Target Net Drops 13.2 Percent in Q2

TargetMINNEAPOLIS-Sales that were less than expected and reduced margins sliced Target’s second-quarter net income down 13.2 percent, to $611 million.

Net sales in the quarter, which ended on Aug. 3, rose 4 percent to $17.1 billion, including a 1.2 percent gain in U.S. same-store sales. Gross margin registered 31.4 percent, down 129 basis points from the second-quarter of last year. Selling, general and administrative expenses increased 3.1 percent in dollars and 22 basis points as a percentage of sales, to 21.6 percent.

Target’s quarterly results now reflect the performance of its Canadian stores, of which 68 are now in operation. The company logged $275 million in sales from Canada, and a loss before interest and taxes of $169 million, as startup and operating expenses, along with depreciation and amortization, cut into the operation’s gross profit.

Gregg Steinhafel, chairman, president and CEO, focused on the adjusted earnings per share of $1.19, up 6.1 percent from last year’s sec ond quarter and which was at the top of the expected range. Steinhafel said this result “benefited from disciplined execution of our strategy and strong expense control, offsetting softer-than expected sales.”

Steinhafel also acknowledged that Target’s U.S. outlook for the remainder of the fiscal year “envisions continued cautious spending by consumers in the face of ongoing household budget pressures.” In Canada, meanwhile, the company is readying the opening of more new stores to meet its goal of 124 stores by the end of the year.