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Target Corporation (TGT - Free Report) announced its second-quarter fiscal 2016 results Wednesday morning, and the company posted earnings of $1.23 per share, beating the Zacks Consensus Estimate of $1.14. Nevertheless, shares of TGT are were down nearly 5.8% in morning trading thanks to overall weak sales.
Despite an earnings beat, Target missed revenue expectations. The Minneapolis, Minnesota-based company saw quarterly revenues of $16.169 billion, which fell short of our consensus estimate of $16.245 billion. That sales figure also represents a year-over-year decline of 7.2%.
Looking further into the report, it becomes clear that Target’s main issue is that less customers are making purchases at its stores. Comparable store sales were down about 1.1% in the quarter, while total transactions fell 2.2%.
In its earnings conference call following the release of the report, Target’s top executives attempted to explain the company’s weak sales by pointing to three main problems.
Target CEO Brian Cornell detailed a double digit decline in electronics sales, which he at least partially blamed on weak sales of Apple products. Target saw a 20% decline in sales of Apple devices, which contributed to a third of the overall plunge in electronics sales.
The drop in electronics was responsible for 70 basis points of the company’s overall comparable store sales decline. Target said it was working with Apple to help boost sales in the future, but it did not detail any specific strategies.
2. Grocery Sales
Cornell also explained that grocery sales fell in the quarter, which has forced Target to “rebalance” its marketing and promotional efforts. According to Cornell, Target has to focus more on the “pay less” portion of its “expect more, pay less” tagline. Target’s executives seemed to suggest that the value of its products may have been lost on potential shoppers.
3. CVS Partnership Disappoints
The final thing that Cornell pointed to was Target’s new partnership with CVS Health Corporation (CVS - Free Report) . Target recently teamed up with CVS to introduce a number of in-store pharmacies to its stores, and apparently these pharmacies haven’t been as busy as expected. Cornell said that not many customers have been signing up for new programs at the CVS pharmacies.
Bottom Line
Earnings conference calls exist to give investors a more in-depth look at the company’s earnings results. Target investors today wanted an explanation for why the company’s same-store sales disappointed, and CEO Brian Cornell and other members of the management team attempt to provide those answers. Looking ahead, we now have three key areas to look towards for improvement at Target.
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Three Reasons For Target's Weak Q2 Sales
Target Corporation (TGT - Free Report) announced its second-quarter fiscal 2016 results Wednesday morning, and the company posted earnings of $1.23 per share, beating the Zacks Consensus Estimate of $1.14. Nevertheless, shares of TGT are were down nearly 5.8% in morning trading thanks to overall weak sales.
Despite an earnings beat, Target missed revenue expectations. The Minneapolis, Minnesota-based company saw quarterly revenues of $16.169 billion, which fell short of our consensus estimate of $16.245 billion. That sales figure also represents a year-over-year decline of 7.2%.
Looking further into the report, it becomes clear that Target’s main issue is that less customers are making purchases at its stores. Comparable store sales were down about 1.1% in the quarter, while total transactions fell 2.2%.
In its earnings conference call following the release of the report, Target’s top executives attempted to explain the company’s weak sales by pointing to three main problems.
1. Electronic Sales and Apple (AAPL - Free Report)
Target CEO Brian Cornell detailed a double digit decline in electronics sales, which he at least partially blamed on weak sales of Apple products. Target saw a 20% decline in sales of Apple devices, which contributed to a third of the overall plunge in electronics sales.
The drop in electronics was responsible for 70 basis points of the company’s overall comparable store sales decline. Target said it was working with Apple to help boost sales in the future, but it did not detail any specific strategies.
2. Grocery Sales
Cornell also explained that grocery sales fell in the quarter, which has forced Target to “rebalance” its marketing and promotional efforts. According to Cornell, Target has to focus more on the “pay less” portion of its “expect more, pay less” tagline. Target’s executives seemed to suggest that the value of its products may have been lost on potential shoppers.
3. CVS Partnership Disappoints
The final thing that Cornell pointed to was Target’s new partnership with CVS Health Corporation (CVS - Free Report) . Target recently teamed up with CVS to introduce a number of in-store pharmacies to its stores, and apparently these pharmacies haven’t been as busy as expected. Cornell said that not many customers have been signing up for new programs at the CVS pharmacies.
Bottom Line
Earnings conference calls exist to give investors a more in-depth look at the company’s earnings results. Target investors today wanted an explanation for why the company’s same-store sales disappointed, and CEO Brian Cornell and other members of the management team attempt to provide those answers. Looking ahead, we now have three key areas to look towards for improvement at Target.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>