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Target still struggling to sell groceries, but is boosted by Victoria Beckham, Nintendo Switch

Target beat Wall Street expectations, but is still gloomy about the future.
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It's not often that a drop in sales would be considered good news for Target, but that's the case on Wednesday as its latest results weren't as bad as some had been expecting.

Gloomy outlooks had predicted Target's same-store sales would drop by around 3.6 percent in results for the 1st quarter of 2017, but the Minneapolis-based retailer defied expectations by posting a much smaller sales decline of 1.3 percent.

The first three months of the year were expected to be Target's most difficult, as it's too early to start seeing the benefit of its $500 million investment in store remodels and supply chain improvements, as well as the impact of some of its new private label brands.

And it's the grocery department that once again is proving to be Target's kryptonite, with weak sales in food, drink and essentials proving a factor in its overall sales decline.

The Bullseye has been making attempts in recent years to improve its shelf stocking and a move to fresher, more natural food selection, but it's not taking hold with customers, with food sales in the first three months of the year down in the low single digits.

But there were successes elsewhere, not least in the recent launch of Victoria Beckham's new line, which the retailer will see the full benefit from in its 2nd quarter results.

During an earnings call, Target executives said the Beckham collaboration was "one of the biggest in our history," selling particularly well online. Those who bought Beckham products checked out with baskets twice the size of other shoppers.

And the retailer's electronics department got a timely boost from the release of the Nintendo Switch, which helped consumer electronics sales to its best results in three years, aided by "healthy growth" from the Apple Watch and iPhone.

But executives remain gloomy on the future, with chief financial officer Cathy Smith saying they expect low single-digit sales declines to continue in the 2nd quarter and beyond.

Brian Cornell, chairman and CEO of Target, said in a press release: "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. As a result, we will continue to plan our business prudently while preparing our team to chase business when we have an opportunity."

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