Volatility to rule Q2

Target had a great first quarter, and when senior executives detailed results last week during a conference call they used such phrases as “extremely pleased,” “superb execution,” “fantastic quarter” and “undisputed success” a lot, and for good reason.

First quarter same-store sales increased 2.4%, and earnings per share surged 30% to 90 cents. Gross margins expanded and expenses decline; always a good combination in retail. Despite the impressive showing which Target executives saw as evidence of the strength of the company’s business model and the “expect more, pay less” value proposition, they were quick to point out that the second quarter and even the rest of the year are filled with a great deal of uncertainty that will impact consumer spending.

Chairman, president and CEO Gregg Steinhafel said it best when he commented on volatility during the company’s first quarter conference call after he was asked a question about his comments that Target began the second quarter with below plan sales during the first two weeks of May.

“There’s going to be good months, bad months and some ups and downs, and I think we’re seeing an environment where that kind of volatility and unpredictability is just playing out in the consumer environment,” Steinhafel said.

Despite the slow start to the quarter, which CFO Doug Scovanner indicated was impacted by weather, the company still expects to see same-store sales increase in the range of 2% to 4%. It also indicated that it was comfortable with analysts’ median estimates for second-quarter earnings of 91 cents and full-year earnings of $3.81.