Wintry weather chills Target's Q1 results, but home has bright spots
Retail Editor 2 -- Home Textiles Today, May 22, 2013
Minneapolis - Described as "choppy and challenging," Target's first quarter disappointed, as net earnings were dealt a harsh blow and sales and comps could not stand up against year-ago comparisons.
To blame was "one of coldest spring seasons on record, following record warmth a year ago," noted Gregg Steinhafel, chairman, president and ceo. The expiration of the payroll tax holiday also caused shoppers to withdraw from spending, he added.
Net earnings for the three months dove 28.5% to $498 million, or 77 cents per share.
In the U.S. segment, quarterly sales inched up 0.5% to $16.6 billion, but comps were down 0.6%, compared to last year's 3.5% increase.
By category, the less-discretionary categories that are less dependent on weather experienced the strongest comps noted Kathryn Tesija, evp, merchandising and supply chain. These included food, health & beauty, and household essentials.
Home comps were down in the low single-digit range, on par with apparel. But there were bright spots, including the Nate Berkus collection and Threshold.
During the quarter, Target opened its first batch of Canadian units - 24 sites, which collectively generated sales of $86 million in the first quarter with a gross margin rate of 38.4%. The loss before income and taxes was $205 million. The Canadian division generated gross margin of $33 million which was offset by $238 million in start-up costs and other expenses.
Canadian operations reduced Target's earnings per share by 24 cents in the quarter.
Steinhafel noted the new Candian units experienced "unexpectedly strong surge in sales" and the "mix in sales in home and apparel was higher than we expected."
Target's digital channel remained strong - and growing - through the first quarter, with sales and traffic on the upswing, "up at a healthy pace," he said. "Our mobile traffic represented more than 30% of our digital traffic."
The company continues to also expand its urban presence, bringing its total CityTarget store count to six units in four cities to date.