Target slashing fall receipts as profit plummets 90%
This morning, the company announced it has also reduced fall season receipts in discretionary categories by more than $1.5 billion.
While Target is planning cautiously for the remainder of the year, executives said current trends support the company’s prior guidance for full-year revenue growth in the low- to mid-single digit range and an operating margin rate in a range around 6% in the back half of the year.
Target Corp. took a 90% net earnings blow in the second quarter as shoppers shifted their spending to necessities, forcing the chain to go heavy on inventory clearance and, ultimately, cripple its profitability.
The result: Net earnings of $183 million, or $.38 per diluted share, down from $1.817 billion, or $3.65 per diluted share, a year ago.
Short on discretionary spending dollars, inflation-impacted shoppers streamlined their expenses to focus on food and beverage, household and beauty essentials. That, in turn, put pressure on the company to “rightsize” its inventories across the board early in the summer, particularly on items including home, luggage and other categories.
These actions “put significant pressure on our near-term profitability,” said chairman and CEO Brian Cornell.
Still, the company’s traffic and units grew, giving moderate boosts to sales and comps for the three-month period ended July 30.
Total revenue was up 3.5% to $26.037 million versus $25.160 million, and comp sales rose by 2.6% on top of 8.9 percent growth last year.
Additionally, store comps increased 1.3% on top of 8.7% growth last year, and digital comps grew 9.0% following growth of 9.9% last year.
In its earnings results today, Target also pointed out other quarterly strides: an increase in unit share in all five of its core merchandising categories; an almost 11% increase in same-day services – led by Drive Up, which grew in the mid-teens on top of more than 80% last year; and fulfilling more than 95% of Target’s Q2 sales at its stores.