profit, a strategy that helped earnings beat analysts’ esti- mates last quarter news from the top down is that the company is not so confident this continued approach will work in the second half of the year. A slowing of technology sales for the retailer and the transfer of its pharmacy operations to CVS Health Corp. have added to the challenges. Looking at the numbers, Target’s same-store sales fell 1.1 percent in the reported period, the company said in a recent statement. Analysts had predicted a 1 percent drop in sales for Target, according to Consensus Metrix. Target has not posted negative same-store sales drop since the first quarter of 2014, when it was recovering from a high-profile hacker attack and now it expects that in third and fourth quarters of this year, that expected sales will range from flat to down as much as 2 percent, not good news for Target or investors. Cornell is trying to refocus the retailer on its key strengths, such as fashion, kids and home decor, to help drive traffic. Its grocery and electronics categories have struggled, with sales of Apple products down more than 20 percent last quarter as customers source these products elsewhere. Some analysts state that the reduction in Target’s foot traffic has nothing to do with the transition of its pharmacy operations to CVS but rather to customers that have called for a boycott of the chain, upset over a policy letting trans- gender customers use the bathroom of their choice. Chief Financial Officer Cathy Smith said in a recent statement
By Jamie Barrie M aybe being in the Canadian retail market is not the only problem for Target, as the corporation cut its annual forecast after the retail chain’s sales slumped last quarter, hit by what Chief Executive Officer, Brian Cornell described as a “difficult retail environment.” Forecasts from the company show expected earnings of $4.80 to $5.20 a share down 11.1 percent when compared with an earlier forecast of as much as $5.40. Target also trimmed its projections for sales in the second half of the year, blaming sluggish demand. This news was not well received by investors as share prices dropped as much as 7.4 percent in the wake of the results. The dour outlook renews concern that the retail economy is sliding into a deeper funk. While Target under Cornell’s watchful eye has been cutting costs to bolster
that she’s aware some shoppers don’t like the policy, but it’s hard to quantify any impact. In response to the complaints, the company is adding a single-stall family restroom to all of its stores, the majority of which already have one.
Investors have been bracing for a retail downturn, but other major players in the retail sector have seen better than
expected results, leaning more on the fact that it might be a problem with Target and not the marketing itself. Home Depot Inc. reported that its latest quarterly profit rose 9.3 percent, helped by Americans continuing to invest in the homes. Department stores Macy’s Inc. and J.C. Penney Co. also posted better-than-expected numbers. But Cornell is confident that Target is on the right plan saying, “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.”
Time will tell if Cornell’s strategy for Target hits the bull’s eye or not.
40
SPOTLIGHT ON BUSINESS • SEPTEMBER 2016
Made with FlippingBook - Online magazine maker