Target Q1 Net Falls 16 Percent
Posted on May 21, 2014 by
MINNEAPOLIS-Target's first quarter ended with a 16 percent drop in net income, to $418 million, as the mass merchant slowly deals with the data-breach scandal and the departures of two top-level executives.
On May 5, Gregg Steinhafel resigned as chairman, president and CEO, in the wake of the hacking of credit-card information of Target customers, uncovered during the holiday shopping season. Earlier this week, Tony Fisher left his post as president of Target Canada, which has produced laggard results since the opening of the first stores last year.
The top-line results for the first quarter, which ended on May 3, suggest that the Canadian segment is beginning to make a positive contribution, according to John Mulligan, who succeeded Steinhafel on an interim basis as president and CEO. Net sales for the company as a whole rose 2.1 percent to $17.1 billion. Sales in the Canadian segment totaled $393 million, compared to $86 million in last year's first quarter, when Target opened the first 24 Canadian locations. Sales in Target's U.S. stores were up 0.2 percent to $16.7 billion, including a decrease of 0.3 percent in same-store sales.
Companywide gross margin finished the quarter at 29.2 percent, down 156 basis points from last year's first quarter. Selling, general and administrative expenses were flat in dollars and down 42 basis points as a percentage of sales, to 21.1 percent.
Mulligan said Target needs to move more quickly to restore its financials to good health. He said the company has made changes to its management team (including the appointment of Mark Schindele to succeed Fisher as Target Canada's president) and is investing in improving U.S. sales and traffic, bolstering the Canadian operation and advancing its ongoing digital transformation. These investments "position Target for accelerated profitable growth as a leading omnichannel retailer," he said.