Less than a week after rival Walmart announced weaker-than-expected domestic sales for its first fiscal quarter, Target Corp. issued disappointing first quarter results that it blamed on poor weather.


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Target posts weak first quarter

May 22nd, 2013

MINNEAPOLIS – Less than a week after rival Walmart announced weaker-than-expected domestic sales for its first fiscal quarter, Target Corp. issued disappointing first quarter results that it blamed on poor weather.

Sales rose just 1% to $16.71 billion as comparable-store sales in the United States decreased 0.6%. Analysts surveyed by Thomson Reuters had been looking for $16.78 billion. Total sales from U.S. stores grew 0.5% to $16.62 billion, while Target’s 24 new Canadian stores generated $86 million in sales for the quarter.

The decline in comp-store sales was driven by a 1.9% reduction in customer traffic that offset a 1.3% increase in the average transaction amount.

The discounter reported a 28.5% drop in net earnings to $498 million, or 77 cents per diluted share. The bottom line was impacted by a 243.1% increase in net interest expense to $629 million that reflects a $445 million charge related to the early retirement of debt. Excluding that charge as well as a $391 million gain on the sale of Target’s credit card receivables and a $17 million item for reduction of a beneficial interest asset, adjusted earnings were $530 million, or 82 cents per share, below analysts’ 85 cents per share consensus estimate on that basis.

Further excluding the negative impact of $153 million, or 24 cents per share, from its Canadian operations, adjusted income fell 8.2% to $683 million, or $1.05 per share.

"Target’s first quarter earnings were below expectations as a result of softer-than-expected sales, particularly in apparel and other seasonal and weather sensitive categories," said chairman, president and chief executive officer Gregg Steinhafel in a statement. "While we are disappointed in our first quarter performance, we remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels and CityTarget, that will drive Target’s long-term growth."

In the wake of the disappointing results, management lowered its adjusted earnings guidance for the year to a range of $4.70 to $4.90 per diluted share, down from prior guidance of $4.85 to $5.05 per share. For the second quarter Target expects adjusted earnings to range between $1.09 and $1.19 per share, above the $1.06 per share expected by analysts.

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