Target’s Q1 Beats Wall Street, Despite Soft Sales

Despite showing soft sales during the period, Target’s first-quarter earnings in fiscal 2017 were better than Wall Street had anticipated.

During the period, which ended April 29, Minneapolis-basedTarget reported a 1.1 percent revenue decline to $16 billion, better than the $15.62 billion anticipated by analysts. Additionally, comparable-store sales fell only 1.3 percent, better than the expected 3.7 percent. Digital channel sales, which grew 22 percent, contributed 0.8 percentage points of comps growth.

On a call discussing the earnings, Target CEO Brian Cornell remained optimistic, stressing his team’s multiyear plan to reposition Target for delivering consistent growth, market share gains and long-term outstanding financial performance, including capital investments of more than $7 billion over the next three years. He did point out, however, that his team was not “due any high-fives in the room here today.”

“While we were pleased that our first-quarter financial performance was better than expectations, our results are not what we want them to be, and we have much more work to do,” he said.

Consumer perception of value at Target has not reflected how well or “out-the-door” prices really are, Cornell noted. As a result, his team is in the early stages of implementing merchandising and marketing efforts to improve the retailer’s value perception with guests and re-establish everyday-price credibility on key items.

“As we implement those changes, we plan to measure carefully and adjust based on how guests respond,” he said, pointing to a new ad campaign late in Q1 that focused on convenient, low-price assortment with everyday items, as well as testing of Target Restock, a service allowing guests to order a large box filled with essential items of their choice and receive it at home the next day.

For its less-discretionary essentials and food and beverage businesses, Target saw low single-digit comps declines during the quarter. Taking steps to regain its value and everyday-price perception in these two areas, Target recently launched its Target Run and Done marketing campaign, which positions the retailer as an easy stop for everyday essentials at low prices. Additionally, the company is investing in training to equip team members with more product expertise in key categories, including food and beverage.

“An important part of that work is to adjust our promotional posture on these items and categories so they better support our everyday message,” said Mark Tritton, Target’s chief merchandising officer.

In the first quarter, Target completed 21 existing store remodels and opened four new small-format locations. For the year, the company on track to complete its goal of remodeling 100 existing stores and adding 30 small-format stores.

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