Target posts first sales drop in two years
Report sends retailer's executives scrambling for answers
Target experienced its first comparable sales drop in more than two years in the May-to-July period and the retailer lowered its outlook for the rest of the year.
While executives at the Minneapolis-based retailer had hoped for sales trends to recover in the second half of the fiscal year, they expect the challenging retail landscape to continue and sales to be flat or down as much as 2 percent in the upcoming third and fourth quarters.
Target CEO Brian Cornell told analysts on a conference call that the biggest issue in the second quarter was a 2.2 percent decline in traffic to the store — a softness he attributed in part to the transition of its pharmacies to CVS Health, which led to some disruptions.
Cornell also noted that electronics sales were down by a double-digit percentage. Sales of Apple products fell 20 percent in the quarter.
While Target has focused considerable energy on improving its grocery department, Cornell said that part of the store continues to be challenged amid price deflation and strong competition.
Target executives lowered full-year profit guidance to a range of $4.80 to $5.20 per share adjusted for one-time events. They previously forecast a range of $5.20 to $5.40.
Target’s net profit dropped 9.7 percent to $680 million, down from $753 million in the same period a year ago. But when adjusted for one-time expenses, earnings were $1.23 a share, which was better than the range of $1 to $1.20 the company had forecast and the $1.12 that analysts were expecting.
Revenue was $16.2 billion, in line with analysts’ expectations and down 7.2 percent from $17.4 billion from the same period a year ago. That is largely a reflection that pharmacy sales are no longer included in its results since the sale of that part of the business to CVS.
Cornell said he expects the company to restore traffic and sales growth “over time.”