Archived Retail Giant Target Slashes Earnings Estimates For 2H16 Citing "Challenging Environment"

[HardlinesFour]

After reports yesterday that Tech Bellwether Cisco plans to layoff up to 20,000 people (see "Global Economic Bellwether Cisco Reportedly Fires 20% Of Workforce") this morning retail giant Target also guided lower for 2H 2016 on the back of a "challenging environment in the back half of the year."

And the market is not happy...



Target beat earnings for 2Q 2016 at $1.23 adjusted EPS vs. consensus $1.13 but slashed guidance for 3Q and the 2nd half of the year with CEO, Brian Cornell, saying the company is facing a "difficult retail environment." Comp store sales for 2Q 2016 declined 1.1% on a 2.2% decline in volume and offset by a 2.6% price increase per unit. The company noted on it's earnings call that sales of Apple products were down 20% in 2Q.



The company called for comp store sales in 2H 2016 of -2% - 0%. Full year 2016 guidance was slashed $0.30 to $4.80 - $5.20 vs. prior guidance of $5.20 - $5.40. That said, the company beat their 2Q 2016 forecast which called for a midpoint adjusted EPS of $1.10 so when you factor in the beat this quarter the guide down is really more equivalent to about $0.43 or about 8%.



“While we recognize there are opportunities in the business, and are addressing the challenges we are facing in a difficult retail environment, we are pleased that our team delivered second quarter profitability above our expectations,” said Brian Cornell, chairman and CEO of Target. “Looking ahead, we remain focused on our enterprise priorities as we continue to see the benefits of investing in Signature Categories, store experience, new flex-format stores and digital capabilities. Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time.”



While Target has plans in place to strengthen results over time, based on the current retail environment the Company believes it is prudent to lower its expectations for comparable sales in the second half of the year. In both the third and fourth quarters of 2016, Target now expects comparable sales growth in the range of (2.0) percent to flat.



In third quarter 2016, Target expects both GAAP EPS from continuing operations and Adjusted EPS of $0.75 to $0.95. For full-year 2016, Target now expects GAAP EPS from continuing operations of $4.36 to $4.76, compared with prior guidance of $4.76 to $4.96. The Company expects full-year 2016 Adjusted EPS of $4.80 to $5.20, compared with prior guidance of $5.20 to $5.40. The 44-cent difference between the guidance ranges for GAAP EPS from continuing operations and Adjusted EPS primarily reflects early debt retirement losses already reported in 2016.

 

[Redzee]

To quote Edward Guggenheim in Titanic, "...we are dressed in our best and will go down with the ship. But we would like a brandy.".
Open bar Mr. Guggenheim.

 

[redeye58]

Sounds like Brian keeps rearranging the deck chairs on the Titanic.

 

[Hardlinesmaster]

I hope we don't look like Kmart.

 

[Kartman]

K who?

 

[The Dude Abides]

It truly is amazing just how out of touch they are with the reality at the store level.

 

[Kartman]

They need to be slapped shitless.

 

[redeye58]

They need to be slapped shitless.

You'd wear your arms out before that would happen.

 

[Kartman]

Word.

 

[On6]

Target is the new Kmart.

 

[Joejoe12]

That's what happens when you have outraged sales goals daily. There was no possible way that same stores sales would comp 2.5-5 for the year. Sad how these people don't know how to run a business

 

[AltPants]

It's almost like the leadership have their heads so far up their own asses they can see daylight.

 

[BoxCutter]

Target is the new Kmart.

Mine is anyway.

 

[Redzee]

It's almost like the leadership have their heads so far up their own asses they can see daylight.

Still brownish. With traces of smooches.

 

[HRZone]

Wal-Mart’s outlook rebuts Target’s view of jittery U.S. shopper

Cornell acknowledged that the retailer has internal problems to address. The handoff of in-store pharmacies to CVS Health disrupted its business. Target’s grocery business — a key driver of regular store traffic — also isn’t where it needs to be, Cornell said. And electronics has been a drag on sales, which Cornell blamed on lack of new products and innovation.

 

[oath2order]

People shop at Walmart because they sell cheap crap. They have low expenses therefore they can afford undercutting us on almost everything

 

[The Dude Abides]

People shop at Walmart because they sell cheap crap. They have low expenses therefore they can afford undercutting us on almost everything

There is a term in Econ called economies of scale. That is where Walmart wins the retail wars. The pure volume of low cost garbage they can sell allows them to rake in cash like no one else.

 

[Hardlinesmaster]

Wal-Mart’s outlook rebuts Target’s view of jittery U.S. shopper

Cornell acknowledged that the retailer has internal problems to address. The handoff of in-store pharmacies to CVS Health disrupted its business. Target’s grocery business — a key driver of regular store traffic — also isn’t where it needs to be, Cornell said. And electronics has been a drag on sales, which Cornell blamed on lack of new products and innovation.

Boosters are stealing our electronics, as fast it is on the shelve.

 

[Tired Grunt]

It's not too late to turn things around if they wanted to. Corporate just needs to re-evaluate company goals and adjust accordingly. But of course, there exists the challenge.

 

[The Dude Abides]

Corporate seems unable to even identify the problems Target has, let alone actually take actions to fix them.

 

[Frontlanegirl]

Corporate seems unable to even identify the problems Target has, let alone actually take actions to fix them.

First thing would be to identify themselves as a problem. How much of the business slump was because of the bathroom issue?

 

[Tired Grunt]

Planning for a long-term growth plan seems to be the big picture they can't get right. Trying to compete with other retailers on a brick and mortar level will eventually bleed the company of its free cash flow, instead, while the company still makes a profit, I believe they should reinvest it and focus on two major things: company-wide training from top to bottom for all employees, and shift more resources into E-Commerce. Revenues must increasingly come more from online sales rather than in-store sales, in order to be able to effectively compete and stay growing in the coming years.

 

[jenna]

1. Better home goods

2. More payroll with a better trained staff. Bring back specialists in Cosmetics and shoes.

3. Technology issues -- online site crashing during peak times, MyDevice issues, Register issues, times when Cartwheel doesn't work

4. Softlines does seem to be improving - continue to be "on trend"

5. Instocks issues -- hello Lilly Pulitzer fiasco, and being out of stock of basics in stores & ad items

6. Continue to improve logistics (ie. less back stock & more door-to-floor.)

7. Stop being so political, and focus on other issues without creating new ones (transgender bathroom debate.)

8. Stop firing or pushing out your best people ---> I am looking at you label strips that make it to stores with obvious mistakes. or store that "push out" old timers who genuinely care about the store and the process.

 

[unknown]

1. Better home goods

2. More payroll with a better trained staff. Bring back specialists in Cosmetics and shoes.

3. Technology issues -- online site crashing during peak times, MyDevice issues, Register issues, times when Cartwheel doesn't work

4. Softlines does seem to be improving - continue to be "on trend"

5. Instocks issues -- hello Lilly Pulitzer fiasco, and being out of stock of basics in stores & ad items

6. Continue to improve logistics (ie. less back stock & more door-to-floor.)

7. Stop being so political, and focus on other issues without creating new ones (transgender bathroom debate.)

8. Stop firing or pushing out your best people ---> I am looking at you label strips that make it to stores with obvious mistakes. or store that "push out" old timers who genuinely care about the store and the process.

But the company saves payroll by pushing out old timers in favor of new hires. Who cares about anything else. It's all about saving money.

 

[jenna]

And I suppose training is free? Not to mention all the time spent on boarding people (paper work, interviews.) Just to have them no show or quite two weeks later.

:waves at corporate: