Target reported increased profit that beat analysts’ estimates but another decline in same-store sales indicated the difficulty in stemming the shift to online shopping.
The retailer’s net income rose to $681 million, or $1.23 a share, in the first quarter, from $632 million, or $1.05 a share a year ago, while adjusted earnings came in at $1.21 a share, easily beating Thomson Reuters analysts’ estimate of 91 cents per share.
But revenue fell 1.1%, to $16.02 billion, and same-store sales were down 1.3%.
Target has been grappling with what CEO Brian Cornell has called a “seismic shift” in the retail industry as customers spend more on experiences and demand quicker, more convenient ways to shop. On Wednesday, he said the first-quarter performance “was better than our expectations.”
“We are in the early stage of a multi-year effort to position Target for profitable, consistent long-term growth, and while we are confident in our plans, we are facing multiple headwinds in the current landscape,” he said in a news release. “As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity.”
The chief executive noted that with dozens of stores being closed by competitors like Macy’s, Sears, The Limited, and J.C. Penney, there may be at least $45 billion to $60 billion of market share that can be absorbed by surviving retailers.
“We’ve got to make sure we’ve got the technology, the supply chain … to take advantage of this unique time in retail where we know there’s going to be billions of dollars of market share up for grabs,” he said.
But the decline in same-store sales reflected not only fewer shopper visits but also fewer items purchased by shoppers. For the second quarter, Target expects another low-single digit decline in comparable sales, and adjusted earnings per share of between 95 cents to $1.15.
“Target’s not out of the woods, yet,” Michael Lasser, a retail analyst for UBS, told CNBC. “The road to improvement will be long.”