Target sales stall in Q1

Target Corp.’s ongoing recovery stalled a bit in the first quarter as the chain joined the list of retailers posting disappointing Q1 sales amid cool, unspring like weather and sluggish retail spending.



But it was not all gloom and doom for the discounter, whose online sales continued their upward course and whose profit topped estimates.



Target on Wednesday reported fiscal first-quarter earnings of $632 million, helped by cost cuts. Earnings, adjusted for one-time gains and costs, were $1.29 per share, which beat Wall Street expectations of $1.19.



The retailer’s revenue in the quarter ended April 30, fell 5.4% $16.2 billion, which missed Street forecasts for $16.31 billion.



Same-store sales increased 1.2%, driven by growth in in both traffic and basket. But the gains were offset by the impact of the sale of the pharmacy and clinic businesses (to CVS Health).



Target said its signature categories, which include home, accessories and baby, performed well. But on its earnings call, the retailer said its electronics sales, which include everything from tablets to phones, were weak.



Same-store online sales grew 23% and contributed 0.6 percentage points to comparable sales growth. (Online sales made up about 3% of Target’s overall sales in 2015.)



“We are pleased with our first quarter financial results, which demonstrate the effectiveness of our strategy in an increasingly volatile consumer environment,” said Brian Cornell, chairman and CEO of Target. “With an outstanding team, a resilient business model and a strong balance sheet, we plan to successfully implement our long-term strategy, even in the face of a challenging short-term consumer landscape.”



On the call, Cornell said it is too early to tell whether the consumer pullback will last through the rest of the year.



"We have seen the impact of climate and a more cautious consumer," Cornell said. "We haven't seen anything from a structural standpoint that gives us pause."



While the company said its view of second quarter results has been “tempered by the recent slowdown” in consumer trends, Target said it currently believes full-year adjusted EPS within its prior guidance range is achievable. The company said it still expects its full-year adjusted profit to be within its previous guidance range of $5.20 to $5.40 per share.



For the second quarter, however, Target is projecting an adjusted profit of $1 to $1.20 per share, with same-store sales flat to down 2%.