Struggling Target Corp. has a lot of work to do — and on Wednesday promised to move faster.
As the company reported a 16.1 percent drop in net profits in the first quarter and lowered its earnings outlook for the year, it reiterated plans to open smaller, more flexible store formats while vowing to grow traffic and sales in the U.S., improve the performance of its loss-making Canadian division, and accelerate its transformation into an omnichannel retailer.
“With the full support of the board, [we] have made it clear to the entire Target team that we are not going to wait for a permanent ceo to improve our operations in performance,” said John Mulligan, chief financial officer and executive vice president, who was named interim chief executive officer on May 5 after Gregg Steinhafel was ousted.
Proving the pressure the retailer is under, Mulligan added that the management’s “mission from the board is clear: Provide focus, remove roadblocks and unleash the team to move faster.”
He told analysts there is one way the retailer will grow, a plan company executives have noted before: “[W]e will continue to develop smaller, more flexible store formats to allow us to serve guests in markets that can’t accommodate our larger store sales. We’ll continue our expense optimization efforts. Our goal is not to cut our way to prosperity, but to free up resources we can leverage in support of the faster growth.”
The discounter’s financial results showed how far the company once renowned for its hip products and savvy marketing — which stirred consumers to nickname it “Tar-jay” — has slipped. For the three months ended May 3, Target reported net earnings of $418 million for the first quarter, from $498 million a year ago. Net sales rose 2.1 percent to $17.1 billion from $16.7 billion. U.S. comparable-store sales fell 0.3 percent in the period.
The earnings missed Wall Street estimates, with earnings per share dropping to 66 cents from 77 cents. On an adjusted basis, EPS was 70 cents, 1 cent below analysts’ consensus of 71 cents.
The quarter’s results were impacted by losses at its Canadian business, as well as the costs connected with last year’s data breach that impacted millions of consumers. Target said it is unable to estimate future expenses related to the fourth quarter’s data breach.
The discounter did lower its forecast for adjusted EPS for fiscal year 2014, reflecting operating results for its U.S. and Canadian business units, to $3.60 to $3.90, from prior guidance of $3.85 to $4.15.
For the second quarter, the company is predicting adjusted EPS of between 85 cents and $1.
While there’s still much work to be done, Mulligan told analysts, “[We’re] in a much better position today than we were just three months ago,” noting that traffic and sales trends have “improved substantially.” He said comps at U.S. stores for the second quarter are expected to be “flat to slightly positive.”
Executives on the conference call didn’t elaborate on what would be done to improve operations at its Canadian unit other than a new format for its weekly circular and new marketing campaigns for its consumables business. Target on Tuesday fired the head of the Canadian division, Tony Fisher, and named Mark Schindele to succeed him.
Executives also noted the promotions and incentive events that were featured over the past quarter at its U.S. stores, such as a spring-cleaning event and a buy-one-get-one-half-off shoe sale. They said Target plans to roll out enhanced apparel displays to 50 additional stores this summer, and several hundred more stores in the fall. Meanwhile, digital visits were up more than 20 percent from a year ago, and the share of digital visits from a mobile phone or tablet continues to grow. But growth in transactions in the digital channel came at the expense of declining traffic trends in the U.S. stores.
Shares of Target rose 1 percent to close at $57.20 in trading on the Big Board.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews