Target Points to Weakening Sales -- WSJ
May 19 2016 - 2:04AM
Dow Jones News
Retailer pins decline on consumer caution and wet weather in
latest quarter Recent data from the U.S. Commerce Department showed
that consumer spending in April rose to the best level in more than
a year. In the past year, Internet and catalog sales have grown
more than three times as fast as overall sales, up 10.2%, while
department-store sales sank 1.7% over the past 12 months. "It's
been a very wet and cold start to the year and it's reflected in
our sales," he said. "We haven't seen anything
By Khadeeja Safdar and Lisa Beilfuss
Target Corp. said consumers pulled back on spending in the first
quarter and warned that a key sales measure could fall in the
current period -- the first such decline in two years.
Chief Executive Brian Cornell cited "an increasingly volatile
consumer environment" and said he expects "excess inventory" at
other retailers to "extend the very intense promotional environment
into the months ahead."
Shares of the company were off 7.6% at $68 as of 4 p.m. trading
on Wednesday. Sales at stores open at least a year rose 1.2% in the
quarter ended April 30, short of Target's 1.5% to 2.5% annual
target.
The company warned that metric would be flat to down 2% in the
current quarter. A decline would be a first for Target since Mr.
Cornell took over as CEO in 2014.
Target joins a growing list of retailers reporting a
disappointing start to the year.
Last week, soft results from department stores like Macy's Inc.
and Nordstrom Inc. illustrated shoppers' shift away from
brick-and-mortar stores and sparked declines across the retail
sector.
That pressure was renewed Wednesday as shares in Wal-Mart Stores
Inc. fell 2.2%. Wal-Mart was slated to report quarterly results
Thursday.
Off-price chain TJX Cos. and home-improvement stores like Home
Depot Inc. reported healthy traffic and spending at their
locations. Wednesday, Lowe's Cos. posted a strong earnings beat
with a profit of $884 million, or 98 cents a share, up from $673
million, or 70 cents, a year earlier. Revenue rose 7.8% to $15.2
billion.
Despite weakness in the first half of the year, Target said it
still sees its full-year earnings forecast as "achievable." Mr.
Cornell said the spending slowdown at the start of the year was the
result of consumer caution and unusually cold and wet weather in
certain regions.
The Minneapolis company has been spending aggressively to beef
up digital sales. In the first quarter, Target's digital sales rose
23%. Online sales represented 3.5% of Target's top line, a smaller
chunk than the 5% achieved in the holiday period, though up from
2.8% a year earlier.
Overall for the quarter, Target reported a profit of $632
million, down from $635 million a year earlier. Revenue declined
5.4% to $16.2 billion, largely due to the sale of its pharmacy and
clinic businesses. Analysts had forecast $16.32 billion in revenue,
according to Thomson Reuters.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Lisa
Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
May 19, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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