A swing in temperatures, the sales of its pharmacy and clinic business, as well as the restricting of its groceries in its stores have resulted in Target missing analyst’s estimates.
Target has reported a lower turnover than its forecasts and has taken a cautionary approach regarding its sales in the current period. It has cited lower demands for groceries and electronics as the reason for its not meeting its sales targets.
With this information hitting the news circuits, its shares fell by 9% to $66.74 in early trading.
Its results have also affected the shares of its rivals including Wal-Mart Stores Inc., JC Penny and Macy’s Inc. Wal-Mart’s shares have fallen by 3.4%.
As per Cathy Smith, Target’s Chief Financial Officer, although apparel sales grew during the first quarter, and were stronger than its competitors, the swing in temperatures have affected demand.
“We did see a noticeable slowdown post-Easter,” said Smith on a media conference call.
She went on to add, that the groceries division too took a hit from re-organisation, as the increase in fresh and organic food meant that customers had to navigate more aisles to find the products they were looking for.
For the first quarters, analysts had expected a rise in sales for stores which were open for at least a year by 1.6%, Target’s sales rose by 1.2%. Net sales have fallen by 5.4% to $16.2 billion. This can be attributed to the sales of its clinic and pharmacy business to CVS Health Corp. As per Thomson Reuters I/B/E/S, anaysts had expected an average its revenues to hover near $16.32 billion.
Digital sales have also fallen: last year, for the same period, they had risen by 38%, while this year they rose by 23%.
Citing a slowdown in consumer demand, Target has revised its sales growth in the second quarter to 2%. It was however confident that it would meet its earnings outlook of $1.00 to $1.20 per share before special items.
It’s comparative first quarter net income has fallen from $635 to $632.
Excluding restructuring charges and gains from the CVS deal, its earnings stood at $ 1.29 per share while analysts had expected $1.20.
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