Target Corp. stock is slipping more than 5 percent to $71.35 in early trading after reporting that its second-quarter sales declined and said e-commerce growth was slowing.
Net income for the quarter fell 9.7 percent to $680 million, or $1.16 a diluted share, down from $753 million, or $2.20, a year ago. Adjusted earnings per share were $1.23 and above the FactSet estimate for $1.13.
Sales for the three months ended July 30 decreased 7.2 percent to $16.16 billion from $17.4 billion a year earlier. This was basically in-line with the FactSet estimate for $16.17 billion. Comparable sales fell 1.1 percent. E-commerce sales grew 16 percent, but last year this channel grew 30 percent and it’s a far cry form the company’s goal of 40 percent growth.
“Our number-one challenge was traffic, which affected sales in all our merchandise categories,” said chief executive officer Brian Cornell on the company’s conference call. Cornell said comp sales were pressured by declines in electronics. “Notably, about one-third of this pressure was driven by Apple products, which were down more than 20 percent in the quarter,” he said.
On a positive note, women’s apparel saw midsingle-digit comps increase in the quarter. The performance was driven by double-digit growth in Target’s brand, which is focused on a younger style-savvy shopper. The children’s Cat & Jack label was well received and delivered double-digit growth as compared to last year’s comp sales for Cherokee.
Second-quarter gross margin rate improved to 31.3 percent from 30.9 percent as a result of the sale of the pharmacy business cost-savings initiatives. However, the company did say that there were increased digital-shipping costs and more promotions.
Looking ahead, Target lowered guidance for the full year 2016 to a range $4.36 to $4.76 from the prior guidance of $4.76 to $4.96.