Target Slashes Earnings Outlook amid Weak In-Store Sales

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August 17, 2016 8:35am NYSE:TGT

target-tgt-logoRetail giant Target Corporation (NYSE:TGT) this morning posted solid Q2 earnings, but its forecast badly missed estimates, sending its shares reeling more than 5% in early trading.


The Minneapolis-based company reported Q2 EPS of $1.23, easily beating estimates of $1.13. Revenue fell 7.2% from last year, however, which was in-line with analysts’ view.

Looking ahead, TGT forecast Q3 EPS to range from $0.75-0.95, while analysts are looking for $0.96.

For the full year 2017, the company now expects EPS of $4.80-5.20, down from a prior outlook of $5.20-5.40. That new forecast would badly miss analysts’ view of $5.13 per share for the year. Target also expects Q3 and Q4 comparable sales to range from a decline of 2% to flat.

Other interesting notes from the report included:

  • Comparable digital channel sales grew 16%.
  • Q2 same-store sales fell 1.1% from last year.
  • Second quarter 2016 net interest expense was $307 million, up more than 100% from last year.
  • Target returned $1.7 billion to shareholders in the second quarter through dividends and share repurchases.

From the press release:

“While we recognize there are opportunities in the business, and are addressing the challenges we are facing in a difficult retail environment, we are pleased that our team delivered second quarter profitability above our expectations,” said Brian Cornell, chairman and CEO of Target. “Looking ahead, we remain focused on our enterprise priorities as we continue to see the benefits of investing in Signature Categories, store experience, new flex-format stores and digital capabilities. Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time.”

Earlier this month, we reported that Target’s grocery business was failing amid weak demand and product spoilage, which seemed to be a harbinger of today’s poor results.

Target shares fell $4.13 (-5.47%) to $71.35 in premarket trading. TGT stock had gained about 4% year-to-date prior to today’s report.

TGT-2016-08-17


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