In the second quarter, Target Corp. today reported adjusted earnings per share of $1.19 versus $1.12 in the 2012 period. Second quarter net earnings of $611 million, or 95 cents per share, include 21 cents of EPS dilution related to the company’s Canadian Segment, according to Target, and stand in contrast to net earnings of $704 million, or $1.06 per diluted share in the period a year ago.
Target earnings beat a Thompson Reuters analyst estimate but sales fell short of the Wall Street expectation.
“Target’s second quarter financial results benefited from disciplined execution of our strategy and strong expense control, offsetting softer-than-expected sales,” Gregg Steinhafel, Target chairman, president, and CEO said, in announcing financial results. “For the balance of this year, our U.S. outlook envisions continued cautious spending by consumers in the face of ongoing household budget pressures. In Canada, where we are only five months into our market launch, we continue to learn, adjust and refine operations in our existing stores as we prepare to open another 56 stores by year-end.”
As regards the U.S. segment, second quarter 2013 sales increased 2.4% to $16.8 billion, Target announced, reflecting a 1.2% increase in comparable sales combined with the contribution from new stores. Segment earnings before interest expense and income taxes were $1.33 billion, an increase of 0.4% from the 2012 second quarter.
Canadian Segment EBIT for the second quarter was a negative $169 million. The Canadian operation generated sales of $275 million during the period. In a conference call, Steinhafel said sales momentum in Canada has been growing slower than anticipated, but he added that, as has been the case in some U.S. markets, a sluggish start can meet expectations over a five-year term.
Steinhafel added that customer demand remained sluggish and somewhat spotty, with younger shoppers particularly wary about spending. The company is adding more services, smaller urban stores and online resources to reach consumers in new ways and open additional retailing opportunities, he said.
Kathryn Tesija, Target’s executive merchandising and supply chain, said in the conference call that second quarter sales in the home department advanced faster than the company average. Tesija added that, as part of its enhancement of the beauty operation, the company had rolled out the Toni & Guy product line, which was developed in Britain and includes hair styling tools. Upcoming home promotions include a Halloween décor initiative, she added.
Target pointed out that, following the March sale of the credit card portfolio in the United States, it combined the historical U.S. Retail Segment and U.S. Credit Card Segment to form a new U.S. Segment. Selling, General and Administrative expenses in the new U.S. Segment include income from the profit-sharing arrangement with TD Bank Group, net of servicing expenses. In prior periods, Target classified credit card revenues from the historical U.S. Credit Card Segment, net of credit card expenses, within U.S. Segment SG&A expenses.