Target (TGT) Q2 Earnings Beat, Sales Miss; Trims View
Zacks Investment Research | Aug 16, 2016 10:31PM ET
Target Corporation (NYSE:TGT) posted second-quarter fiscal 2016 results, wherein adjusted earnings of $1.23 per share surpassed the Zacks Consensus Estimate of $1.14 and management’s previous provided guidance of $1.00 to $1.20 per share. Earnings per share of this Zacks Rank #2 (Buy) company inched up 0.5% year over year.
Including one-time items, earnings from continuing operations came in at $1.07 per share compared with $1.21 reported in the year-ago period.
Target wind up its Canadian operations after a comprehensive evaluation. This is enabling the company to deploy resources solely in the domestic markets and focus on developing its omnichannel capacities. The company also intends to invest in merchandise categories such as Style, Baby, Kids and Wellness.
Despite better-than-expected bottom line results, stock plunged 5.5% during pre-market trading hours as top line continues to struggle and management trimmed its outlook citing tough retail environment.
Let’s Unveil the Picture
Total sales declined 7.2% to $16,169 million from the prior-year quarter, and also came below the Zacks Consensus Estimate of $16,245.2 million, thus marking the fourth straight quarter of revenue miss. The sale of the pharmacy and clinic businesses to CVS Health (NYSE:CVS) impacted the top line.
Minneapolis-based Target’s comparable sales for the quarter decreased 1.1%. The number of transactions declined 2.2%, while the average transaction amount climbed 1.1%. Comparable digital channel sales surged 16% and added 0.5 percentage points to comparable sales.
Gross profit decreased 5.7% to $5,067 million, however, gross margin expanded 40 basis points to 31.3%. Operating income fell 8.1% to $1,241 million, while operating margin remained flat at 7.7%.
Target’s credit card penetration expanded 100 basis points to 11.1%, whereas debit card penetration increased by 70 basis points to 12.7% during the quarter. Total REDcard penetration climbed to 23.9% from 22.1% in the year-ago quarter.
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