Target Reports 4Q Loss On Canada Pullout
NEW YORK (AP) — Target Corp. delivered a cautious profit outlook for the first quarter and reported a loss in its fourth quarter, dragged down by costs to end its money-losing foray in Canada.
But the discount retailer recorded stronger-than-expected sales during the holiday season as shoppers bought more clothing and other items, giving some hope that efforts to turn around its U.S. business are paying off.
The results, which included the second consecutive increase in a key sales measure in a year, come a little more than a month after the discounter announced it was giving up on Canada and focusing on revving up its U.S. business.
The closing was the first major move by CEO Brian Cornell, who took over last August and who is charged with reclaiming the retailer's image as a purveyor of cheap chic fashions.
The results also show how the Minneapolis-based company is successfully moving past a massive data breach disclosed a week before Christmas 2013 that compromised millions of credit and debit cards. That caused shoppers to flee for months and hurt sales and profits. It was one of the major reasons behind the abrupt departure of CEO Gregg Steinhafel, who resigned last May.
Target's business is benefiting as middle-income shoppers are feeling some relief because of lower gas prices and an improving economy. But Target said that its moves to bring in trendier merchandise and cater to shoppers who are increasingly going online have been the bigger factors behind stronger sales.
The discounter has been playing catch-up online and revamping its apps. It also cut its minimum online purchase to qualify for free shipping in half to $25. Target said shoppers responded to its no-minimum free-shipping offer during the holidays.
During a media call, Chief Financial Officer John Mulligan emphasized that Target shoppers who buy online and in stores spend more and are more engaged. Digital sales increased 30 percent during the quarter. He noted that Target's online sales account for about 2.5 percent to 3 percent of the company's total sales.
Even before Cornell took the helm, Target had begun to reassess its operations, sprucing up its baby departments and adding mannequins to its fashion areas. Cornell wants to double down on a handful of areas like children's products and furniture. It is also reimagining its grocery area and wants to focus on products unique to Target.
Target is set to unveil more details of its strategy to investors on March 3. Those will include cost-cutting moves, but Mulligan did not elaborate during the media call Wednesday.
The company said that it lost $2.6 billion, or $4.14 per share, in the three months ended Jan. 31. That compares with a profit of $520 million, or 82 cents per share a year earlier.
Excluding costs to exit Canada and other one-time items, Target's adjusted earnings were $1.50 per share. Analysts polled by FactSet expected $1.46 per share. Target is now liquidating all 133 stores after entering Canada just two years ago.
Revenue rose 4.1 percent to $21.7 billion. Revenue at stores opened at least a year rose 3.8 percent. The measure is considered a key indicator of a retailer's health.
Shares of Target fell 3 cents to $76.93 in afternoon trading.
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