For the first quarter, Target Corp. beat Wall Street earnings estimates but saw comparable store sales slip.
The retailer posted net earnings of $681 million, or $1.23 per diluted share, versus $632 million, or $1.05 per diluted share, in the year-earlier quarter. With income from discontinued operations factored out, diluted earnings per share from continuing operations was $1.22 versus $1.02 in the year-prior period. Target’s adjusted diluted earnings per diluted share beat a Zacks Investment Research analyst average estimate of 89 cents.
First quarter comparable sales declined 1.3% year over year, with number of transactions down 0.8% and average transaction down 0.6%. Contribution to comps from the digital channel was 0.8% while that from stores was negative 2.2%. Digital sales, on a comparable basis, gained 22% in the first quarter versus the previous first quarter, and contributed 4.3% to overall sales as compared with 3.5% in the period a year before. Overall first quarter sales slipped 1.1% to $16.02 billion.
In a conference call, Brian Cornell, Target chairman and CEO, said the company’s business had strengthened in March and April, but he acknowledged that results aren’t where managements wants them. He pointed to the company’s traffic decline and softness in the food and beverage and essentials categories as problematic. In addition, Cornell emphasized that consumer perception of value at Target did not reflect the retailer’s price position. So it has introduced marketing and merchandising efforts to improve the value perceptions and “reestablish everyday price credibility on key items.” The company has launched a new advertising campaign focused on the value and convenience of shopping Target, and it has initiated a test program dubbed Target Restock, which allows consumers to order a box of essential items they can choose from a broad assortment.
Cornell stated, “Target’s first quarter financial performance was better than our expectations, reflecting strong execution by our team as they delivered for our guests in a very choppy environment. After starting the quarter with very soft trends, we saw improvement later in the quarter, particularly in March. We are in the early stage of a multi-year effort to position Target for profitable, consistent long-term growth, and while we are confident in our plans, we are facing multiple headwinds in the current landscape. As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity.”
