassing data breach.



Adjusted earnings per share missed analysts' expectations by a penny, while quarterly sales topped their estimates by a whisker. The company also provided earnings guidance for the third quarter, below Street view, and slashed earnings forecast for the full-year 2014.

"While results from the quarter didn't meet our expectations, we are seeing some early signs of progress as we work to improve results in the U.S. and Canada," CFO John Mulligan said in a statement.


The Minneapolis, Minnesota-based retailer reported net earnings of $234 million or $0.37 per share for the second quarter, down 62 percent from $611 million or $0.95 per share in the prior-year quarter.

Results for the latest quarter primarily included $0.27 per share of loss on early retirement of debt and $0.11 per share of data breach related costs, net of insurance receivable.

Excluding items, adjusted earnings for the quarter was $0.78 per share, compared to last year's $0.98 per share.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $0.79 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter increased 1.7 percent to $17.41 billion from $17.12 billion in the same quarter last year, and topped twenty-three Wall Street analysts' consensus estimate of $17.38 billion by a whisker.

U.S. retail segment sales edged up 0.7 percent to $16.96 billion from last year, reflecting contribution from new stores and flat comparable sales. Transactions declined 1.3 percent.

"In the U.S., traffic trends continue to recover and monthly sales are improving, with July comparable sales up more than 1 percent. Better U.S. sales have continued into August, driven by early back-to-school results. In Canada, the team is making important changes to operations and the merchandise assortment with a focus on delivering improved results by this holiday season," Mulligan added.

Canadian segment sales surged 63.1 percent to $449 million from $275 million in the year-ago quarter, reflecting the contribution from new stores partially offset by an 11.4 percent decline in comparable sales.

Target's digital sales, including flexible fulfillment, grew more than 30 percent in the second quarter, about double the industry growth rate.

Target's second-quarter net interest expense surged 164 percent to $453 million from $171 million last year, driven by a $285 million charge related to the early retirement of debt.

In second quarter, Target paid dividends of $272 million, an increase of 18 percent from $231 million last year.

Looking ahead to the third quarter, Target projects adjusted earnings to be between $0.40 and $0.50 per share, while analysts are expecting earnings of $0.65 per share.

For fiscal 2014, the company slashed its adjusted earnings guidance to a range of $3.10 to $3.30 per share from the prior forecast range of $3.60 to $3.90 per share. Street is currently looking for full-year 2014 earnings of $3.49 per share.

PepsiCo Inc. (PEP) executive Cornell was named the new Chairman and CEO, effective August 12, to replace Gregg Steinhafel, who stepped down in early May in the wake of a massive data breach that compromised personal data of millions of customers in the holiday shopping season.

"Target is an extraordinary company. I'm excited to join the team as we work to drive U.S. traffic and sales, improve Canadian operations and accelerate Target's digital transformation," Cornell noted.

TGT closed Tuesday's regular trading session at $59.25, up $0.41 on a volume of 4.81 million shares. In the past 52-week period, the stock has been trading in a range of $54.66 to $67.25.

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