Target Offers Muted Profit Outlook -- Update

By Chelsey Dulaney 

Target Corp. offered a profit outlook for the current quarter that falls mostly below Wall Street estimates, though the retailer said its sales for the holiday quarter beat the upbeat projection it gave last month.

Chief Executive Brian Cornell, who joined the company in August and has since been engineering a turnaround at the retailer, attributed the strong sales to strength in Target's style, baby, kids and wellness segments.

"We're seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work," said Mr. Cornell in a news release.

In the latest quarter, which includes the key holiday shopping season, sales at existing locations grew 3.8%, beating January's boosted forecast of 3%.

Shares edged up 1% premarket and have risen 36% over the past 12 months through Tuesday's close.

For the current quarter, Target forecast per-share earnings of 95 cents to $1.05, mostly below with the estimate of $1.04 a share from analysts polled by Thomson Reuters. Target said it will give guidance for the year in March.

The company guided last month for stronger-than-expected adjusted earnings and sales for the fourth quarter based on its performance through November and December. But it warned it would book a pretax charge of more than $5 billion as it unveiled plans to exit its Canada business after just two years. The company said it couldn't find a realistic scenario that would get the segment to profitability by its goal of 2021.

The botched entry into a market that was hungry for Target's products contributed to the company's decision to part ways with Chief Executive Gregg Steinhafel last year. Mr. Cornell is still piecing together his turnaround plan for the retailer.

Target's results in the latest period compare with a weak performance over the 2013 holidays when its data breach hurt results. Since that time, the company has overhauled its management team and made other efforts, including lowering its free shipping minimum this week, to draw in shoppers.

In all, for the quarter ended Jan. 31, Target posted a loss of $2.64 billion, or $4.10 a share, compared with a profit of $520 million, or 81 cents a share, a year earlier. The results included a charge of $5.59 a share related to the Canada exit. Earnings from continuing operations, excluding one-time items, $1.50 a share.

The company's boosted projection from last month called fpr $1.43 to $1.47 a share in earnings from continuing operations.

Gross margin widened to 28.5% from 27.6% as overall transactions grew 3.2%.

Net sales grew 4.1% to $21.8 billion, just topping the $21.6 billion expected by analysts.

The company said sales at existing locations grew 3.8%, beating January's boosted forecast of 3%.

Write to Chelsey Dulaney at [e-mail]

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